A series of tax cuts on real estate in Greece are seen adding to demand in the sector and improving the quality of homes on the market, many of which are in bad shape, say experts.
Greece's ten year economic downturn, which shrank the economy by about a quarter, sent prices tumbling down and pulled the break on renovation work for many home owners. As a result, a large number of properties in Greece are dated, have not been renovated for years and consume excessively large amounts of energy.
Over the weekend, Prime Minister Kyriakos Mitsotakis announced that a three year freeze will be introduced on value added tax applicable on newly built properties and that owners will be provided with new incentives to improve their assets. Investors will be provided with a 40 percent tax break on renovation costs, or expenses related to improving the energy efficiency of a property.
"If this is legislated right...its could litellay change the face of the country's cities, in addition to other benefits," says the Hellenic Property Federation in statement.
Greece slapped a 24 percent VAT rate on newly built properties in 2006 as part of a push to up state revenues. The decision to freeze the tax for three years is seen as helping the country's construction sector, which has been thawing out, but at a slow rate.
"Construction costs will be reduced, buyers will be hit with just a three percent transfer tax and construction activity will be boosted," Dimitris Kapsimichalis, president of Greece's federation of building constructors, tells Capital.gr. Today, if a construction company leases a block of newly built apartments, it must pay the 24 percent VAT, adds Kapsimichalis.
The relief these measures provide real estate investors comes after Greece reduced in July the ENFIA property tax by an average of 22 percent. These steps, along with improved sentiment in the economy after conservatives New Democracy won Greece's recent elections, have helped lift real estate prices in a trend that is likely to continue.
The latest data from the Bank of Greece, the country's central bank, shows that apartment prices across the country jumped 7.7 percent in the second quarter of 2019, the fastest pace seen in Greece in 12 years. In the first quarter of the year, prices advanced by 1.3 percent.
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