The increase in VAT from 5 to 9 percent for apartments under EUR 120,000, a measure that the government takes into account in the new package of fiscal measures valid from next month, along with the introduction of new taxes and the abolition of existing facilities in the construction trade, will generate higher prices in the chain and an artificial crisis on the local real estate market, with negative effects on the receipts to the state budget from several sources, believes Liria Themo, marketing director of Atria Urban Resort.
“In Bucharest, at least up to now, there have been affordable homes for the middle class, but the new fiscal measures announced for the real estate sector – namely the new VAT rate of 9 percent, which replaces the 5 percent, which overlap the blockages already existing, sound an alarm for all those who want to purchase a home in the Capital. If the OUG project goes through in the proposed form, many will be put in a difficult situation,” explains Liria Themo.
Selling fewer homes due to the increase will have a negative impact on VAT receipts and may cause developers to slow down the pace of construction. Slowing down the pace of construction will have a negative impact on the construction labor market, and, implicitly, on the receipts to the state budget from the perspective of contributions. In the medium term, the market will once again become labor deficit, with many workers choosing to go abroad again to make money. Any decision to relax taxation in real estate, adopted later for the new construction market, will run into difficulties in attracting labor.
