18.12.2023
One of our previous articles wrote about the introduction of a new property sales tax that the seller must pay, and raised the question of how the government, which wants to curb high rents and sales prices, especially of residential units, will achieve this by increasing costs.
In Greece, which faces the same problem as Cyprus and other European countries, the government is introducing new incentives to help increase the supply of properties for sale and rent. This is an idea worth considering.
The Greek government’s proposal under the renovation and letting program is that residential owners who are willing to rent out their apartments for at least three years will be entitled to a government subsidy of €4,000 for renovations for at least three years. of the year. 10,000 euros per unit. This applies to apartments with a maximum covered area of 100 square meters and a cost of no more than 300,000 euros.
The reason is that, increasing supply will help curb price increases and, at the same time, improve the housing stock and maintain control over undeclared income, which is quite common in Greece.
However, reading between the lines, it appears that the government grant will require the beneficiary to provide a mortgage – a serious problem if the housing has other burdens – and non-payment of rent by tenants is not addressed.
The problem of supply shortages, as already mentioned, exists in most European countries. The Danish government, in order to help low-income citizens, has allowed construction using containers, especially in areas close to higher education institutions. In other countries, including the UK, boats on rivers or canals are often used as housing.
Looking at the local housing market, circumstances are leading to some disconcerting developments. An example that has recently attracted attention in Limassol is a project with 12 studios built from containers, most likely without any permits, which are rented for 600 euros per month, mainly to immigrant residents. Such buildings are hardly suitable for living.
The following options exist to solve this problem:
- Reduction of VAT from 19% to 5% for real estate that is leased for a minimum period of 10 years. If the property is sold before the end of the 10 year period, the discount must be taken into account.
- Reviewing the unreasonably set minimum development size for residential units by at least 20-30% so that two-bedroom apartments can be 70-80 square meters rather than 100 square metres.
- Increasing the density of residential areas by 20%.
This is a complex situation in all respects, and a range of measures must be taken to resolve it.
