07.09.2022
Contractors are asking for a formula to keep most buyers safe from a revised bill to introduce a reduced VAT rate (5%) on first home purchases. OSEOK’s position is that the cost cap should be removed from the bill, emphasizing that the mass of buyers cannot be deceived.
OSEOK President Stelios Gabriel said that since some wealthy investors could benefit from the measure, the criteria for the average Cypriot buyer should not be tightened. “If anyone should be offended, then, of course, it should not be permanent residents of Cyprus, who make up a large part of the real estate market,” he noted in this regard, emphasizing that institutionally there should be empowerment of domestic buyers.
Cost ceiling creates discrimination
The controversy before the Parliamentary Finance Committee over a revised bill to introduce a reduced VAT rate of 5%, which creates a distinction between buyers of apartments and houses, was intense.
Among other things, the bill provides that 5% may be levied on the first 170 sq.m. with a maximum area of 220 sq.m. and with a maximum value of 350,000 euros.
For apartments, the reduced VAT will apply to the first 90 sq.m. for area up to 110 sq.m. and for an amount not exceeding 200,000 euros.
For their part, the contractors are in favor of removing the cost cap from the bill, emphasizing that the cap is sufficient to comply with the legislation.
“It is useless to limit the amount, since the cost of apartments or houses, even one area, varies significantly depending on the area in which they are located,” Mr. Gabriel pointed out, noting that he should not be fined by a citizen of Cyprus, because part investors could take advantage of the reduced VAT rate to purchase a primary residence.
OSEOK’s position is that the revised bill, which was introduced as part of social policy, significantly restricts transactions and puts potential buyers in a difficult position. However, it should be noted that the real estate market continues to grow dynamically, sales have grown by more than 30%.
As a reminder, real estate sales reached 972 sales in August this year compared to 724 in the corresponding month of 2021, which gave rise to the real estate market by 34%, while a similar increase (39%) was recorded in sales documents filed on Cyprus, in the period January – August 2022, which they reached 8,453 from 6,089 in the corresponding period last year.
Contractors estimate that the mobility recorded in the domestic real estate market during the year is due to the need for buyers to take advantage of a reduced tax of 5% on the purchase of a first home before changes to their detriment occur.
Prices for materials do not fall
The rally in the cost of basic building materials continues without end.
Despite the fact that an attempt was made to correct prices in late July and early August, construction costs nevertheless remain high, which creates problems for contractors and buyers.
“The new pan-European price ceiling measures announced for Russian natural gas have caused disruptions in international markets, keeping the prices of key construction products high,” explained the OEAC President, stressing that despite the fact that there was no stabilization period , no reductions were recorded in the real market.
A large increase in the main construction products occurred at the beginning of the year and continued until May. Recently, the Statistics Office Building Materials Price Index recorded an increase of 17.52% in July 2022 compared to the same month last year. For the main categories of goods, an increase was recorded in metal products (21.50%), minerals (16.35%), wood, insulating, chemical and plastic products (16.17%), mineral products (15.76%) and electromechanical products (11.90%).
