Lower VAT for housing unlikely to unblock Bucharest real estate market

The measure, taken to counter the market deadlock caused by the financial crisis, only applies to new apartments smaller than 120 square meters and costing less than €100,000.

“We informed potential clients about the facilities of the ordinance as late last week, and people’s interest rose. We are talking about people who are not relying on loans, who have liquidities to pay for a home or who only need a small loan,” Bermo Group Marketing Manager, Flavius Esnican, told Business Standard.

Bermo Group is controlled by Imotrust real estate company, based in the northwestern city of Arad. Prices there amount to €800-850 per sqm, compared to €1,000-1,500 per sqm in the country’s capital.

Furthermore, the measure only applies to apartments already registered in the property registry, meaning they have to be finalized. Most people now buying an apartment that is to be finalized next year still have to pay 19 percent VAT.
“This measure, added to discounts offered by developers, can but increase demand. I cannot say that a sudden rise in the volume of sales will be felt, but this is yet another element in the chain of discounts,” according to Ilinca Paun, head of consulting company Colliers International residential department.

The decline of the residential market is confirmed by statistics released by public notaries, which show that the volume of real estate deals dropped 20 percent year-on-year in October 2008.