With property prices falling by 32 per cent since 2010, Greece has now reduced its tax on the sale of properties to just three per cent. Previously anyone buying a commercial or domestic property in Greece had to pay eight per cent on the first €20,000 of the property’s value and 10 per cent for amounts beyond that.
The new unified tax now also applies to vacant lots, sports fields, farms and agricultural land and is not restricted to income generating property. Furthermore the tax applies to a greater section of society whereas, under the previous system, only those with larger property or land holdings were required to pay the tax.
The controversial new regime has been imposed on Greece by the European Union, European Central Bank and the International Monetary Fund as a condition of providing bailout funds during the country’s six years of deep recession. First year estimates say the three per cent tax should raise around €2.65bn, less than the €2.90bn collected under the old system, with the budget shortfall being made up by cuts to government spending.
According to the country’s central bank property prices have suffered a catastrophic collapse during the financial crisis, with the commercial sector hardest hit. The biggest fear now, says Ioannis Revithis, the head of Greece’s real estate agents association Omase, is that “this law will lead to the failure of the entire property market, and that instead of reducing the excessive taxation, it will only add to the number of already stalled transactions”.
Whichever way the long-term market reacts, foreign investors have become the immediate winners. Since the turn of the year buyers from non-EU countries are freely being offered Greek residence permits to allow them to purchase or rent property worth over €250,000, prompting fears of a further value slide.
Officially it’s hoped the new levy will provide a boost to Greece’s budget revenues by rolling several taxes into one, but many claim it will force a stumble in the economy’s expected rebound, driving dented property prices even lower.
“This year will be crucial for real estate in Greece,” said fellow Omase member, Michalis Georgiou. “Prices will drop by up to 20 per cent, benefiting foreign buyers yet again. Over-taxation has always caused property devaluation, which works to the advantage of foreign investors who want to buy at very low prices,” he added.
Nor are Greece’s banks happy. The Alpha Bank argues that the tax is not being fairly imposed on all property owners across the country, with excessive emphasis placed on urban real estate. “It is absolutely certain that this tax will hinder a recovery of the property market and the 2014 economy, despite the very favourable consequence that the significant reduction in transfer tax may first appear to have,” claimed a bank report.
Not surprisingly the tax reduction is being hailed as vital to recovery by the Greek government in a year which sees the country holding the EU presidency. “At the end of our presidency, Greece will be back on its feet and Europe will have taken a major step to exit its crisis,” Prime Minister Antonis Samaras promised. “What was once Europe’s ‘weakest link’ will be a symbol that Europe works, Europe can, and Europe will make it.”
Previous Post
Sale of Distressed Dublin Pubs Shows No Sign of Easing
