According to Reuters, EU officials didn’t agree on lower VAT for non-social residential units. As a result VAT for apartments over 120 sqm and houses over 350 sqm will be taxed by higher 19% VAT, while social residential units below mentioned size will be still taxed by lower VAT, which will in any case increase from 5% this year to 9% as of January 2008. Although this is another catalyst for price increase of residential units, these are not expected to follow similar trend as in the past. Consensus is that price of residential units in the Czech Republic will increase by up to 10%, while in the past it was approx. 20%.
We see EU decision regarding VAT for residential units in-line with the expectations.