Czech Republic, Poland and Cyprus are against the rest of EU countries and blocked a change of VAT rates. Negotiations will continue on Friday, 27 January. The change refers to prolonging the exception of lower VAT for residential construction, reconstruction and heating. A current rate of 5% is valid until the end of 2007 and Czechs are trying to extend the exception until 2015. A possible hike to 19% will significantly increase the demand for apartments before the end of the “lower VAT period”. An ongoing drop of demand should stabilize over a two-year horizon. We see this news as neutral for today’s trading and reiterate our Buy recommendation.