New Finance minister proposes to include all new residential construction with two floors at the most to so called “social housing”. Note that, from beginning of 2008, VAT for residential construction should fall into the regular 19% rate from the current lower 5%. The original definition for “social housing” of the former government was apartments to 90sqm and houses to 150sqm. Social housing is subject to approval of European Commission. The government should discuss the Minister’s proposal today (December 6).
Lower VAT would be positive for real estate developers and would lower the expected drop of demand for residential units after 2007. We see this news as neutral for today’s trading and would wait for final outcome of this issue.