Obtaining guest investor residency through real estate purchase
What does VAT increase mean regarding the Budapest real estate market?
Zsófia Szabó, 2020. 01. 23.
Back in 2016 the Hungarian Government decided to reduce the VAT of newly-built estate sales from 27% to 5% in hopes of livening the real estate market. The initiative provided the desired results and the market rose: the dropping number of constuctions suddenly and drastically jumped on top.
The program has reached a turning point on 1st of January, 2020: once again the valid VAT rate of newly-built estates is 27%. This has caused a stir in the building industry, given that these provisions make the financial implications of unfinished constructions shift greatly. The reasoning behind late handovers are often traced back to the lack of materials or professionals, which is strongly related to the boom in the building industry. Those affected by the unfinished constructions expressed that they do not feel comfortable paying the impact of the initiative, thus the government decided to open up a loophole due the pressure.
In conclusion, estates that had an approved construction permit by 1st of November, 2018 and are yet to sell are still selling with a 5% VAT rate until the very end of the year 2023, like these apartments:
What does this mean?
The program has reached a turning point on 1st of January, 2020: once again the valid VAT rate of newly-built estates is 27%. This has caused a stir in the building industry, given that these provisions make the financial implications of unfinished constructions shift greatly. The reasoning behind late handovers are often traced back to the lack of materials or professionals, which is strongly related to the boom in the building industry. Those affected by the unfinished constructions expressed that they do not feel comfortable paying the impact of the initiative, thus the government decided to open up a loophole due the pressure.
In conclusion, estates that had an approved construction permit by 1st of November, 2018 and are yet to sell are still selling with a 5% VAT rate until the very end of the year 2023, like these apartments:
What does this mean?
- If we look at two properties with similar features, the one permitted after November 2018 is 22% less beneficial if the increased VAT is expected from the buyer.
- The VAT increase steepens the price of newly-built estates, so the demand will likely shift in favour of the properties which has been already used, so there is a high chance these prices will go up as well: if you are considering to sell, now is the time!