Hello,
As every month, we bring you the hottest real estate news from around the world.
This month we want to draw your attention to:
A. The increase of the minimum wage in Romania to 3,000 lei from 1/1/2023, and in Bulgaria to 780 leva.
B. New tax changes that took effect from 1/1/2023 in Romania and Hungary.
Enjoyable reading,
Ilan Leibovitch, Adv., and the office team
The Economist crowned Greece the strongest-performing economy of the year among OECD countries
This week Greece was named the top economic performer of 2022 among selected OECD countries by The Economist magazine.
The Economist ranked Greece on five key indicators in its analysis of the 34 OECD countries. Greece achieved the strongest result in output, consumer prices, inflation, share prices and net public debt as a percentage of GDP.
After Greece come Spain, Japan, France, Italy, Britain, the US, Germany and Estonia.
The Economist determined that despite the challenges affecting world economies this year, including inflation that squeezes household incomes and falling stock markets, Greece's performance was “a pleasant surprise”.
“For the first time in a long while, the economic party is happening in the Mediterranean,” the paper wrote, referring to other Mediterranean economies such as those of Portugal, Spain and Italy, which did well compared with traditional strongholds such as Germany, which did poorly.
Greece's GDP from the 4th quarter of 2021 to the 3rd quarter of 2022 rose by 2.2%; consumer prices rose by 7.8% from December 2021 to October 2022, with 82.4% of products rising by more than 2 percent.
Share prices on the Athens Stock Exchange rose by 0.8% in the first 11 months of 2022.
Greece reduced its net public debt by 16% as a percentage of GDP.
Bulgaria's minimum wage rose on 1 January
The Bulgarian government announced an increase of the gross monthly minimum wage by 9.9% to 425 euro (780 leva).
In annual terms, the increase amounts to 20%, Bulgarian Minister of Labor and Social Policy Lazar Lazarov said.
In October, European Union ministers gave final approval to a new directive on adequate minimum wages across the bloc. The directive aims to improve the level of statutory minimum wages and to strengthen collective bargaining mechanisms in order to reinforce wage protection.
At the same time it was published that the average annual full-time wage of an employee in Bulgaria was the lowest of the 27 European Union member states, at 10,300 euro - less than a third of the European Union average.
With an average annual salary of 13,000 euro, Romania came second from the bottom of the list, while the European Union average stood at 33,500 euro, according to publications of the European Union's statistics office (Eurostat). Luxembourg topped the list, with 72,200 euro, followed by Denmark with 63,300 euro and Ireland with 50,300 euro.
Tax updates in Hungary
The Hungarian parliament extended the reduced VAT rate of 5% on apartments until the end of 2024.
In addition, progressive local business tax rates (HIPA) were set for small businesses.
Romania and Bulgaria remained outside Schengen
Despite the efforts made by Romania's prime minister and president to bring the country into the European free-movement area - Schengen - they failed. The interior ministers of the European countries that are members of the agreement, which allows free movement of people and goods among them, voted in December against admitting Romania and Bulgaria, despite the support of the European Commission for their accession.
The opponents of accession were the Netherlands and Austria, which justified their opposition by citing the “soft hand” policy of Romania and Bulgaria toward illegal immigration.
Tax changes that took effect on 1/1/23
A number of changes and legislative updates were made in the taxation of micro companies:
A company with more than 20% of its income from management and consulting services (excluding tax, financial and accounting consulting services) will not be able to pay tax as a micro company (as a reminder, a micro company pays tax at a rate of 1-3% of turnover).
A micro company that crosses the 500,000 euro turnover threshold will become a company paying income tax from the quarter in which it crossed that turnover.
Forecast for the Romanian real estate market in 2023
The website imobiliare.ro compiled the real estate professionals' forecast for 2023.
The crisis caused by Covid, the war in Ukraine, soaring inflation and the energy crisis - all these disruptive factors led to a period of instability at every level and in every field. Accordingly, 2022 was the period in which investors became more and more cautious and paused briefly to reset expectations and risk appetite in response to a rapidly changing macroeconomic landscape. However, what the real estate market will bring, how it will adapt and how it will cope with the challenges are the questions on everyone's mind. In a brief real estate analysis of forecasts for 2023, most respondents - analysts and real estate professionals - remain positive about the sector's outlook and continue to be convinced of the relevance of their strategies and of the real estate sector's ability to adapt to changing circumstances.
Alexandru Pricop, managing partner of Residentialist at SVN Romania, argues that any result recorded in 2023 must be read with great caution in the broader context, that is, the results of recent years. “If, for example, we were flying at the level of the International Space Station and we will be at the level of a transatlantic cruising aircraft, that does not mean at all that the market has collapsed.” He also believes that the result recorded in 2023 must be adjusted to the context. “Housing sales in Bucharest and Ilfov stand, after the first 10 months of 2022, 9% up on the corresponding period in 2021, which was a peak year, with an increase of almost 37% over 2020, which in turn brought a 5.3% increase in home sales compared with 2019. So over the last three years we saw a rise in sales of almost 54%. I believe that in the coming period the pace of price increases will slow overall. Owners in the secondary market who do not align with the new market conditions will have no chance of selling.”
Ramona Ganea, senior manager at Sudrezidencial.ro, believes that the factors that drove prices up in recent years are real ones, such as the rise in construction costs, the lengthening of the periods required to complete construction caused by longer planning procedures, issuing of documents, or the long procedure needed to connect a new building to utilities, the labor shortage, and higher labor costs. Low demand in the market cannot persuade any investor to sell at a loss. “There will be adjustments, that is clear, because the profit on real estate investments is also calculated according to the speed of turnover, but I do not see the possibility of a drastic price drop, until construction material prices fall, until labor costs are settled and many of these real factors that drove the price rises disappear, at least not for properties under construction. What I am trying to say is that developers do not want to block trade by keeping prices high, but they also cannot do the impossible. The common interest of the real estate market is to trade, to have flow. That is also why a large share of developers are much more flexible in how purchases are made and have adopted different versions of interest-free payment options, giving everyone the possibility to buy without additional costs.”
At the same time, Ramona argues that 2023 will be a year of transition to a new real estate market, one adapted to buyers' current needs, a market that will supply high-quality real estate and, hopefully, a predictable and stable real estate market.
Daniel Crainic, marketing manager of Imobiliare.ro, predicts a first half of the year marked by the impact of various pressure factors (inflation, the cost of electricity, the cost of financing), factors that will affect buyers, who will stay relatively restrained in their purchase decisions. “Prices will be relatively stable, with small declines in certain market segments. In some places we will see good sale offers (the difference between contract prices in 2019 and 2020, compared with current ones, is as much as 30%). There will be buying opportunities for those with cash. In the second half of the year we will see an increase in the number of transactions due to the stabilization of apartment prices and inflation. The growth in transactions and the decline in supply (since fewer projects are being built and permitted) will lead to price rises, with effects felt especially in 2024 - 2025. Rents in the large cities will rise significantly in 2023, by more than 10%.”
“This is a market with less and less room for amateurs, since in times like these the professionals stand out,” says Mădălina Angheloiu, a broker and owner at RE/MAX, who draws attention to the factors that led to price rises in recent years and how this impact is felt. “The impact has been felt for several months already, because of the lower number of new offers entering the real estate market, some buyers are no longer eligible for the credit they needed, other buyers are afraid of the economic, political and social situation, and so on, and thus abandon the idea of buying, or perhaps prefer to wait for prices to fall.”
As for the real estate market in Brașov, the city with the fastest pace of real estate development, professionals in the field say that 2023 will not slow the pace of developments in this area.
“The rise in housing prices experienced in Brașov this year, especially in the third quarter, stems on the one hand from the fact that in recent years Brașov did not have strong residential development as happened in other cities in the country. The deliveries of new properties this year accelerated development in the city, and this process will continue next year as well. 2022 was a difficult year in terms of sales, rises in construction material prices and labor costs, combined with the existing demand - which is currently standing still a little - all of which will lead to an increase of at least 8%-10% in sale prices in the coming period, and economic instability, the situation in the energy market and the conflict in Ukraine are factors that will significantly affect the development of the real estate sector,” says Cătălin Mândru, representative of Qualis Properties (Brașov).
In the western part of the country, Gabriel Grecu, CEO and founder of FOXFORT Imobiliare, talks about people's level of confidence in the current economy and financial prospects. He sees this as a decisive factor with significant influence on the real estate market in the Timișoara area. “One of the factors that can significantly affect the real estate market in the Timișoara area is the level of consumer confidence. If people have confidence in the economy and in their financial prospects, they are more likely to be willing to buy a property, which can lead to an increase in demand and prices. If, on the other hand, confidence levels fall, consumers may be more reluctant to buy property, which could lead to a decline in demand and prices.”
Analysis: Ukraine's economic results in 2022 and the economic forecast for 2023
The analysis, written at the GROWFORD research institute, summarizes the state of Ukraine's economy in 2022: real GDP is estimated to have contracted by 31.5% to 40%, inflation rose to about 30%, exports fell by 40% and the unemployment rate reached 24.5%. According to an International Monetary Fund estimate, the budget deficit reached 20.5% of GDP, while real defense spending grew almost sixfold. For 2023 the author forecasts growth of 1% to 4.5%, inflation of about 22%, international budget support of 37-39 billion dollars and a gradual cancellation of the tax relief given to businesses during the war.
Source: Kyiv Post, Tatyana Bohdan
Accurate as of the issue date. Laws, tax rates and procedures change; check the current position before any decision.
Translated from the Hebrew original. עברית