Hello,
The holidays are behind us, and as every month we are happy to bring you the hottest international real estate news from around the world.
We noticed that during the holiday period the Israeli media devoted quite a lot of attention to the growth in real estate investment abroad (our secret has been out for some time), and we have gathered some of the articles on the subject for you.
This month we would like to draw your attention to:
A. The rise in rents in Greece and the government's fight against Airbnb.
B. Changes to the apartment purchase subsidy program in Hungary starting January 1, 2024.
C. The Romanian government is considering raising VAT on new apartments to 9%.
D. Cyprus and Greece have become a destination for real estate investment by Israelis.
Happy New Year and enjoy the read,
Adv. Ilan Leibovitch and the office team
Alpha Bank report - Airbnb has a direct effect on apartment prices in the country. The Greek government is trying to curb the phenomenon with several measures that will take effect from January 1, 2024
According to an Alpha Bank report, for the period between 2013 (when the law enabling a Golden Visa for real estate investors in the country was enacted) and 2022, there was a parallel growth between the number of units listed for short-term rental on the Airbnb platform and purchases of properties.
In 2022, real estate purchases by foreigners totaled 2 billion euros, whereas for comparison, in 2013 total purchases by foreigners came to 156 million euros. In parallel, in 2022 more than 73,000 properties for short-term rental were registered in Athens, Thessaloniki and Crete, while in 2016 fewer than 10,000 properties were registered in the same destinations.
The report notes that another effect of the development of the short-term rental market in the country is that it may limit the supply of real estate for long-term rental and lead to higher rents.
It should also be noted that a check carried out by the European Commission across the 27 EU member states found that in Greece 11.3% of the properties purchased were intended for short-term rental.
The Greek government is trying to combat rising long-term rents, and as part of this, several changes are expected from January 1, 2024:
1. Change to the definition of short-term rental - short-term rental will be defined as a lease or sublease for a specified period of less than 60 days, of a property advertised on a digital platform, provided that no services other than accommodation and the supply of bed linen are provided.
2. A new Activity Number Code (KAD) - all those engaged in short-term rental business activity will be required to start or add an activity based on the new KAD.
3. A requirement to register as a business for those who rent out 3 or more units through a digital platform on a short-term basis - this means they become a kind of legal entity, which as a result will increase their insurance contributions and property tax, and VAT will apply to them from the first apartment.
4. Imposition of VAT, a resident tax and a climate change impact tax that replaces the residence tax.
5. Stricter supervision - based on data from the electronic platforms, with sanctions imposed in cases of tax evasion or the provision of services other than accommodation and bed linen.
6. Tougher penalties - in the case of failure to register in the register of short-term rental properties, the fine is made stricter and is set, depending on use, at 50% of the gross income of the last tax year and at least 5,000 euros (today the fine is flat and comes to 5,000 euros). In the case of a repeat offense in the next use, the above fine will be doubled.
7. Renting out all the apartments in an apartment building - where all the apartments in an apartment building or residential complex are available for short-term rental, it will be considered a tourist lodging, which requires the appropriate permit.
As a result, a total of 7,440 individuals and 5,297 legal entities with 57,696 properties (34.2% of the properties) will be required to pay VAT and additional taxes, unless they choose to convert some of the properties to a long-term lease. It should be noted that 4,100 individuals have exactly three properties (and a further 1,687 individuals have four properties).
Finally, from now on all real estate purchases and sales will be carried out only by banking payment methods. In this context, real estate purchase and sale contracts must state that the transfer price is paid exclusively by banking payment methods. The goal is to eliminate the possibility of buying real estate in cash, which perpetuates tax evasion and money laundering.
VAT on new apartments may rise to 9% from January 1, 2024
The Romanian Ministry of Finance published a bill that includes a series of new fiscal and budgetary measures, including changes to the reduced VAT rate that applies to housing.
Whereas until now a VAT rate of 5% applied to homes whose value does not exceed 600,000 lei (excluding VAT), which is about 120,000 euros, from January 1, 2024 it is proposed to raise it to 9%.
The 9% VAT rate will apply only to homes with a maximum usable area of 120 sqm, excluding buildings whose value, including the land on which they are built, does not exceed 600,000 lei, excluding VAT, purchased by individuals (not legal entities/companies) separately or jointly with other individuals.
Homes priced above 600,000 lei will continue to be subject to VAT at a rate of 19%.
The Hungarian government is changing the real estate market
Since 2015, the Hungarian government has offered a subsidy for apartment purchases by young families under a program known as The Family Housing Allowance (CSOK) scheme, under which a family in which the spouses are under 40 with 3 or more children can receive a subsidy of about 32,000 for purchasing a new apartment.
The Hungarian government announced that it is canceling the program from January 1, 2024. It is expected that in the coming months, until the end of the year, families that meet the conditions will sell the properties they own and look to buy a larger apartment.
Israelis are storming Cyprus and Greece: “the next startup nation”
The article deals with the growing interest of Israelis in Cyprus and Greece, both as a destination for real estate investment and as a place to live and do business. According to the article, in the World Intellectual Property Organization's innovation index Israel fell from 8th place in 2019 to 16th place in 2022, while Cyprus rose from 23rd place to 20th place, and in the year before publication about 9,800 new high-tech workers received a work permit on the island. It also notes that more than 3,000 Israeli families now live in Cyprus, compared with a few dozen Jewish families in 2000, and that Greece's minister of development and investments noted in January that Israelis are the largest group of real estate investors in Greece. Professionals interviewed describe an increase in Israeli investment in both markets and a change in the investor profile, alongside price increases in recent years.
Source: N12, Carmel Liebman, 28.9.2023
“A social powder keg”: Germany's construction industry on the verge of collapse
Germany's construction industry, which accounts for about 12% of GDP, is in crisis amid inflation, rising interest rates and more expensive raw materials and energy: in the first four months of 2023, 437 construction and real estate companies filed for insolvency, an increase of 20% compared with the corresponding period in 2022. According to the article, the government elected in 2021 set a target of 400 thousand apartments a year, while in the previous year about 295 thousand units were actually built, and the industry estimates that the real need is about 700 thousand apartments a year. Industry sources also point to regulation and bureaucracy - including the rent cap in sought-after areas, green building requirements and different building rules in each federal state - as factors that make construction more expensive and slow it down, and they call on the government for further relief.
Source: TheMarker, 10.9.2023
Are interest rates and prices choking you? The solution Israeli real estate investors found
According to the article, the stagnation in Israel's real estate market, high interest rates and the political and social situation are leading more Israelis to consider buying property abroad, mainly in Greece and Cyprus; according to JLL data cited in it, Israelis invested about 2.3 billion dollars in real estate abroad up to the end of last year. A survey by the Geocartography group found that about 20% of households in Israel have begun to take an interest in buying an apartment abroad, and about 60% of those interested attribute this partly to the political situation as well. According to the survey, Greece leads in interest (about 38%), followed by the US, Cyprus and Portugal, and about half of those interested are aiming for an investment of up to NIS 800 thousand. Dan Kachenovsky, CEO of Merkaz Hanadlan (Real Estate Center), warns in the article of the expected harm to the construction industry in Israel and of the risks of investing in real estate abroad.
Source: ynet, Hila Zion, 17.9.2023
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