ČSÚ: Most new buildings belong to the category of social housing

Prague - Most new buildings in the Czech Republic belong to the category of so-called social housing. This follows from data provided to CTK by the Czech Statistical Office today. These constructions are subject to a reduced value-added tax rate, which has increased from five to nine percent due to government reforms starting from the new year. The tax from these new constructions is expected to bring the state treasury 2.3 billion crowns this year, Zuzana Chocholová from the Ministry of Finance's communication department informed CTK.
    New apartments and houses, which are subject to the increased 19 percent VAT rate since January, represent a significant minority of total housing construction in recent years. The Ministry of Finance estimates that approximately 600 million crowns will enter the state budget this year from the increased VAT rate on new buildings.
    For example, almost 99 percent of new houses and 94 percent of apartments would fall under the reduced tax rate from construction in 2006. As previously informed by Vladimír Toman from Orco Group, it is possible to expect that the supply of apartments not falling into the category of social housing will narrow even further.
    Since the beginning of the year, the nine percent reduced VAT rate applies specifically to so-called social housing. This rate includes family houses with an area of up to 350 square meters and apartments up to 120 square meters. The 19 percent rate applies to other apartments and houses.
    The increase of the lower tax rate since the New Year is primarily borne by customers, with developers seldom reducing their margins for it. "Every client-paid payment currently includes the applicable VAT rate," explained Pavla Temrová from Finep company. However, some development companies allowed clients to pay for unfinished apartments and houses as early as last year to save costs.
    The expected increase in VAT and rising interest rates contributed to an increase in demand for new apartments in the last months of the previous year. Nevertheless, most real estate market experts do not expect that the tax increase will cool this year’s demand for new housing.
    The increase of the reduced VAT rate from five to nine percent is expected to bring about an additional approximately 26.5 billion crowns to the state treasury this year.
    
New apartments and houses that would today fall under the nineteen percent VAT rate, in percentage

Year	2004	2005	2006
Family houses over 350 square meters	1.09	1.14	1.33
Apartment buildings over 120 square meters	6.06	4.79	6.08