Real estate companies: The cancellation of the property acquisition tax would be correct

Prague - The abolition of the property acquisition tax proposed by Finance Minister Alena Schillerová (ANO) would be the right step that could stimulate the real estate market. This was stated by representatives of most real estate companies and developers contacted by ČTK today. However, they view the abolition of tax deductions for mortgage interest as a problem. While the property acquisition tax only applies to older apartments, the removal of tax deductions would also affect new buildings.

"This tax is a boogeyman for many clients, one of the obstacles to buying property. Its abolition will definitely help the real estate market. We believe it could attract 20 to 30 percent more interested parties than currently. Demand for properties is currently declining due to the pandemic, by as much as 50 percent," said Andrea Daňhelová, managing director of Fincentrum Reality.

Jan Hrubý, CEO of Re/Max, added that he has long considered the tax to be nonsystematic. Especially after the obligation was transferred from the seller to the buyer in 2016, effectively increasing the cost of acquiring property. "Abolishing it overnight is a unprecedented step, but we understand the government's effort to help the market. On the other hand, the abolition of deductible items from the mortgage seems to us like half a step back. It is a solution for short-term relief at the cost of eliminating long-term relief. Personally, I would prefer to keep deductions and eliminate the acquisition tax," Hrubý further stated.

In today's show on Partie TV Prima, Schillerová used a property worth five million crowns as an example. "The buyer will take a four-million crown mortgage and must pay a tax of 200,000 crowns right at the start. When applying for a mortgage deduction, at an interest rate of 2.28 percent, they deduct 91,200 crowns from the tax base in the first year, and receive 13,200 crowns. If they repay the mortgage over 30 years, they will receive about 187,000 crowns. We say, let them have 200,000 crowns right away," the minister added.

According to lawyer Jana Sedláková from Sedlakova Legal, it is not possible to consider the rates remaining at the same level for so long. "Currently, they are low, but after refinancing they may not be, and so even a client with a mortgage will lose out. From my perspective, this could actually result in a disadvantage for those who want to acquire their own housing," said Sedláková.

According to regional director of 4fin, Tomáš Trauške, the abolition of interest deductions for housing-related loans would be a step in the wrong direction. "In the Czech Republic, there is no state support for housing, and deductions are the only thing we have. Their abolition would affect not only the real estate market and housing-related loans, but especially young families with children," Trauške stated.

Vladimír Zuzák, director of Maxima Reality, added that the property acquisition tax should have been abolished long ago because it constitutes double taxation, which is really unpleasant due to often very high amounts. "Most developed Western countries do not even have this tax. If it is abolished now, the whole market will certainly welcome it. It is interesting, however, that it has not been possible for years and now suddenly it is," noted Zuzák.

"We are surprised by the idea of compensating the revenue from this tax by abolishing deductible items related to mortgage interest. The first affected in the market will be precisely the borrowers with mortgages, and quick assistance should be directed to them. If the minister plans to instruct banks to provide assistance to borrowers uniformly, she should also give banks tools to address such delays together with the Czech National Bank," added Tomáš Pardubický, director of the development company Finep.

Last year, the Senate already proposed abolishing the tax. However, the Chamber voted against the proposal in September. "The acquisition tax unnecessarily increases the costs of acquiring one's own housing and thus makes it impossible for some people to purchase their own home. Moreover, it is a taxation of money that has already been taxed," stated senator representative Raduan Nwelati (ODS) at that time.