Developers association warns against VAT increase

The Cyprus Land and Building Developers Association (LBDA) warned against the potential rise in VAT for property purchases, saying that this would harm both the economy and first-time buyers.

The proposed legislation would amend the current VAT structure, which stipulates that the first 200 square metres of a buyer’s primary residence would have a VAT of 5 per cent, bringing the eligible area down to 140 square metres.

The association considers that the proposed amendment “is moving in the wrong direction”, adding that the change will make conditions more adverse for potential property buyers.

According to the association, completed or under construction houses that have an area bigger than 200 square metres will not be able to be sold to the beneficiaries of the reduced VAT rate.

Moreover, the revision of already designed or licensed houses, in order for them to comply with the changed legislation, will significantly reduce the product offered in the market and will create pressures for price increases.

The association says that the additional VAT cost for the purchase or construction of a primary residence that is between 140 and 200 square metres in size, which is affected by the 19 per cent tax rate, combined with the increase in construction material prices, will push property prices higher.

“This will make the purchase of a new house difficult, especially during a time when more and more Cypriots are unable to take this first step,” the association said, adding that financially vulnerable people will be particularly affected.

The association also explained that as a result of the amendment and the aforementioned consequences, “many young or large families will be forced to cancel their plans and limit their purchase to homes with fewer square meters”, adding that home ownership will become a privilege for those who can pay the added VAT cost.