Real estate developers worried over new taxes
Kids enjoy a part at a newly developed resident in Istanbul. Many real estate developers and property consultants are raising their voice against new taxes.Representatives of the Turkish real estate sector have expressed worry over new tax regulations that they say could increase the price of housing for consumers while leading to a fall in employment in the industry.
The new value tax (VAT) law, which will especially impact small luxury houses that are located in metropolitan areas, are smaller than 150 square meters and will be licensed by the end of 2013, could intimidate property buyers, according to players in the sector.
“This means almost all of the houses to be constructed in metropolitan urban areas will be subject to this regulation, and so will be taxed 18 percent,” Civil Engineers Confederation (IMKON) Chairman Tahir Tellioğlu said at a recent press meeting. “The tax raise in new residences will drive buyers to purchase second-hand houses to eliminate the tax raise.”
Turkey was recently listed as one of the most alluring markets for global real estate and third among emerging markets in an annual survey released by the Association of Foreign Investors in Real Estate (AFIRE).
‘2012 was hard’
However, Tellioğlu said 2012 was difficult for the sector, noting that the sector’s growth for 2012 was expected to be 1 percent – which is behind the Turkish economy’s growth of 3 percent.
The chairman said employment in the sector could fall from 4 million to 1 million as a consequence of the tax’s impact on sales.
Meanwhile, many companies in the sector have said they might seek to share the tax with buyers in order to soften the effects of the blow on the industry, daily Radikal reported.
Sector representatives estimate the number of licenses granted in 2013 will be just half of the 700,000 given in 2012 due to the new regulations. Houses licensed prior to the introduction of the new regulations, meanwhile, are expected to be completely sold out.
The tax regulation, which was implemented by the Finance Ministry at the beginning of 2013, revamps the VAT rate on real estate. With the changes, a tax of 8 percent will be assessed on houses under 150 square meters with a value of 500 to 1,000 Turkish Liras per square meter, while VAT of 18 percent will be levied on houses worth in excess of 1,000 liras per square meter.
The VAT for houses over 150 square meters will remain unchanged at 18 percent.
Turkey’s state-owned Housing Development Administration (TOKİ) said Jan. 8 that the properties under their management would not be exempt from the new regulation.