Articles / News
Real Estate: How to turn a problem into an opportunity. By Alexandros Moraitakis
The "easy solution" of real estate taxation and how it affects the economy and the middle class. Movements that can change the image and increase values. What should be done with ENFIA. Writes the Economist Mr. Alexandros Moraitakis, former Member of Parliament for ND, Candidate of Athens.
Published on the website EURO2DAY.GR and in the OWNERS NEWS
In Greece, real estate is considered the "easy solution" for finding tax revenue. Since the houses do not have legs, they can be taxed in various ways, sometimes with ENFIA and the "salty" municipal fees, sometimes with all kinds of "hikes" and of course always with high transfer costs.
In fact, because the property owner is considered by definition "bad rich", the government has taken care to tax him with a "social sign", through another European originality: Instead of ENFIA being imposed on each property separately, it is imposed on each owner-taxpayer , as a result of which those who have όσο something more than a tile are disproportionately high. Another measure of the disappearance of the middle class.
The side effects are already very big.
* During the crisis, property prices have fallen around or even over 40% based on data from the Bank of Greece (see table below).
* Property owners are being taxed in an effort to preserve what they acquired with the blood of themselves, their parents and grandparents.
* Many large companies operating in the wider construction industry are highly indebted, laying off employees and loading banks with red loans.
* Domestic cement consumption is expected to reach a new low of fifty years this year, despite any demand in the field of tourist accommodation.
* Banks have -without wanting to- own more than ten thousand non-functional properties, a number that is constantly increasing, as most of the properties that are put up for auction end up in the banks again…
On the other hand, real estate constitutes in Greece - by a large margin - the largest percentage of household wealth. In contrast to the US and many European countries - where there are large investments in shares, bonds and other investment products - in Greece we have focused "traditionally" on real estate, with a very large percentage of Greeks owning and many of our fellow citizens of small and medium income to own more than one property.
What does this mean; That we can turn the problem into a great opportunity. That is, if we manage with a series of measures to increase housing prices and put in the process of recovery the construction activity, they will greatly increase the wealth of all Greek households - from the poorest to the richest - so immediately (will increase the valuation of their property), as well as indirectly (the demand for a number of industries and for over a hundred categories of professions will be stimulated).
If, for example, we manage to recover real estate prices by 30% in four years, then the current owner of two houses worth 200 thousand euros, will have earned 60 thousand euros, or otherwise what a household would have earned in ten years, if it had managed to increase his annual income by 6,000 euros. At the same time, many new jobs would be created, while there would be benefits for both the Greek government and the banks.
To do all this, we need to move gradually with a wide range of coordinated movements, among which I would point out the following:
* The stabilization of the country's public finances. The more the "country risk" is reduced (often, this is seen through falling interest rates on long-term government bonds) the more positively real estate prices and rents are affected. Therefore, fiscal prudence measures are needed, through the reduction of unnecessary expenditures and through the rationalization of the public sector.
* The creation of positive expectations for the economy, through an institutional framework that rewards entrepreneurship and attracts investment. Every new company that comes to invest in our country from abroad will need offices, warehouses and branches for itself, as well as houses for its executives.
* The state should transfer resources from public consumption to public investment, which in combination with the NSRF funds, can do κάνουν miracles. The extension of the metro lines in Athens, for example, has already started to raise property prices in many areas, although it will take a few more years until the project is completed.
* The undertaking of individual development policies, which will function as e.g. the "golden visa" and the "AirBnB". A typical example is the institutionalization of an attractive framework for the installation in Greece rich