MARKET IS FINALLY ALIVE, AND MODERN CROATIA INTRODUCES TAX!

13th international conference on real estate development

The abolition of tax relief when buying a first property, reduced tax rates for buying real estate, housing subsidies, changes and supplements to the Law on Construction, the introduction of a property tax instead of the current municipal fee, and the introduction of construction rent and contributions for building communal infrastructure instead of the municipal contribution are all the news that are already being implemented or will be implemented from next year and have a direct impact on the real estate market.

ROCK'N'ROLL

- This is like rock'n'roll on the market, just when we came to the soothing phase - Dubravko Ranilović, president of the Association of Real Estate Business, stated at the 13th international conference on real estate development in the Esplanade Hotel in Zagreb, commenting on how, for the first time since 2008, the number of real estate transactions was halted last year, and the market has finally come to life.

It has happened that the growth of newly built property prices has led to a small increase in old building prices in certain locations. Additionally, the decline in the number of subscribed housing loans has been halted, and there are more and more new projects. However, the experts gathered at the conference organized by the Filipović business consulting company pointed out that the market lacks projects for middle-class citizens, and invited investors to make a good plan before each project, to investigate the market, and to consult with the industry.

The abolition of tax relief when buying a first property was seen as an inadequate measure to replace, as it has slowed down the market as many buyers have decided to wait for the subsidies, and it is uncertain whether they will receive them. The comment on the property tax was also unavoidable, which they believe should not be introduced in its current form, especially in the current economic situation and on the current real estate market, because the local authorities will be able to spend the revenue from this tax as they see fit, while the current municipal fee was used exclusively for a specific purpose.

The other reason for the unreasonableness of the tax is the chaotic state of land records and the uneven cadastre, and one could even hear that there was too much freedom given to local authorities to decide on the value of points and coefficients for calculating the taxable basis.

The agencies believe that this leaves cities and municipalities room for manipulation and the ability to increase the tax from year to year, depending on their budget deficit. The amount of the property tax will depend on the square meters, zone, purpose, age, and condition of the property. Therefore, the tax should be higher for newer and refurbished properties or luxury ones, but how much it will be is not yet known, as the value of individual points and coefficients will be determined by local authorities.

BAD COMMUNICATION

Professor Josip Tica from the Faculty of Economics believes that no city or local parliamentarian will raise their hand for a high tax rate, as it would mean consequences at the elections.

- We introduce the tax because others have it, Croatia actually wants to be modern in the fiscal sense. However, it is unclear with what purpose we introduce it. The most important function of the tax is to prevent a tax invasion in the taxation of rental income, because it is impossible in a country like Croatia to identify all those who earn rent - Tica said and added that it is not important how the tax will be called, but whether there will be democratic control over the decisions on its rate and how much it will be, and whether it will meet its economic goals.

According to agencies, it should be limited to the total amount of possible annual tax revenue in relation to the value of the property, or introduce a tax on the entire property. When it comes to construction rent and contributions for building communal infrastructure, Tica clarified that a poorly communicated decision was made to the public, but the concept is clear: if you build in the city center where there is infrastructure, the tax burden is less, and if you build in the "desert," the contribution is a bit higher.

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