The real estate agency imovendo suggests fixing the real estate commission as a solution in combating house price inflation.
Source: Pexels
Author: Redaction
The creation of a fixed rate of 5,000 euros in real estate commissions will reduce house prices by 3.89%, a measure that will have an impact in the fight against galloping inflation of property prices and would generate annual savings for Portuguese families of around €850M, according to real estate consultancy imovendo, in an analysis of prices transacted in the real estate market sent to
SUPERCASA Notícias.
The application of this measure would allow the Portuguese to save an average of €8600 (-3.89%) in the transaction of a property, also reducing the effort rate of families in mortgages.
"The property market needs more practical measures that really help the Portuguese to buy a home and to cope with the uncontrolled rise in prices. This proposal is an example of how inflation can be fought in the housing market without harming owners or buyers", stresses Miguel Mascarenhas, CEO of imovendo.
On average, estate agents operating in Portugal charge a commission of around 5% of the property value, which ends up inflating house prices.
"The regulation of the real estate tax to 5,000 euros, instead of a percentage tax whose value varies according to the price of the property, will allow the sale price of flats to drop by 3.89% - an average saving of €8,000 - and by 4.1% in houses, for an average saving of €10,200", stresses Miguel Mascarenhas.
VAT reduction
Another of imovendo's proposals to combat the high prices in the real estate market is the reduction of the VAT rate on real estate commissions from 23% - the current value - to 6%, which would result in a generalised reduction of property prices by 0.81%.
In practical terms, exemplifies the consultant, the owner of a three bedroom flat, worth 400,000 euros, who does the transaction through a traditional estate agency, will have to pay a commission of the final sale value of 26,212 euros (around 5% plus VAT), of which 4,654 euros will go towards paying VAT at 23%.
"The result of such a high fee is that the property will be put on the market for 426,212 euros, since at the time of sale the owner will pay 5% commission plus VAT, an amount that is not deductible in most cases", stresses Miguel Mascarenhas.
According to imovendo's analysis, with the VAT rate reduced to 6%, the same property would go on sale for the sum of 422,762 euros, or 3450 euros cheaper, allowing a saving of 0.81%.
"Real estate commissions in Portugal are among the highest in Europe, especially when compared to the Nordic market where commissions are between 1% and 2%. Lowering the sale value of the property without the owner losing out contributes to a better functioning of the real estate market, also allowing the reduction of the value of loans to buy and the greater profitability of the business."
If we consider the reduction of VAT on residential properties - and that 60% of real estate transactions take place through real estate mediation - this measure would result in a loss of annual VAT revenue of around €180M for the State. If the measure is taken only for used real estate and under the same assumptions, the annual VAT revenue loss would be €156M.
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