VAT hike boosts real estate deals; North Bucharest Investments sees 40% more in December

The VAT increase accelerated property transactions before the end of 2023, while lower numbers of building permits and favourable financing conditions supported demand for existing properties. Real estate sales saw a significant increase in the last month of last year, official data from the National Agency for Cadastre and Real Estate Publicity (ANCPI) showed on 15 January.

Bucharest saw a 30% increase in sales in December compared to the previous month. There were 15,454 transactions in December, compared to 11,916 transactions in November.

This positive evolution shows an increased interest in the real estate sector in Bucharest and the confidence of potential clients in the evolution of the real estate market in the Capital.

“We used to have a calmer period in December every year, with fewer transactions. The last month of 2023 was atypical. We had a remarkable development in North Bucharest Investments. In December we had an increase of 40% compared to November, and the northern area of the capital was the most active in terms of sales, being dominated by investors buying with their own funds. Anticipating the 4 percentage point VAT increase, which would add on average more than 5,000 Euro to costs, many clients were motivated not to postpone the decision to purchase a property,” said Vlad Musteață, founder of North Bucharest Investments.

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The increase in sales in December 2023 was also significant when compared to the official December 2022 data – and was 17%. 15,454 properties were sold in December 2023, compared to December 2022, when 13,254 units were purchased.

Key factors contributing to this increase include:

– Change in VAT rate:

The announcement of a VAT increase for real estate in 2024, from 5% to 9%, incentivized potential buyers to complete purchases before the new rate takes effect, contributing to the increase in sales in Q4 2023.

– Number of building permits:

A decrease in the number of new building permits was observed, which limited the supply of new properties on the market. This supply constraint has resulted in increased demand for existing properties.

– Lower mortgage rates:

Banks have offered lower rates on home mortgages, making property purchases more affordable for buyers. This bank policy has made it easier for more real estate transactions to take place.

The Bucharest residential market was significantly influenced by these factors in the last quarter of 2023.

“Looking ahead to 2024, these trends are expected to continue to shape the market. VAT increases may initially temper demand, but in the longer term, limited supply of new construction and favourable lending conditions will continue to drive the market. It is very important that developers and investors respond nimbly to these changes, adapting to the evolving demands of buyers,” added Vlad Musteață, founder of North Bucharest Investments.

The NBI Group recorded more than 400 real estate transactions in 2023 in new blocks in the northern part of the capital. In the last year alone, the company’s turnover doubled from 20 million lei to 42 million lei.