In Poland, tensions are increasing around the draft bill on cadastral tax, which, although lying in a government drawer, already creates immense controversy. If this tribute comes into force, the owners of the 3rd and subsequent apartments will face a hard choice and the consequences will be felt by all tenants. Experts inform against 2 key phenomena: a sharp increase in rents and the deliberate degradation of the housing stock. This is not only an economical revolution, but besides a serious threat to the standard of life of millions of Poles. Will the government take a step that can drastically change the Polish rental market?
Why will the owners halt repairing? Degradation mechanism
The key presumption of cadastral taxation is its relation with the value of the property, not just with its metres, as is the case in the current property tax. Portal Netherlands.org, analysing the experience of countries where specified a strategy already exists, points to a worrying trend: owners frequently avoid upgrading their properties. The mechanics is simple and brutal: the better the standard of the apartment, the higher its valuation by the valuers, and hence – higher cadastral tax. This leads to an economically rational, albeit socially damaging decision to deliberately keep premises in worse condition.
In Europe, cadastral taxation rates vary. According to Abc-Taxes., most commonly are 0.5 percent to 3 percent of the property value. In Germany, the average rate is about 1.9 percent, and in Lithuania or Latvia between 0.2 and 0.6 percent. If even a conservative rate were accepted in Poland 1 percent of the property value per year, the loads would be significant. For a bachelorette PLN 300 thousand The yearly taxation would be PLN 3 thousand. In case of large flat of value 800 1000 PLN It would be already 8 1000 PLN A year. home owners would pay the most – from the property valued at PLN 2 millionThe taxation could be taxed until PLN 20 thousand. For comparison, the portal teksmeritum.pl indicates that the current property taxation for an flat worth PLN 300 1000 is just about PLN 100 per year. The difference is colossal and straight proportional to the hazard of degradation.
Rent up, standard down: What does that mean for tenants?
The tenants, which are a large part of Polish society, can experience cadastral taxation in 2 ways. First of all, rent owners almost surely They'll shift extra costs to tenants.. Portal flatte.app warns that this may lead to a sharp increase in rents and a deterioration in housing availability, especially in attractive locations where property value is highest.
Secondly, and this is the biggest threat, owners will deliberately avoid renovations and modernization. Any investment in the standard flat – a fresh installation, window replacement, or refresh of the bathroom – would increase its value and thus tax. In practice, this means that apartments for rent may become neglectedkept in a ‘minimum residence’ state. Thus, tenants can pay more for little standard locations, and negotiating any improvements will become almost impossible. However, there are alternate models specified as the French or Belgian one, where the taxation is counted on the "potential income" from the property alternatively than its value, which does not discourage renovation. The Irish system, where taxpayers themselves declare value, but with penalties for understatement, is another example of flexibility, says ♪ I don't know ♪.
Difficult choices for owners: Sales or degradation?
If you have 1 or 2 apartments, you can relax – the task only provides for taxation from the 3rd premises, with exemptions for families with children. However, for investors with many properties, the situation will be dramatic. 1 percent per year of 2 additional housing units worth PLN 500 1000 each 10 1000 PLN taxation per year. As he notes Asmo-solutions.pl, the current property taxation does not weigh the condition of the building; the cadastral will change that.
The owners will gotta make tough decisions. The first option is sale of part of the propertyto avoid taxation. Second – accepting additional, crucial costs. The third, most disturbing, is deliberate degradation of housing standards. Avoiding the replacement of old windows, neglecting the electrical strategy or giving up any improvements that would increase the value of the property can become an economically rational, albeit socially harmful choice. In utmost cases, owners may even consider deliberately lowering the standard before an expert visit, e.g. by dismantling air conditioning or installing cheaper equipment to minimize valuation and tax.
Long-term marketplace impacts and alternate paths
The introduction of cadastral taxation can have far-reaching consequences for the full housing marketplace in Poland. Experts estimation that the marketplace may be further hit from 100 000 to 150 000 apartments. On the 1 hand, specified supply could theoretically reduce property prices, which would be beneficial for buyers. On the another hand, a large part of these premises may be in bad method condition due to the fact that the owners have not invested in maintaining them for years to avoid higher taxes.
This can lead to a emergence two marketplace segments: inexpensive housing in bad condition and costly premium premises. The average class of housing, the most popular so far, may vanish as owners will avoid investments that would place their properties in this segment. To minimize negative effects, experts, including Atriumduo.pl, they propose alternate solutions: progressive rates, taxation of speculative real estate, relief for little affluent persons, or a French-based strategy where taxation is based on possible rental income alternatively than property value. Reliefs are besides considered for owners who invest in improving housing standards, e.g. taxation exemption after a major renovation.
Although the task is ready, its implementation is not bound. Minister Katarzyna Pełczyńska-Nałęcz from Poland 2050 stressed that the organization would not enforce the taxation without the approval of the coalitions. However, global force is increasing: the cadastral taxation recommends both the global Monetary Fund and the OECD to Poland. In view of the advanced budget deficit, the anticipation of expanding taxation revenues may prove very tempting to the government. If the taxation is introduced, tenants and housing owners should prepare for crucial changes in the rental marketplace that can specify its form for years. Monitoring this situation is crucial for everyone who is active in the real property marketplace in Poland.
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The cadastral taxation is in the drawer. Experts: rents will go off, apartments will go down!
