A prospective buyer examined an empty flat in Helsinki in June 2015. The Finnish government on Thursday revealed it intends to do away with the transfer tax exemption granted to first-time buyers, a move that, according to opposition members, makes it even more difficult for young people to become home owners. (Jarmo Stenmark – Lehtikuva)
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THE GOVERNMENT of Prime Minister Petteri Orpo (NCP) on Thursday unveiled a proposal to scrap the transfer tax exemption granted to first-time home buyers in order to partly pay for a wider lowering of the tax rates.
First-time home buyers who meet certain criteria, such as being 18–39 years old and acquiring at least a 50 per cent stake in the property, will be exempt from the tax until year-end.
The government is set to, on the one hand, remove the exemption and, on the other, lower the transfer tax on buildings and real estate from 4.0 to 3.0 per cent, on shares in housing and real estate companies from 2.0 to 1.5 per cent, and on other shares from 1.6 to 1.5 per cent. The proposal can create benefits worth thousands of euros for non-first-time home buyers: the transfer tax on a flat worth 200,000 euros will drop from 4,000 to 3,000 euros and that of a single-family home worth 300,000 euros from 12,000 to 9,000 euros.
The adjustments are set to enter into effect on 1 January 2024, although the lower transfer-tax rates are to be applied retroactively to transactions made on or after 12 October 2023.
“We hope […] that by lowering the transfer tax, which has been regarded as very harmful for real estate trade, will invigorate real-estate sales,” Orpo stated to YLE on Thursday.
He conceded that the proposal will undermine the position of aspiring home owners but promised that the government would offset the negative effects with amendments to ASP, the bonus scheme for people saving for their first home.
Joona Widgrén, an economist at OP Financial Group, stated to the public broadcasting company that the proposal could re-ignite activity in the dormant real estate market.
“It’ll very likely slightly increase people’s willingness to move. People will be more likely to be ready to move to a house that suits them better when the transfer tax drops,” he analysed. “Given that this will enter into effect at the start of the year, this could slightly boost first-time home purchases in the autumn and early winter.”
The proposal has stirred up concerns in both industry and political opposition about the ability of young people to become home owners.
“It’ll certainly make life more difficult for people who were eager to become home owners,” summarised Jouni Vihmo, the chief economist at the Confederation of Finnish Construction Industries (RT).
Members of the Social Democrats pounced to criticise the proposal during the question-time debate in parliament on Thursday.
Chairperson Antti Lindtman reminded that the average age of first-time home buyers have continued rising steadily while high interest rates are making the transition from renting to owning more difficult for many.
“Now you’ve dropped another bombshell. You’re planning on introducing a new tax to first-time home buyers. Why are you once again singling out young people?” he grilled according to YLE.
Tytti Tuppurainen, the chairperson of the Social Democratic Parliamentary Group, similarly described the proposal as a hard blow to young people who are dreaming about home ownership.
“Is this the kind of intergenerational fairness that the government is pursuing?” she asked.
Minister of Climate and the Environment Kai Mykkänen (NCP) pointed out that the proposal could to increase circulation in the real estate market by up to seven per cent, according to an assessment by the Ministry of Finance. The government, he added, will present a proposal for comments concerning the price cap in the bonus scheme for first-time home buyers next week, with a view to revising the scheme by next spring.
“The plan is to develop it into something that gives many a better opportunity to get their hands on their first home,” he summed up.
Aleksi Teivainen – HT
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Source: www.helsinkitimes.fi
