April 30, 2020 / 6:11 PM / 25 days ago

Czech government cancels home purchase tax to spur market

PRAGUE, April 30 (Reuters) - The Czech government has approved scrapping a 4% tax buyers pay when buying property, Finance Minister Alena Schillerova said on Thursday, as part of efforts to galvanise a market first slowed by steep price rises and now hit by the novel coronavirus.

Low interest rates, rising incomes and administrative bottlenecks in building new housing drove up prices in the Czech Republic in recent years, leaving many, especially younger people, unable to enter the market.

The central bank had also put tougher loan recommendations on borrowers, demanding higher downpayments.

The tax is applicable on purchases of existing apartments and homes, not on new builds, although the ministry said it had been a burden especially to younger people needing more upfront cash to get in the housing market.

Under the proposal, which lawmakers still need to approve, tax write-offs on mortgage interest payments will be maintained until the end of 2021, Thursday’s statement said.

The ministry estimated cancelling the tax would cost the budget 10.6 billion crowns ($428.02 million) in the remainder of 2020 and 13.8 billion in 2021.

The government has increased its planned central state budget deficit target more than sevenfold for 2020, seeing a record shortfall of 300 billion crowns as it aids people and business hurt by the economic drop caused by the coronavirus outbreak and suffers losses in state revenue.

$1 = 24.7650 Czech crowns Reporting by Robert Muller and Jason Hovet; editing by Barbara Lewis

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