Home.co.uk
Home.co.uk

News: Euro transaction fee scandal

Fri, 28 Sep 07

Buying a property in Europe can cost up to 25% of the purchase price in overall transaction fees... 

Punitively high round-trip transaction costs (total cost of buying and selling a property, including all taxes and fees) are incurred in Russia (25%), Bulgaria (24.9%), Italy (17%), France (16.3%), and Greece (15.5%).  Purchasers of new property often incur even higher costs, with additional VAT of 20% payable in some countries, according to a report released this week by the Global Property Guide .

In Russia and Bulgaria, transaction costs can reach around 25% of the property value for a typical transaction of a resale property.  On the other hand, property buyers will be relieved to know that transaction costs are very low in Estonia, Slovakia and Lithuania, typically below 4%. Transaction costs in the UK are near the bottom of the scale at around 5%.

 

The study considers all transaction costs involved in the property sale-purchase process, including registration and notary fees, legal fees, real estate agents’ commissions, and sales and transfer taxes such as VAT.

French rip-off

Interestingly, roundtrip transaction costs in countries with French legal systems are generally higher compared to other countries; these French legal origin countries include Monaco (19.7%), Belgium (17.9%), Italy (17%), France (16.3%), Luxembourg (15.7%) and Greece (15.5%).

In several countries with French legal systems, the use of lawyers is mandatory, with fees set by law. Sales and transfer taxes are also more common in French legal system countries.
 
The study disputes earlier findings that southern Europe has Europe’s highest transaction costs. This impression was created by studies concentrating on selected southern countries with French legal systems.

Buyers in for a shock

Buyers of new residential property are in for a shock, because additional taxes are charged on newly constructed or renovated properties (which are often hidden in the sale price).

Monaco imposes 20.6% VAT (instead of 6.5% registration tax) on new properties, bringing total costs to 33.75%. In France, transaction costs for new properties are around 31%, because of the 19.6% VAT levied in lieu of registration fees.

Real estate agents’ fees are highest in Scandinavian countries. However, this is because the agent guides buyers throughout the property registration process. The use of lawyers in Scandinavia is common but not required.

Back to: News Index