House purchase from GU - VAT reduction from 19% to 16%

Hi everyone,

since this is my first post, I’ll introduce myself briefly. My name is Tim and I have been living with my future wife in Düsseldorf for 5 years. I work in Key Account and my fiancée is a teacher. She is 30 and I am 33 years "young".

Now to my concern.

My fiancée and I have been looking for a house for about 2.5 years. In August 2019, we found a new semi-detached house from a developer that we really liked. The developer built 3 of these semi-detached houses, so 6 semi-detached units. One of them was already completely finished and available for viewing. We did that. We liked almost everything about the house except the floor plan, which could even be changed for an additional cost. However, the price of the property was a bit too high for us, or rather we tried to negotiate the price down a bit. Unfortunately, the developer did not or only very little accommodate us here and we initially put the house purchase project aside again.

Now, about 6 months later, the house still had not been sold and it caught our interest again. We contacted the developer and asked if the property was still available and if we could meet again. The developer was interested and so we have another appointment the day after tomorrow.

Now to my core question:
Currently, the government’s economic stimulus program regarding the VAT reduction is quite hyped – especially builders who renovate a house or build a new one themselves naturally benefit from the reduction.

But since we will be buying from a general contractor, this advantage would unfortunately be denied to us (real estate transfer tax = VAT in house purchase from the general contractor).

However, the house is still in shell condition. This means: the screed has not yet been laid, the bathrooms are not yet done, the drywall partitions have not yet been erected, the sockets have not yet been installed, the plaster is not yet on the walls, etc., as a shell construction looks like. Wouldn’t the general contractor save money on these works through the VAT reduction?

Is it now possible in the price negotiations to bring up the point that the VAT has also dropped by 3% (ok, it’s not a real 3 percent but less) and that this would benefit the general contractor, since the performance delivery would take place in Q3 and Q4 2020?

I hope I was able to explain our concern well enough and that you know the answer to this. This would help us a lot on Thursday.

I look forward to your answers.

Many thanks and best regards,
Tim

Theoretically yes, practically rather no. He might accommodate you a little, but the trades also increase over time. If you don't buy it, then someone else will; the other houses are already sold.

Theoretically yes, practically rather no. He might give you a little bit of a concession, but the trades also increase over time. If you don’t buy it, then someone else will, the other houses are already sold.

Thank you for your quick response. The theoretical part is enough for me for now. For your information again. The house is not located in a metropolitan area, but rather rural near the Dutch border in West Münsterland (my home region). The residential area is one of the best in this city, yet despite that, the purchase price of about €480k plus garage, floor plan changes, garden, front yard (paving work), upper floors in all rooms except bathrooms and plaster seems too high to us. Travel time to the next hotspot (Oberhausen) is 40 minutes, to Düsseldorf 50-70 minutes, depending on where you want to go. The house has been projected for sale since the end of 2018. The shell has been standing since June/July 2019. Since then nothing has happened. Best regards, Tim

Why is the shell construction standing? Are there problems? Do they have no more money? Strange... Are there other houses that are older but much cheaper? Perhaps buy an older house and renovate it.

If you get a discount, that's good; if not, you have to decide.

In my opinion, the general contractor has no advantages because as an entrepreneur he does not care about the VAT... he is not an end consumer.

You are buying from the developer. As you correctly recognized, he does not charge VAT. But he is also not allowed to deduct input VAT from the purchased services.

Accordingly, he could have a small financial advantage through VAT. But the prices of materials, craftsmen, etc. will continue to rise despite lower VAT, because everyone wants to have something completed within the 6 months. (Supply/demand) Therefore, I do not believe there will be much room for negotiation for this reason, especially since he did not give in the first time.

Unless he had to stop construction for liquidity reasons. Since he has advanced payment for the shell construction, he might be happy to find a buyer at all to become liquid again. In such a situation, one might even forgo the planned profit.
But this is pure speculation.