Client dictates conditions
Prices for rental accommodation in Belarus have fallen significantly
A new micro-district in Mogilev
“The market has fallen significantly: by around $100 per flat since last year and it is not yet at the bottom,” commented the Deputy Director of the Tvoya Stolitsa property agency, Natalia Radenya. “Some owners are not ready to lower their prices, hoping that the market will change. However, there are no signs of this happening. Accordingly, they have to offer their accommodation at lower prices. At the moment, clients dictate the market conditions.”
In 2014, 52,000 Minskers rented their flats legally — according to the Ministry for Taxes and Duties’ Inspectorate. By early 2016, this figure had reached 60,000. The number of illegal tenants is falling and, according to approximate calculations, only around 10 percent don’t have a legal contract. The Ministry regularly organises the ‘Renting Flats — Paying Taxes’ campaign. Its idea is simple: anyone can complain about a neighbour who is illegally renting their flat by calling a special telephone number. Last year, many Minskers informed the ministry of illegal cases and 50 percent of them were confirmed.
Why have prices fallen? Of course, the global economic crisis has had a role to play in this. Incomes have not fallen but spending has increased. Growing Dollar rates have escalated the situation. Due to the currency changes, tenants are refusing Dollar contracts and require fixed prices in Belarusian Roubles. Home owners also need to make adjustments as utility services have become much more expensive recently. In late 2018, prices are expected to reduce further as Belarusians will then have to pay one hundred percent of the costs of communal services.
Another anomaly is that fees for communal services are higher in apartments where nobody is registered. Previously, the owners of ‘empty’ flats were in no hurry to register their guests but now ask them to register to gain an additional discount.
Construction activity has also contributed to falling prices. When the country offered credits, people bought a great deal more accommodation. Moreover, state rental houses for young specialists and those who are on a waiting list are built with lower rental rates than for commercial accommodation. An increasing number of such houses are now appearing.
To discourage illegal activity in the housing market, ‘underground’ entrepreneurs are now being investigated, punished with fines, confiscation of property and prison sentences. Owners often use their apartments for illegal business activities — beauty salons, offices or drugs. They also rent their apartments which are then used by tenants as a venue for illegal activity. The price paid for misdemeanours is serious: imprisonment or confiscation of the flat. Five years ago, it was suggested that draconian laws should be introduced to allow the authorities to seize apartments from all those who rent them illegally. The Ministry of Taxes and Duties however, decided that renting property does not apply to business. Therefore, under the existing law, punishment is impossible. The question on whether rules should be changed is yet to be addressed. In the meantime, there are unscrupulous owners who conduct property ‘scams’ such as the recent news of a landlord who took multiple deposits for the rent of one small, already tenanted, flat and was finally convicted of fraud.
Revenues from the rental of apartments in Belarus are subject to a fixed tax. In a year, the owner of a standard one-bedroom apartment must pay around $145. If the tax authorities decide that a citizen has more expenses than income and that money is derived from the illicit rent of an apartment, they would have to pay income tax at a rate of 16 percent — rather than 13.
Penalties for non-payment of tax for individuals are as follows:
15 percent of the unpaid tax if this non-payment was unintentional;
20 percent if payment was not made intentionally.
By Alexander Pimenov
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