Spanish property tax cut for new builds

Last Friday the Spanish government announced a temporary reductions in the value added tax (IVA), lowering it from eight percent to four percent for any purchase of a new property. The government’s aim is to rekindle Spanish property sales and help reduce Spain’s stock of unsold new homes, which amount to approximately 687.000 properties in Spain, and just over 20.000 in the province of Malaga.

This gives buyers an incentive to finalise their purchase within the next four months. On an average property worth 200.000€ the cut means that buyers will save themselves some 8.000€. the majority of the 20.000 unsold brand new homes in the province of Malaga are in the hands of developers or the banks.

This tax deduction is of course welcomed, but if banks are still unwilling to relax their criteria regarding lending, the effects will more than likely be subdued.

So the properties that will benefit the most are those that have developer’s mortgages in place. The questions though, how does this apply to new build properties that have come under the banks control? Are these ‘new builds’ or have they been transmitted once and are thus resale’s? This question has yet to be answered.

Along the Costa del Sol, the areas that should benefit the most from this tax cut are Marbella and Estepona. These areas saw a high concentration of building works in the last few years due to the property boom.

Although this tax cut should not really benefit the property market in the long run, as it will only motivate existing buys to go to completion slightly sooner, it does benefit two groups. The first group will be the developers, who will get to shift some of the stock sooner, second the buyer, who stands to save several thousand euros.

There are also rumours that if the Partido Popular win the next elections, this tax cut might be extended further, but like all political promises, we will just have to wait and see…

Regards
Andrew Bellés

Original article