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Tax Reduction of 4% - bad for the property market and the country, but good for the banks!

20/08/2011

José Blanco, Development Minister for Spain has just announced that with immediate effect the purchase tax (IVA) on the sale of all new Spanish properties will be reduced from 8% to 4%. This initiative will be applicable only for the sale of new properties signed for at the notary before the end of this year (2011).
  • Who are reputed to own the most new properties in Spain? The Banks! Even where they don't own them, the indebtedness of many of the Promoters or Contractor is such that effectively the banks have control and a pending bad debt.
  • For all the owners who have bought already, perhaps financially distressed and desperate to sell, they will now find that the new property next door has effectively been down valued and will be being sold even cheaper and with the bank no doubt offering beneficial mortgage rates. Therefore, it will reduce property valuations and prices further.
  • For the country, it's 4% less tax that it is going to receive at a time when it is desperate for new income.
  • Also, for Spain or, if the purchaser is a foreigner, the country that he/she comes from, it's more money being tied up in non-productive real estate, when that money is required to be circulating in the economy building businesses, employment, profit and increased tax income.

Not a clever move at all!

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Campbell D Ferguson
F.R.I.C.S. Chartered Surveyor
Survey Spain
00 34 952 923 520

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