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2012 January 03

4% VAT maintained by new government on new property purchase

January 3, 2012
Property News
No Comments
housing, IVA, property, propiedades, VAT, vivienda

Among the provisions included in the Royal Decree on urgent measures for economic and social deficit correction, approved by the Executive on December 30 (2011), highlights the recovery in income tax relief for the acquisition of a first residence, with a view to reviving the housing market and easing the unsold “housing stock”, estimated at about 700,000 properties. The Government also agreed not to renew the 210 euros rent allowance for young people between 22 and 30 years.

The personal income tax rebate for the purchase of a principal residence is maintained under the same conditions that existed until December 31, 2010, investment of 15% allowed in a first home purchase, up to a limit of 9,015 euros, which translates into savings for buyers of up to 1,350 euros. Currently, the deduction can only be applied for by those earning less than 24,000 euros. This measure will apply retroactively from January 2011.

The new Royal Decree also includes the establishment of a super-reduced VAT of 4% for the first home purchase from 2012 (which has currently been in place as a temporary measure since August 2011 and was subject to being extended as, if and when the Spanish PP political party win the recent general elections, which they did with an overall majority). This measure is intended to help the housing market recovery, as noted by the Executive. On the other hand, it establishes an increase in Property Tax (IBI) that affects homes that are above the average price. This latter provision shall be temporary for two years.

Spanish property market in 2011: another year up the creek

January 3, 2012
Property News
No Comments
economy, housing, Spain

Spanish house prices fell for the 5th consecutive year in 2011, according to data from Idealista.com (based on asking prices), a leading property-portal.

The average asking price is now 20pc below the high reached at the end of 2007, and back to where it was in 2004, when the boom had run about half its course. The chart above illustrates this with data from Madrid (blue line) and Barcelona (orange).

But house-hunters are still not satisfied, according to Idealista’s ‘Demand Thermometer’. Potential buyers are looking for an additional discount of 21pc on average before they jump in.

As always, asking price reductions have not been uniform across the country: In some areas, like Lleida (Catalonia) and Puente de Vallecas (Madrid), asking prices are already down by more than 40pc.

As far as all other housing market indicators go, 2011 was another bad year, if not the worst since the crisis began (final data will not be in for a few months). Property sales, house building, mortgage lending and confidence all tumbled to new lows, whilst repossessions hit new highs.

Outlook for 2012

Property price falls accelerated towards the end of 2011, boding ill for 2012. Most market watchers expect prices to continue falling in 2012, as banks slash prices to shift their properties, and private vendors follow suit as the credit crunch drives down budgets.

I agree that 2012 will be another bad year for the Spanish property market as a whole, but I also think it could be the start of better times on the coast for 1) quality, up-market areas with diversified international demand and 2) low-cost property in well-consolidated areas. Bargain-hunters from non-Euro countries like the UK, Norway, Switzerland and Russia, will be on the prowl as a weaker Euro and falling property prices combine to attract the curiosity of investors.

But all bets are off in the event of a major macro-economic shock in 2012.

Source: Spanish property market in 2011: another year up the creek | Spanish Property Insight Blog.