Good News and Bad News
Although I have been on my holibobs and this happened three weeks ago I feel that a certain issue is too important to pass over. I want to draw attention to this matter as it is of great importance and may well affect purchasers who are in the process of buying or intend to buy a new property in the coming months.
Good News
José Blanco, Spain’s Minister for Development, and Economic Vice President Elena Salgado, made the decision to cut the rate of VAT by 50% from 8% to 4% with immediate effect, following a ministerial meeting on 19th August. The reduction is to be in place with immediate effect…
“With this measure we intend to dispose of the ‘stock’ of unsold homes and reactivate the construction sector where there is potential demand,” said Blanco during a press conference – he went on to say that he was confident the initiative would have a “very positive” effect.
‘It’s all very well reducing VAT on new builds but if you can’t get the finance in the first place it’s not a lot of good,’ I hear you say. Well, José Blanco advises he is already in discussions with the Instituto de Crédito Oficial to address the main problem, which is the lack of loans or financing required to kick-start the construction sector. These measures are hoped to revive the industry and create employment in the worst affected sectors of unemployment.
One step forward and two steps back…
The reduction of VAT on new housing comes just 13 months after the Government announced in 2010 that in July of that year VAT would be increased on new homes from 7% to 8%…
Bad News
Now for the bad news: this reduction in VAT will expire on 31st December, 2011. And the reduction applies to ‘new builds’ only and not to ‘pre-owned’ or ‘resale’ units.
Whilst the move is welcomed by the industry the consensus of opinion feels it is unlikely to have any significant impact on a decision to buy in Spain. Possibly more could have been achieved by reviewing Spain’s inadequate legal system and regulating the conveyancing process.
It is difficult to envisage this working – some cities may well have a high demand for new housing but due to lack of available finance to start these projects it is difficult to see how any advantage can be achieved.