PURCHASE TAX IN SPAIN FOR NEW PROPERTY - A VILLA FOR SALE IN VALENCIA
In an interesting development today the Spanish government have said that they are going to halve the purchase tax in Spain for newly built Spanish properties. Currently purchase tax in Spain for new builds is 8% but this will now be dropped to 4%. Meanwhile, purchase tax in Spain for re-sale properties in Spain will remain at 7%
Needless to say, this is an attempt by the Spanish government to encourage sales of new builds which remain a millstone around the drooping neck of the Spanish property market. So, the reduction in new build purchase tax in Spain is something to be welcomed – albeit that it should have been done long ago!
Certainly, few people would argue that purchase tax for properties in Spain (both new and old) is very high and should be reduced in any event.
Of course, it remains to be seen whether purchase tax in Spain for re-sale houses will also be dropped although I cannot see that happening – not least because sellers of re-sale homes do not have the massive lobbying power of the troubled Spanish banks and the big developers.
So – does this mean that you should now target new Spanish properties, if you are a buyer?
Well, as always, everything is down to location, quality and price with straight maths only a part of the equation to buying a Spanish property safely.
Certainly, there are some excellent Spanish new build properties on the market at very tempting prices (even more so now that the purchase tax has been reduced by 4%). However, alongside these are many that are very poor and often located exactly where the average foreigner least wants to have either his holiday or permanent home in Spain. It also has to be said that in some cases Spanish new build properties have been built to minimum standards and sometimes this can be markedly the case when it comes down to their actual size.
A good example that always surprises me relates to flats and apartments in Spain which have shrunk in size over the years. Thirty to forty years ago it was not unusual to see apartments that had 120 – 140 m2. Then the average build size for a three bedroom flat slid to 90 m2. During the recent Spanish property boom this reduced further and many times I have been in new three bedroom flats of between 70 – 80 m2 – which, to my mind, is pretty small.
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As a consequence,you are often better off buying a resale apartment in Spain(in the right area,with a lift etc.)and reforming it-than a new apartment. Certainly,the overall price can be more or less similar with any 4%reduction in Spanish purchase tax for a new build something that should be treated as little more than a distraction.
Still,irrespective of arguments one way or another as to the respective merits of buying new Spanish property or old-the reduction in Spanish purchase tax is good news. For once,the present government should be commended.
Nick Snelling-Culture Spain
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Hi Nick
I did some tedious but eventually interesting number-crunching on house purchase tax.I worked out that if I were to buy my UK house at its present market value and pay the‘stamp duty’,I would break even on spending the same amount on a Spanish property[in my location of choice]and living in it for 10 years,when municiple taxes are dialled in over that period on both properties.
In other words,the Spanish raise tax on property principally on the change of ownership and the UK raises property tax principally on annual local authority charges.
The merit of the Spanish system is that high front-end costs[and the sliding scale of capital gains tax]discourage speculation and excessive turnover in pre-owned properties.
The merit of the English system[is Scotland different?]is that front-end costs are easier to swallow for 1st time buyers and even though the banding system seems unfair–£1 into the next band up and you pay that rate on 100%of the purchase price–it peaks at 4%.And that even in a period of low turnover,the main source of tax is still generating revenue.
Mind you,4%on that £115m flat I mentioned is still a nice little earner for H.M.G.–£9.6m in stamp duty!I don’t doubt that some sort of off-shore/corporate/non-dom malarkey will make it all OK.
They have to get it from somewhere.It’s what they do with it that makes one weep…
Chris
I just cannot wait until you buy your 115 million flat over here–from me!!
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