The two main Spanish property taxes that have seen increases are, transfer tax (ITP) which is applicable on the purchase of existing homes and stamp duty (IAJD). Both these increases have been in force as of the beginning of 2012. Although these increases do not seem to have been reported widely in the press.

Supposedly these increases have been implemented to ‘help stimulate employment and growth’ and to ‘increase government revenue through a more progressive tax system’.

TRANSFER TAX
Prior to 2012 if you were purchasing an existing home (resale property) you had to pay a 7% tax on the sales price up to 400.000€. And 8% on any amount above the 400.000€.
As of the 1st of January 2012, the tax on the sale of properties up to 400.000€ has risen to 8%, on the amount above 400.000€ you have to now pay 9%. And if you are buying for over 700.000€ then the tax on that amount rises to 10%.

The property transfer tax was originally raised from 7% to 8% for purchases over 400.000 when the Spanish government raised VAT (IVA) on new properties to 8%. At the time the Andalusian government used the rationale of not discriminating against any particular group. However when the tax burden on new purchases was reduced by the central government to 4% for a short period to stimulate (or at least bring forward) the sales of new homes, this ‘discount’ was not seen on the sales of existing homes. Now with the new government in power in Madrid, this tax reduction is set to continue for 2012. Yet taxes on resales have not decreased, but have in fact increased. For a local government that claims it does not want to discriminate against any particular group, the Socialist lead Autonomous Community of Andalucía new rules seem to benefit those buying from developers and penalising those buying from individuals.

Andalucía is still trying to promote younger people to get onto the property ladder by allowing them to purchase properties up to 130.000€ and pay only 3.5% transfer tax as long as it will be their primary residence.

STAMP DUTY
Prior to 2012, if you were buying a new property you would pay additional to the VAT 1% stamp duty. In the case of a resale property, you had to pay it in the case that you were taking a mortgage. Again as of 2012 this tax has increased by 20%. So it now stands at 1.2%. Although it will not affect all those buying resales properties, it will affect the many looking at financing. Unless of course you are under 35 and buying the property for less than 130.000€ and intend to use it as you main residence. Then it stands at 0.3%.

Regards
Andrew Belles

Lower house prices have helped boost sales, and a huge drop in housing starts over the last 3 years, most acute in popular tourist resorts like Marbella, means that the housing glut is shrinking fast.

Given the long lead times in the building industry, there could be an acute shortage of new housing a couple of years from now.

Shortages will be made worse if demand recovers to its normal level of around 22,000 new homes a year, based on the size of the population. Unemployment or fear of unemployment is keeping many potential buyers out of the market.

45pc of Malaga’s 200,000 unemployed are young adults who be first time buyers looking to start a family if they could afford to.

Much of the blame for this sorry state of affairs lies with politicians says José Prado, President of the ACP. “In recent years they’ve done nothing but earn a fortune from construction and made no effort to attract investors.”

Source: Article by Mark Stucklin

The European Commission today approved the holding of five Spanish train corridors included in the design of the trans-European network should be operational by 2030. The Mediterranean Corridor, which originally included the province of Malaga, now appears to go from Almeria and Sevilla across the north of Andalucia to Antequera / Bobadilla.

The Mediterranean corridor, with an investment of 19,424 million euros, and is constituted as a multi-use corridor, both road and rail, which connect the French border to the main transport nodes in four regions of Spain along the Mediterranean Coast.

This set of infrastructure projects will connect the French border with Algeciras, via Barcelona, Valencia, Cartagena and Almeria, and will have a transverse axis between Granada and Antequera, where it forks to finish in Seville. All major ports along the mediterrean will connect to the new network (Barcelona, Tarragona, Castellón, Sagunto, Valencia, Alicante, Cartagena, Almeria, Malaga and Algeciras, etc.) and will feature the development of the Guadalquivir river corridor to the port of Sevilla

Along the Mediterranean Corridor, the European Commission has also approved the Central Corridor, the Atlantic Cantabrian-Mediterranean Corridor and the Atlantic Mediterranean Corridor. With these investments, Spain will get to perform the necessary infrastructure works to achieve a comprehensive network for both passenger and freight transport.

In all, Spain will invest 49,800 million euros between 2014-2020, in carrying out the works.

Development sources have indicated that this investment will take place under the state budget will mean an average cost of 7,000 million euros annually, which must be added between 10 and 20% of 31,700 million euros that contribute to a Europe-wide European Funds.

Spanish Article: Diario Sur

Moreover, these investments exceeded 1000 million between April and June for the second consecutive quarter. Something not seen since 2008, before the final collapse of these purchases. In the second quarter, an increase over the first purchases was 16.1%.

Foreign investment in Spanish property had been falling steadily since 2003, when it reached 7.072 million euros, 2004 saw this decrease to 6650 million, 5.495 million in 2005 and, finally, 4.716 million in 2006.

However, this trend was reversed in 2007, when 5.341 million euros was invested, a 13.3% more than 2006.

2008 saw a similar figure of 5.331 million invested in Spain.

Then in 2009, the economic crisis saw investment decrease to 3,651 million euros.

If the trend for this continues, we will see foreign investment in Spanish property rise to the 2008 figure. A good portent for owners of properties, whether residential or commercial in the more popular locations.

Regards
Andrew Bellés

Europe is facing economic meltdown but the crisis hasn’t deterred British buyers from snapping up properties in Spain.

Italy, Greece and Bulgaria are also attracting British buyers seeking a bargain. But wherever you are buying, the advice is the same – do your homework to avoid pitfalls.

Mortgage funding
One of the effects of the global banking crisis has been that mortgages are more difficult to secure and borrowers must put down a bigger deposit to get a loan from banks overseas.

The growing debt crisis in recent months, particularly in Greece and Italy, has exacerbated the problem. A number of Greek banks have stopped lending for the time being.

Spanish and French banks will lend to those with only a 15 or 20 per cent deposit, but this could be tightened if the financial crisis takes a further turn for the worse in Europe.

Conn says: ‘Historically, European banks have been more conservative than their British counterparts. Britons applying for overseas funds will need a chunky deposit and must provide all relevant paperwork to show income and liabilities.’

Some British lenders allow homeowners to remortgage to fund a holiday home purchase abroad, but it will depend on individual criteria and borrowers will usually still have to have significant equity in their British home, even after they have released the funds, to qualify. For many, an overseas mortgage will be the only option, but rates in Europe and the US are competitive.

Frank Kyle, 32, an engineer in the oil industry, got a bargain when he bought his new holiday home in Murcia, south-eastern Spain, but he had to put down a bigger deposit than he had planned. Frank, from Glasgow, paid 112,000 euros (£97,500) for the two-bedroom property on a popular golf resort and he is confident he bagged a bargain. His neighbour in Murcia paid 170,000 euros for a similar apartment five years ago.

He had hoped to secure the apartment with just a five per cent deposit, but he paid closer to 40 per cent, securing a mortgage from a Spanish bank. Frank’s 4.5 per cent variable loan rate makes his monthly repayments about 378 euros (£326). Almost all banks now require borrowers to take capital repayment rather than interest-only mortgages.

Frank Kyle, 32, an engineer in the oil industry, got a bargain when he bought his new holiday home in Murcia, south-eastern Spain, but he had to put down a bigger deposit than he had planned. Frank, from Glasgow, paid 112,000 euros (£97,500) for the two-bedroom property on a popular golf resort and he is confident he bagged a bargain. His neighbour in Murcia paid 170,000 euros for a similar apartment five years ago.

He had hoped to secure the apartment with just a five per cent deposit, but he paid closer to 40 per cent, securing a mortgage from a Spanish bank. Frank’s 4.5 per cent variable loan rate makes his monthly repayments about 378 euros (£326). Almost all banks now require borrowers to take capital repayment rather than interest-only mortgages.

‘I am often away on oil rigs and ships, so I have never bought property in Britain,’ he says. ‘I’m hoping to get out to Murcia at least four times a year. Hopefully, I’ll get my golf handicap down to single figures.

‘My plan is to hold on to the apartment long term so I’m not worried about short-term dips in prices or the volatile euro. I may be working for a French company soon too and it will pay me in euros, which removes the currency risk on repayments.’

Watch out for the currency risks
For many British buyers a euro loan will present currency risk if they are paid income in sterling. This is something buyers must bear in mind, particularly in the current uncertain economic climate.

Most overseas mortgages, like Frank’s, are also on a variable rate and not fixed, so buyers must be aware that monthly repayments could rise.

Typical mortgage rates in Spain and France are between three and four per cent variable. But the rate offered will always finandepend on a borrower’s circumstances.

Exchange rate changes are a cause for concern, especially for those about to make a large transaction. But buyers can lock into a rate ahead of a property purchase.

Full article

Since 2005, the golfing sector has seen visitor numbers increasing by more than three per cent each year, and in 2010 alone, 427,000 golfers spend €687m in Andalucia.

Malaga province has 50 golf courses, more than 55 per cent of the total in Andalucia and almost 30 per cent of the total number in Spain.

The first study carried out in Andalucia since 2005 by the Junta de Andalucia Tourism Council reveals that the Costa del Sol has become the main point of reference for golfers in the region, thanks to the wide variety and quality of golf courses, improved connections via train and plane, and the number of hotels, golf properties  and other services available.

The Costa del Sol is also seen as a pioneering area for the golf sector, and has internationally recognized courses such as Valderrama and Sotogrande.

Tourists who visit Andalucia mainly for golfing account for two per cent of the total number of visitors, and 4.5 per cent of the total tourism income. A high percentage of golfers who visit Malaga province are British and Germans, who stand out as those with the highest purchasing power.

Amongst British golfers, the average profile is that of a group of friends over 35 years old, with a wide social status, all belonging to the same club who want quality golf courses as well as varied leisure and cultural alternatives.

Most prefer destinations with direct flights from their home locations and short transfers to the golf course.

The average golfer in Malaga stays 15.8 days, visiting the golf course 4.6 days, while in Cadiz, visiting golfers only stay for 6.9 days and visit the golf course 3.5 days on average.

Due to upcoming competition in Portugal, Turkey and Morocco, the Junta de Andalucia study advises golf clubs, courses and hotels to offer better value for money in order to keep clients happy.

Article Source

The new law should allow for the possibility of a direct execution of an eviction order of less than 15 days and without any other formalities in the case of tenants who do not voluntarily leave the property in the stipulated time.

Several of the more interesting points about the new law:

1. Eviction application reduction

Upon formal request of outstanding payments the landlord now only needs to wait one month (previously two months) before filing an eviction application. Although it should be noted, as with the previously laws, this eviction application can be avoided however if the tenant makes good any outstanding amounts in this time.

2. Rapid execution

A court sentence is now sufficient for the execution of the eviction on the day and at the time stipulated in the sentence.

3. Verbal Court Case

The new law also means that all actions, both the eviction itself as well the claiming of outstanding rent can now be carried out verbally (i.e. without the need for additional documentation). This will allow for the passing of a court sentence in as little as 5 days.

The law always provides that in certain cases the landlord will under certain circumstances no longer be necessarily bound to a minimum contract of 5 years. The landlord will be able to rescind the contract in certain additional cases including the need for the property for personal use and can be extended to cover direct family members. These clauses would have to be expressly written in the contract however. Please note though, if the landlord of family member does not take possession of the property, the landlord would be obliged to return the property to the tenant and to pay of the outstanding expenses incurred in seeking alternative accommodation.

Now that this step has been taken, the Spanish government only needs to improve the tax deductions that landlords can make on a rental property, and the rental market should finally be able to develop properly.

Regards
Andrew Bellés

The data indicates that 17,977 transactions were conducted Andalusia, representing a fall of 34.3 percent from the second quarter of 2010, according to the statistics of real estate transactions compiled by the Ministry of Development, who pointed out that this decline is less pronounced than the national trend, where the number of homes sold during the second quarter stood at 90,746 homes, representing a 40.8 percent less than the same period in 2010.

Compared to the first quarter of 2011, home sales in Andalusia increased by 18.6 percent, while Malaga saw an improvement of 21.8 percent. It should be noted that the 1st quarter of 2011 saw similar decreases compared to 2010.

As for new housing in the second quarter, sales fell by 52.4 per cent to 5882 dwellings, whereas in the case of second-hand housing, there were 12,095 operations, 19.3 percent less than in the second quarter of 2010.

By provinces, Malaga recorded 4602 transactions, 35 percent less than in the second quarter of 2010, Seville reached the 3464 transactions, 34.2 percent less, Granada there were 2256 transactions, a 30.1 percent less than in the second quarter of 2010, in Cadiz 2164 transactions were recorded, 40.1 percent less, in Almería there were 1842 transactions, 38.6 percent less compared to the same quarter last year.

In the other provinces also saw declines, as in Huelva, a decrease of 20.8 per cent to 1446 transactions, were registered in 1192 Córdoba transactions, 38.8 percent less than in the second quarter of 2010; Jaén and 1011 operations were recorded, 27.6 percent less.

There are many theories regarding these decreases, including the impending elections, the property tax breaks that ended at the end of 2010, etc….

Andrew Bellés

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

Six years on, Mr Armstrong is forced to live with one of his daughters as he prepares to take on the bank that promised so much yet threatens to leave him penniless.

His lawyer is filing eight similar complaints against various Nordic banks on behalf of expats who bought into equity release plans in the false hope that they could avoid inheritance tax and enjoy a salary for life. He believes the true number of victims could run into the hundreds.

Scottish-born Mr Armstrong, aware that his daughters would eventually be liable to pay Spain’s top rate of 34 per cent inheritance tax on the €2 million Costa del Sol property he owned outright in Malaga, sought the advice of an independent financial advisor known to advise British expat pensioners living on the coast.

The advisor, who was allegedly unauthorised to sell financial products in Spain, suggested Danske Bank’s Capital Assurance product as a means to reduce liability and introduced him to the local Danske Bank branch in Mijas. He too faces possible criminal investigations.

Mr Armstrong alleges that he was assured by no less than three Danske Bank employees that taking out a €1 million Danske Bank mortgage loan against his home and effectively indebting himself would reduce his daughters’ inheritance tax liability by half.

It was agreed that €850,000 would be used by Danske Bank to invest and the profits used to pay off the mortgage, while a €150,000 lump sum would be given to Mr Armstrong as equity release.

According to Mr Armstrong’s lawyer Antonio Flores from Lawbird Legal Services , it is illegal to indebt yourself in order to reduce your inheritance tax liability.

He said: “This type of product, peddled by unauthorised agents under the auspices of supposedly reputable banks to mostly British pensioners, is becoming more and more common and should be avoided at all costs.”

The Danske bank mortgage loan of €850,000, Mr Armstrong was told, would be invested in bonds, Swiss Francs and Euros.

Mr Armstrong said: “After the first year I realised that they had lost me £18,000. For the next five years Danske Bank continued to lose money and in 2009 I was told by an account manager for Danske Bank in Luxembourg that I should sell my property and pay the bank back the €650,000 they had lost.

“I refused, so in November 2010 Danske Bank issued a foreclosure on my house and also a repossession order through the local court due to take place last month.”

Fortunately for Mr Armstrong, his lawyer obtained a court ruling suspending the reposession following the lodging of criminal complaints against the bank and its staff.

Mr Armstrong has now been forced to rent out his home and resume his former job as a yacht captain in order to raise legal fees.

A spokeman for Danske Bank said: “According to the law we cannot comment on individual customer cases nor questions related to individual customer cases. We have no comment.”

The investigation continues.

Source: Telegraph.co.uk

On a happy note the Costa del Sol real estate sector is gradually starting to rid itself of its unsold stock that has been dampening the local property market.

While reviewing the information from the Ministry of Development, in 2010, the homes left without a buyer was reduced by 5.4%. This is the first fall since the beginning of the current crisis and contrasts quite dramatically with 2009, when there was an increase of 7.5% properties without buyers.

Leaving aside percentages for a moment, by December 31st 2010, there were still 21,443 unsold properties on the market. The equivalent of 3.12% of all unsold properties in Spain. This ranks it about 10th in Spain for the province with the most unsold properties. But only make up 2.03% of all properties in the province, below the national average of 2.7%

In fact Malaga has performed substantially better that the national figure (0.08% decrease) and far better than the figure for Andalucía (1.18% decrease). The rate of construction has been steadily declining with the 2010 figures being similar to the 2009, but the sales of new property are recovering and although this year has not started as positively as the last, we at least have seen a definite pick up since April and expect that this will be reflected in the end of years statistics.

Regards
Andrew Bellés

All regions experienced declines in Spanish property prices with the exception of the Basque Country, where it rose 4.9%. The biggest drops were in Aragon (8%), Balearic Islands (6.8%), Extremadura (6.6%), Murcia (6.3%), Cantabria (5.7%), Andalusia (5.6%) and La Rioja (5.5%).

In the case of the provincial capitals, the price of new housing rose in Pontevedra (0.9%) and Zamora (0.3%), while it remained constant in Palencia and Badajoz and fell in the rest of the provinces. The capitals of provinces with the highest housing prices were Barcelona (3,720 € / m2), San Sebastian (€ 3,615 / m2) and Madrid (3,240 € / m2), while the lowest were in Murcia (1,387 € / m2), Badajoz (1,389 € / m2) and Cáceres (1,405 € / m2).

‘Drastic’ reductions in new developments

The study predicts that the coming months will absorb significant surplus of the new housing stock, since there is a potential demand, but it depends on the economic situation and the possibilities of financing. The revival in the pace of sales will be “gradual” and “slow” and will come hand in hand with lower prices from developers, although it is “closely linked to its ability to support their level of indebtedness.”

Given these supposed “drastic” reductions of new promotions, recovery of the sector will still be dependent on the absorption rate of the stock, which is uncertain due to the high rates of unemployment, economic uncertainty, tightening credit requirements and of course lack of demand for certain areas.

The report indicates that the ongoing restructuring of the Spanish financial sector can have a significant impact on the housing market because it affects mainly the institutions traditionally associated with mortgage lending. .

Regards
Andrew Bellés

According to recent data compiled by the Bank of Spain, Foreign investment has not risen above the 1 billion mark since 2008, and has not seen such a strong rise in over 10 years.

Foreign investment in Spanish property has maintained a downward trend since 2003, although in 2007 and 2008 quarterly figures remained above the 1,000 million euros, although the falls were exacerbated in 2009 and 2010.

Meanwhile, the Spanish invested 185 million euros in real estate assets outside of Spain between January and March, a decrease of 25.7% compared with 249 million last year.

Unlike foreign investment in Spain, the Spanish foreign investment continues a downward trend and has not exceeded 600 million since 2007.

Orginal article: www.expansion.com

In its conclusions to the investigation the public prosecution department accuses Ruiz Casado, and his wife, Teresa Maldonado, of wrongful appropriation and calls for a four year prison sentence for both of them. The private prosecution accuses the defendants of fraud in addition to wrongful appropriation and asks for sentences of eight years each.

According to the public prosecution the sales contracts specified that deposits paid would be returned with the corresponding interest if the dates for the start and completion of the project were not honoured. If the developers had opened an account for the funds for other things, he would have been able to pay them back” explains the prosecution.

Representing the buyers, the private prosecution claims that the buyers signed their contracts and fulfilled their financial obligations “under clear and evident deceit, as they were led to believe that the development was being built”.

“There wasn’t even planning permission” say the legal representatives of the buyers, stressing that there is evidence of fraud. Both public and private prosecution call for the funds to be returned.

Source: Sur in english print edition 17th to 23rd of June 2011

Land was the hot commodity in the decade-long Spanish property boom. Local councils allowed ever more plots to be zoned for urban development, issuing building permits with abandon and receiving fees or a percentage of the land. The scale of the boom is only now apparent, following requests from the Bank of Spain for details of lenders’ exposures.

Almost a quarter of the banks’€320 billion in loans to developers is backed by land, according to estimates by Goldman Sachs. Land also makes up nearly half of the €70 billion of real-estate assets now owned by the banks and savings banks. Add it all up, and Spanish institutions have exposure to more than €100 billion of empty plots, either as lender or owner. “The main issue for the banks isn’t excess housing, it’s land,” says Carlos Ferrer-Bonsoms of Jones Lang LaSalle, a consultancy.

According to Fernando Rodríguez y Rodríguez de Acuña of RR de Acuña, another consultancy, there are approximately 1.5m unsold homes in Spain, of which 1m need to be sold before most of that acreage is developed. Digesting that housing glut will take at least five years. He calculates that another 2.7m homes could be built on existing developable land. Plots located in crowded metropolitan areas like Madrid or in prime coastal locations stand the best chance. But he estimates that 1.45m of those developments won’t see the light of day until after 2020, due to their poor location. Many will never get built at all.

Some banks are striking bargains with stronger property developers or co-operatives to build housing units on the more attractive land plots in exchange for a slice of the development. But a bank will finance the project only if the developer manages to sell a high percentage of the units upfront, a tall order.

La Caixa, one of Spain’s largest savings banks, is pioneering the use of land for affordable housing. It is building 1,100 units of low-rent apartments for the young and old on plots swapped for loans with bust developers. The construction is funded by its charitable foundation, Obra Social la Caixa. After ten years tenants will have an option to buy.

Options for taking land holdings off banks’ balance-sheets are unattractive. Land transactions totalled just €4 billion in 2010, down from €23 billion in 2004. Distressed funds are willing to buy, albeit at steep discounts. But many banks are carrying the land on their books at higher prices and are reluctant to sell at a big loss. Even those lenders that have braced for big losses—Spain’s biggest bank, Santander, has provisioned 35-40% of its acquired land, for instance—may need to set aside more. Just how much more is a question with ramifications well beyond those empty tracts of Iberia.

www.economist.com