Spanish property mortgage relief

Recently the Prime Minister of Spain, José Luis Rodríguez Zapatero, announced that by 2011 mortgage relief for those earning more than 24,000€ will be stopped. After originally reading the article Zapatero and Common sense I have had time to do a bit of research on the topic and Spain does not seem to be alone in this ‘gesture’, with countries like Ireland having implemented similar measures recently.

As is typical with most socialists this system will work on a sliding scale and will of course penalise those that earn more. From 2011 if you earn 17,000 or less a year you will be entitled to mortgage relief. Over 17,000€ it will be on a sliding scale and once you reach 24,000€, no relief for you!

But why implement this in 2011, instead of now? Like other nations? Well the reasoning seems to be that by implementing it in 2011, it will motivate buyers of primary residence to maybe not wait to see if the market drops further, but instead purchase now. If it works the idea is to help clear up the new/unsold property, estimated at nearly 1 million properties, found throughout Spain.

And in the short term this might even work. My issue with this though, is that it will be hitting the Spain’s main engine of growth, the middle classes. The rich, will not be affected and the working classes will not benefit as unless the household earns approximately 17,000€ or more, they will not be able to afford to purchase a property anyway!
So who else wins or loses under this scheme? Well banks are definitely going to benefit, as they will be giving out the mortgages. Developers in the short term will also benefit as they will be able to shift a lot of their unsold/new stock. Although with the increasing amount of properties that developers have been handing over to the banks to clear their debts until recently, the banks will also be winning via the sale of properties. And in the long term developers could possibly lose out from all those who are buying their main residences. But let us be honest, developers are going to lose out in the future regardless as their current business model for the residential market (mass building) is dead and buried.

In the governments defence though, they claim this is a ‘progressive’ policy and in a way it is. Via a range of studies it has been shown that home owner improves a child’s performance at school. Home ownership also makes you a ‘stakeholder’ in the community. The idea being you as a property owner will take a more active interest in your surroundings. But as with most studies, the methodology and results are open to interpretation.
In either case, many here in Spain feel that Zapatero has chosen political expediency over long term economic performance. Either way the main opposition party (partido Popular) have confirmed that they will reverse this plan if they are elected.

Andrew Belles

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One Response to “Spanish property mortgage relief”

  1. Cain says:

    Hi, Does anyone know if there are any specialist mortgage brokers for the Polaris World Torre development?

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