Measures for resolving housing issues Spain
The press has been very full of doom and gloom reporting. Post Pedro Sanchez announcements on the housing issues in Spain.
The Headlines reported in UK press of 100% purchase tax is however both misleading and not factual.
There were a number of new housing measures announced in reference to the housing issues.
The Press statements however had no real details. Just attention grabbing headlines. Before any changes can be made a number of things would have to happen.
Spanish Banks rely on a small but profitable Mortgage in Spain market. Generated by non resident buyers. Therefore they will be watching things closely. Feedback from them and Lawyers are the same.
Purchase taxes Spain
Firstly transmission tax or purchase tax is set by each Autonomo region. Not by the state. It varies currently from 6% to a maximum of 10%. Depending on where you buy. Each region has a different political alliance. Therefore it is reasonable every region will take a very different view.
Whilst it is possible that each region chooses to apply a different purchase tax. It is in their control not central government.
To discriminate and implement taxes against a certain sector of people would require constitutional and law changes. These would have to get through, what is a basically a hung parliament with. With no clear majority. The likelihood of unreasonable increases in purchase taxes being approved is minimal.
European Court of Justice can intervene
It is also the case that the European court of Justice ruled some time ago, that the implementation of increased income tax for non residents was against the law. That it did not fit with rules within the EU of fairness, non discrimination, and freedom of movement. Therefore a challenge from the European courts may also inhibit what can be implemented.
Other issues are how do you deal with a property bought in a Company name. By definition an SL is resident.
Focus on second homes
In general it is expected the focus will be on property used for the purpose of generating incomes. Therefore generating ongoing taxes. Also for second homes. There may well be some changes in the overall taxation. At present second homes, or investment property is treated for taxation purposes the same as a residential home. It is not beyond reason to expect some increases or removal of tax discounts. For owners of second homes.
This would increase the tax exposure for non residents buying in Spain. However, not by the wild figures, bandied about by the press.
What are the issues
The announcements are a knee jerk response to growing discontent of Spanish people. Particularly in the key cities and tourist areas. Salaries are still low in Spain for the average worker. It has become increasingly difficult for them to find reasonable housing. Also during a period of high interest rates, to gain a Mortgage in Spain.
Rents have increased due to tourist activity and outside investors. Something does need to be done.
There is no real housing shortage in Spain
In reality there is not a housing shortage. There remains many unoccupied properties. Built between 2002 and 2015, without licenses. These could be utilized by the state to provide affordable housing.
Private owners are loathe to rent to Spanish citizens. Mainly because of the punitive laws in favor of the renter. Removing a squatter, or someone who has not paid the rent is both time consuming and costly. Most property owners will not risk renting on a long term let.
There are many changes that the government can make to improve the situation. However none of these changes will grab the headlines like the bombshell dropped this week. By keeping the statement very general it has had the effect required. Spanish people think their government are very serious.
Should potential buyers in Spain be concerned
Whilst only forming a small group of people. Non residents buyers can be blamed for the housing issues. Despite them being a drop in the ocean. And finally Pedro Sanchez has committed to nothing. It’s a statement not a fact. Until embedded in law nothing will change. The challenges and law changes such a measure would require, are not going to happen quickly. It is very unlikely in the format reported that they will happen at all.
Buyers in Spain, and those thinking of a Spanish mortgage should consider that costs of owning a property in Spain may rise over the next few years. However not to the extremes being reported by the UK press.
