Reduction in VAT provides boost for new Spanish property

Spanish VAT cut will benefit homes on Costa del Sol

Photo credit: Cédric Nussbaumer

The Spanish government has announced a 50 per cent reduction in property tax, providing a boost for the country’s housing market.

The slashing of IVA (VAT) on new build homes from 8 per cent to 4 per cent, applicable until 31st December 2011, has been hailed as decisive action by the property industry, especially those on Costa del Sol, a popular area for construction. The reduction would save a property purchaser a sizeable €8,000 on a €200,000 purchase.

According to Jose Blanco, Minister of Development, the measure aims to "revive the construction sector" and "contribute to creating employment in the sector most affected" by the recession.

The decision follows remarks from Finance Minister Elena Salgado that Spain remains confident in the face of its national debt.

Speaking at the weekend, Salgado said that the Spanish government is still committed to reducing the country’s deficit and is certain that investors will return to the economy.

“The position of the Spanish government is to continue with the reforms and the austerity programs,” Salgado told Bloomsberg . “We trust the markets will give us that vote of confidence so that by our own means we will be capable of stabilizing [the Spanish] market.”

Alongside the ongoing austerity measures, the 50 per cent VAT cut will be welcomed by real estate professionals hoping for faster financial recovery.

"This will hopefully spark some movement in the market as new build properties become more affordable," commented Nick Stuart, Managing Director of Spanish Hot Properties .

With the VAT reduction due to expire in a matter of months, foreign investment in property is expected to surge before the end of the year.

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