Spain’s election: A landslide of change?

Photo credit:  Gavin Golden

The landslide victory for the People's Party in Spain's General Election is hoped to herald an avalanche of change for the country's property market.

The Centre-Right party's triumph follows elections in Greece, Ireland, Italy and Portugal as Spain becomes the fifth Eurozone country to switch government this year. The real estate industry is now urging the government to act, as thousands of discounted homes across the country remain unsold.

Tax cuts and tourism initiatives are two of the measures anticipated by property professionals, as Spain's appeal to lifestyle buyers remains strong, partially helped by the existing VAT reduction for new homes.

"Spain still has arguably the best weather in Europe, is easy to get to and property is relatively cheap," Spanish agency Mercers commented to OPP , while house builders such as Taylor Wimpey have seen success by slashing VAT altogether.

Marc Pritchard, Taylor Wimpey's Sales Manager, comments: "We initiated the NO VAT policy as a way of assisting potential buyers further especially seeing as buyers have executed caution when committing to Spanish property. Indeed, we have seen considerable interest in our VAT free properties since its introduction and with only weeks to go before this rare time-limited opportunity for investors to purchase their dream home in Spain VAT free ends, we are urging property hunters to invest now before it too late."

As with the UK, unemployment is a central component to Spain's recession, particularly for under-30s, and tax changes by the PP could create jobs as well as stimulate investor interest.

In Motril, for example, an ambitious land development was scrapped when the market crashed. But plans have since been changed to a reworked "sporting and marina complex" that could create 1,000 jobs, as Spanish developers look for new ways to encourage investment.

The council's chief architect Juan Fernando Perez Estevez explains to Reuters : "It is something that will attract high-end customers who will need services. And it will be the catalyst for further activity. We've got the infrastructure, the motorway, so this is an important development that will attract investment."

Construction has always been a key source of jobs in Spain. At the peak of the housing boom, when the People's Party (dubbed the "Pro Property Party") were last in power, 2.8 million people were employed in the building sector, but this has now dropped to 1.4 million – just 7.8 per cent of the working population.

With unemployment high, Spaniards cannot afford new homes and banks continue to repossess property. But with many seized assets turning sour, banks are losing out on billions of Euros. And yet the Bank of Spain accused them in recent months of "holding back" the best properties until house prices have returned to higher levels. Around 600,000 "bottom of the market bargains" are currently available on the market, according to Property in Spain .

And so Spain relies on overseas buyers to boost demand. Hopes reside in the new Spanish government, recognised as taking the problem more seriously, to continue selling off land assets in prime locations and encourage foreign investment. If the Eurozone remains stable, Reuters adds, "Spain can rebuild".

Some, including Property in Spain , are looking for immediate solutions: "The new Government has one month to the start of the New Year buying season to come up with enough incentives and safeguards to get more buyers tempted by the genuine bargains and mortgage deals on offer." 

As the industry awaits new incentives to clear the large stock of discounted homes, prime Costa property at cheap prices is expected to eventually bring back international buyers to the country's sunny coasts. According to a forecast from Bankinter last week, Spain's supply will last for several years, but houses are predicted to become even cheaper for buyers, with prices falling another 6 per cent by 2013.

It is a long road to recovery but in time, the PP's acronym may stand for "Pro Property" once again.

"There won't be any miracles. We never promised any," said the Prime Minister-elect Mariano Rajoy, who will be sworn into office in December. "But as we have said before, when things are done properly, the results come in."

Has Spanish property still got your vote?

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