VAT on new homes rising from 4pc to 10pc next year

The Government has confirmed that VAT on new homes will go up from 4pc to 10pc at the start of next year.

Spain desperately needs to sell a glut of new homes, and nurse it’s battered construction industry back to health, so what does the Government do? The one thing most likely to achieve the opposite, namely raising the cost of buying new homes by increasing VAT from 4pc to 10pc, adding tens of thousands of Euros to the average new home purchase from the beginning of next year.

I wrote about this issue a couple of weeks ago, but at that stage it wasn’t clear if the Government was going to raise VAT on new homes or not, having raised it on pretty much everything else, including home refurbishment from 8pc to 10pc, ensuring that from now one everyone will pay for home refurbs in cash.

With both VAT and the tax on resales (ITP) going up, we might see a big comeback in under-the-table cash payments, also known as “B money”, after years of steady decline. Tax evasion is a national sport, and this Government is going to give it a big boost. I wouldn’t be surprised if they raise less tax as a consequence.

The Government has also gotten rid of mortgage tax relief on primary residencies, and according to analysis by Idealista.com, a property portal, the price of new primary residencies will have to fall an additional 10pc to 20pc if buyers are to avoid having to spend more money on a home purchase.

You can read more about the increase in VAT on new homes here:

Comments

comments

5 thoughts on “VAT on new homes rising from 4pc to 10pc next year”

  1. Vernon White

    Spain sorely needs some serious Financial Brains to stop who ever is in Govt making these crazy decisions , are they on a suicide course or something?
    Any moron would realise that to get the market moving the need for a very low Tax Rate on New Properties is whats needed, not the opposite!

    All these idiots need to do now is raise the Tax on Re- Sales and then thats it , bust completley and no one buying , selling or even living there at this rate!

  2. Spanish Property

    OK, it used to be 7%, then 8% – reduced to 4% then up to 10% …

    Spain, please come on – you wonder why you’re in so much trouble.

    Get it sorted – lower vat, get the economy going again – help the repossesions that are going on.

  3. Dee Burke

    Too many people want too big a piece of the pie. My dreams of living in Spain have to be put away, Vat increase on refurbs, income tax every year on your property, on the spot fines from the police which can lead to abuse,Brits singled out because of Gibralter, 400 euro fine for 1km over the speed limit no thanks, hasta la vista.

  4. speakfreak

    Increasing VAT on new homes will maybe reduce the number of new homes being built. Why is that bad? I thought one of the problems at the moment was that there were far far too many new homes on the market. As for reviving the “battered” construction market that’s the last thing they should be doing. One big reason why the housing bubble was created was an over-sized construction sector each fighting the other to build more houses for less people and too much reliance on the sector to contribute to the Spanish economy. What we want is not more construction, but more BUYING and that’s simple to achieve- cut prices by 50% to something like sanity.

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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on ms@spanishpropertyinsight.com.