This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
The autonomous region of Madrid has announced tax cuts for 2014, including a reduction in the transfer tax that buyers pay when purchasing a resale property.
High transactions costs are killing the Spanish real estate market at a time when it needs all the help it can get. So it comes as a great relief to see at least one region start to reduce taxes on home sales.
The president of the Autonomous Region of Madrid, Ignacio González, has announced plans to reduce the ITP transfer tax on resale properties in the Madrid region to 6pc in 2014, down from 7pc today. He also announced that stamp duty (AJD) on notarised documents used in house sales will go down from 1pc to 0.75pc, plus a reduction in the marginal rate of income tax.
“The money is better in the pockets of our citizens,” said González.
As a result, the transfer tax of 6pc on resale properties in Madrid will be the lowest in Spain. The autonomous regions of Valencia and Catalonia recently raised ITP to 10pc, whilst in the Balearics and Andalusia, ITP is on a sliding scale from 7pc to 10pc.
However, VAT on new homes in Madrid will remain at 10pc. VAT is set by the national Government in Madrid, not regional Governments.
By reducing ITP to 6pc, Madrid will start attracting more interest from international investors, at the expense of other regions. The net effect will be to increase sales and tax revenues in Madrid, and help stimulate the local economy. It’s a smart move for Madrid.
The only problem with announcements like this is they encourage people to delay purchasing until the reduced tax comes into force. Expect resales in Madrid to start falling in the last quarter of this year, and then rise rapidly in the new year.
Personally, I am vehemently against high taxes on property buyers. High taxes are terrible for ordinary families, who lose a big chunk of their savings on taxes, and end up with inferior quality housing. If you take awy 15pc of a family’s property budget in taxes, costs have to be cut somehow to compensate. Costs will be cut in construction quality, fixtures, fittings, and furnishings.
Just to give you an international benchmark, in hight-tax Denmark, there is no transfer tax, and no VAT on new homes. The Danish authorities may tax profits and capital gains heavily, but they don’t decapitalise ordinary families just because they need to buy a new home.
In Extremadura, one of the poorest regions in Spain, with a housing stock to match, the ITP is 11pc, almost guaranteeing that there will never be any investment in upgrading the housing stock of the region.
Marty Swan says:
The tax on purchasing property in Extremadura is 8%, not 11%. We specialise in foreign buyers with property in all parts of the region.
Mark Stücklin says:
The bottom rate is 8pc, but the top rate over €600,000 is 11pc.
Martyn Swan says:
Not many properties here are over 600,000 euros. We have been operating for 7 years and have never sold one! We have over 200 properties on our website and only 5 are over 600,000 euros. The vast majority are under 300,000 euros, way below the 11% band.
Lafina says:
Hi
Can anyone advise of a good website in Spain such as an equivalent to rightmove or zoopla. I’m looking for good investment properties in Madrid but it’s very hard to understand whether a property is good value or overpriced. Idealista and the other usual sites are lacking in data and very slow to use… Any advice welcomed!
Thank you!
Barry McCormack says:
Hello Lafina,
I am a real estate agent here in Spain so would suggest you take a look at the website of Solvia, the real estate arm of Banco Sabadell, one of the more aggressive banks offering discounted properties and investment opportunities in Madrid, though reliable data is virtually impossible to come by in the way that Right Move and Zoopla offer to the public.
If I can help in any way, do not hesitate to contact me.
All the best
Mark Stücklin says:
Lafina. There is a good solution, but it’s for professionals and costs 1,000€/month to use. I use it and I can see there are some great deals in Madrid. I’m working with the developers of this online valuation system to put together a portfolio of investment opportunities. Sign up for my news bulletin to be kept informed.
Steve says:
7%-6%! Too little too late (IMHO).
That’s a small amount of common sense flickering at the end of this tunnel. If they (the regions) had all done something innovative/bloody obvious and significant like 3% years ago maybe it would have had some effect in slowing down this train-wreck of a country…but now? Pathetic.
Chris, London says:
by comparison, less than £250k in the UK is 1%.
Serhat Batur says:
Martin mentions that “We have been operating for 7 years and have never sold one! We have over 200 properties on our website and only 5 are over 600,000 euros. The vast majority are under 300,000 euros, way below the 11% band.”
With this reality, It is difficult to understand why 500 k Euro investment was set as minimum threshold for residency visa with new law. I think this is quite high and as foreign investor I also find the taxation very discouraging as well comparing to other countries. 1 % cut is not significant to attract foreign investors.
Kris Van Lancker says:
When will the tax cut by the Autonomous Region of Madrid be implemented? Will it be on 01 Jan 2014? Thank you.
Spainman says:
I agree with Steve. 1% is a drop in the ocean and will not attract significant investors let alone the working population in Madrid. A version of the Denmark system is what is required