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Madrid, Spain: The Spanish Government has cut value added tax on new property in Spain by 50 per cent with immediate effect.
The reduction in VAT (Spanish - IVA) from eight per cent four per cent on new build Spanish properties came into force on August 19th and will continue until the end of the year.
Announcing the decision Jose Blanco, Minister of Development for Spain, said he hoped the new measures will "revive the construction sector" and "contribute to create employment in the sector most affected by the recession”.
The move comes at a time when the Spanish real estate market is close to rock bottom. Prices are down to around 2005 levels and many banks are offering one hundred per cent mortgages in an effort to attract buyers.
The VAT reduction will mean a saving of up to 8,000 Euros (US$ 11,500) on a 200,000 Euro (US$ 288,420) property.
Some Spanish property developers are going even further, pledging, "No VAT at all" until the end of the year - reducing VAT payments on new property transactions effectively to zero.
The real estate and construction industry in Spain reacted positively to the news:
"This should provide a much needed lift for the Spanish property industry, which has been grappling with massive over-supply in certain areas. Although prime locations such as Marbella, Malaga and Majorca have seen strong demand from northern European buyers and an increase in sales volume over the past twelve months, in many less desirable areas the market continues to struggle.
"Buyers should see this as a positive step by the Spanish Government to get the property market moving again. We have already seen a significant increase in enquiries for Spanish property and we anticipate strong sales over the coming months as buyers hurry to complete on purchases before the end of the year.
“It remains to be seen just how much impact the tax cut will have in less popular areas. However, buyers who have been considering taking the plunge in more popular locations will likely look on this as an opportunity to get an even better deal on their investment.” commented Adam Smith, market analyst for Ocean Villas Group.