Luxury Real Estate

Courtesy of Kirsty Bryson of Luxury Homes by VAPF

With the idea of trying to give the Spanish economy a little helping hand to get back on its feet, after the world crisis brought the construction industry in Spain basically to a halt, the Spanish Government has this week decided to drop the VAT tax on new home sales by 50%, reducing the existing rate of 8% to a mere 4%, and prioritizing the sale of new homes over second hand properties.

The news has been received with open arms by the construction companies, which have seen their sales dwindle due to the surge in sales of second hand properties. Many foreign residents had to quickly sell up their holiday homes in Spain to find extra funds to cover the losses their businesses back home were incurring and many jobs were badly affected as a consequence of the crisis, so many of these second hand properties were sold below their original purchase prices, as people were desperate to put their hand on the cash. Obviously, new properties were being completely overlooked.

Prices have certainly levelled out now, with the difference in prices between new properties and second hand ones not as obvious, especially taking into account the extra cost often required to renovate older homes. This new measure puts the new developments back on track, even if it is only for a few months, as the VAT reduction will only be applicable through the end of this year. Compared to the 7% transfer tax you pay on a second hand property purchase, the 4% VAT is certainly much more attractive, especially when the property is brand new.

For companies like Luxury Homes by VAPF, whose mother company VAPF has over 48 years of experience in the real estate development sector and has been through a crisis or two before this most recent one, this tax incentive is certainly well deserved and should contribute towards re-launching the residential construction industry in Spain, which is one of the main pillars of the economy, along with the ever-present and booming tourism industry.