No matter where in the world you currently live, many people dream of Spanish home ownership, and thousands of those people every year make that dream a reality. If you’ve been waiting for the right opportunity to make your dream of living in Spain come true, then that moment could be now. The Andalusian government have announced a new decree that will see property taxes in the region temporarily lowered for all potential new homeowners, which could make purchasing a home in the region more affordable than ever. Here’s everything you need to know:
Which Property Taxes are Affected?
The two taxes that will be affected by this new decree are the Transfer Tax and the Stamp Duty. The potential savings could be significant. The previous Transfer Tax rate was 10%, 9%, or 8%, depending on the value of the property you were purchasing, but this has now been dropped to 7% regardless of the property purchase price. A similar change has been made to Stamp Duty, which has been reduced to 1.2% (from its previous rate of 1.5%).
It’s important to note that this reduction in property taxes is a not a nationwide policy: it only applies to properties in Andalusia. What’s more, there is a time-limit on the initiative, so you’ll have to move fast. The reduction will only be in place until 31st December 2021, meaning that now is the perfect time to start your property search.
These reductions will make purchasing property in the region much more appealing and affordable than ever before. If you’re not sure what the real-term implication of these reductions will be, here we assess things more extensively:
Making Second-Hand Property More Appealing
Whilst this news is excellent for all potential property buyers, it is particularly interesting for those who are hoping to invest in second-hand property (a term to refer to all property that isn’t newly built). The more your potential purchase costs, the more money you will ultimately safe on your property transfer tax. The flat transfer tax rate of 7% will apply until December 2021, at which point it will revert to the previous rates. These rates were determined by the property value, and saw home purchasers spending the following:
- Up to €400,000 you pay a Transfer Tax rate of 8%
- From €400,000 to €700,000 you pay a Transfer Tax rate of 9%
- From €700,000 onwards you pay a Transfer Tax rate of 10%
If the right home for you is a new build home then, whilst you will be able to take advantage of the 7% transfer rate, you will also have to pay a 10% VAT rate, which is why second hand homes are a more attractive proposition at this point.
How Much Could I Save?
The main question that many potential property buyers will have at this point is ‘how much could I save?’ This depends on how much your property is worth, but the potential savings are significant. An example of this is that if you want to invest in a beautiful Mijas Costa villa that has a purchase price of €1,500,000 then instead of having to pay a Transfer Tax fee of €139,000, the transfer tax that you would have to pay would now be €105,000, meaning that you would be looking at a saving of €34,000 if you purchase a home this year.
You could also save money on your stamp duty as a result of these changes. Stamp duty has been dropped from 1.5% to 1.2%, which applies to new build properties (but is not applied to resale homes). This means that new build buyers can also benefit from a significant tax reduction during this period.
What are the Reasons for these Changes?
The Andalusian Government have implemented these changes is order lower property taxes in the region and make investment in the area a more attractive proposition. Other reasons for these temporary changes are:
- To encourage investment in the real estate sector, encouraging buyer both from within Spain and overseas to choose Andalusia when making their next move. This will encourage them to invest in the local property sector and simultaneously, the local economy.
- To recuperate taxes in an indirect way, by giving local citizens access to a higher economical capacity, with the hope that this will be expended back into the economy, ultimately.
If you’re thinking of moving to Spain, particularly to Andalusia, then there’s no time like the present. If you’re ready to turn your dream of Spanish home ownership into a reality then why not get in touch with our local property experts, who are perfectly placed to help you find the Spanish home of your dreams.