The Spanish government announced on August 19th 2011 that tax would be cut on new properties with immediate effect to 4%. The reduction from the current 8% rate will apply until the end of December 2011.

 

This offers an ideal opportunity for anyone considering an overseas property in Spain to hugely reduce their up front costs. However buyers will need to act within the next 4-6 weeks to ensure that purchases, mortgage applications and the necessary legal process can be completed before the end of the year. It often takes two to three months to complete this process.

 

This is yet another boost for buyers of Spanish property. With banks cutting prices on many of their brand new properties on the Polaris World golf resorts in Murcia to less than half their original price we now have this additional boost to an already buoyant Murcia property market. A property costing €200,000 on Hacienda Riquelme resort in 2007 would have paid tax of €14,000. Today that same property can be purchased brand new for less than €100,000 and with a tax bill of under €4,000.

 

It is yet a further blow to private sellers of property in Spain. The reduced tax does not apply to resale property. With re-sellers already reducing prices by 20% to 25% from peak prices in line with market falls in Spain generally, they have been undercut further by the banks "dumping" the last of their stock at up to 50% reduction. The banks also offer 90%-100% mortgages on bank repossessed property while buyers of resale properties struggle to borrow 60%.

 

With Paramount planning a theme park in Murcia and the new airport at Corvera set to open in 2012 this is an exceptional time to take advantage of massive reductions in prices, reduced taxes and superb mortgage deals.

 

With many banks offering 100% mortgages this will substantially reduce the cash outlay for buyers. When buying in Spain you need typically an extra 10%-12% for costs. This includes 8% for IVA (Spanish VAT). With this recent cut that 8% reduces to 4% saving buyers €4000 on a purchase of €100,000.