Good News All Round For Spanish Property
There was general optimism for the future of the Spanish property market after Spain’s Ministry of Development reported a rise of almost 27% in applications for new construction during the first nine months of 2017. Data produced by the country’s Ministerio de Fomento showed a total of 60,695 applications for new-builds between January and September of last year representing a 26.5% year-on-year hike. This figure falls less than 4,000 short of the 2016 twelve month total of just over 64,000.
The rate of increase, if it were maintained for the remainder of 2017, would have resulted in some 81,000 applications. This would be the highest number of applications since 2010, a year in which proposals for new-builds reached a remarkable 91,600. The majority of licenses being sought during the period up to September 2017 were for the construction of apartment complexes, making up 75% of applications, an increase of more than 30% on 2016 figures. Proposals to build new villas and detatched houses rose by almost 17% year-on-year to 14,675, whilst permissions sought for extension of existing homes rose by more than 11% and applications for refurbishment to established properties increased by 2% to some 20,000 during the same period.
The findings do not distinguish between types of property but approval for specific use will depend on criteria set by regional governing bodies. Consells in the Balearics, in particular, are being urged to limit the use of city centre accommodation for private holiday rental in order to deal with an acute housing shortage amongst residents.
The figures suggest that investment is growing from both domestic and international sectors reflecting a healthy growth in the economy and a possible return to the thriving market that existed before the dark days of the financial crisis. In fact much unfinished construction has re-commenced as a result of substantial, new injections of cash. Employment will be generated as development gets under way to vastly improve the landscape and remove the scars left by the housing crash. It was also reported that bank reposesions fell by almost 60% during the third quarter of 2017, bucking an unfortunate trend that began after the bubble burst on the property market a decade ago. In fact most repossessions last year were on properties mortgaged between 2005 and 2008.
The steady rate of growth is being seen as highly positive by experts who are predicting a continuation of the upward trend without risk of another deep depression. The decline in the number of re-possessed properties and increase in applications to extend and refurbish are also indicators of new found confidence. Spain’s popularity as a global holiday destination or, for some, as a permanent home continues to soar with numbers of visitors increasing each year. It seems certain, then, that the demand for accommodation can only continue to grow and create a stable future for sound investment.
Tax and Property Ownership Post-Brexit
There was good news for many Spanish property owners, at the beginning of this year, as inheritance succession and gift taxes were substantially reduced in some regions including Andalucia and Murcia. The result of the reforms means that the much maligned levy has been virtually eliminated for close family beneficiaries. This includes assets gifted by expatriates living in the newly regulated areas of Spain. The situation may not be so favourable, however, for British nationals after the final phase of Brexit. Spanish law differentiates between EU/EEA residents and those from outside the European Union when it comes to tax .
Currently a Spanish resident leaving assets in Spain to someone living in the UK could be fairly confident that, being an EU resident, the beneficiary would be taxed according to the rules of the region where the assets are based. If Britain ceases to be part of the European Economic Area completely, however, UK residents will be subject to harsher Spanish state taxes. The same conditions would apply to British beneficiaries who are resident in Spain. Under the new, relaxed legislation, some of the most generous regions in mainland Spain offer spouses and close family up to 99% of the total value of the assets in tax relief, whilst the highest concession on tax liability for spouses and descendants, under state rules is less than 16,000€ total.
This would make UK heirs to Spanish assets liable for a much higher rate of tax. It is also worth considering that, once Britain is outside the EU/EEA, in the event that no separate agreement is reached, non-Spanish residents who have sold their main residence in Spain and subsequently reinvested in a main home in Britain will no longer receive capital gains tax relief in Spain. So what action can UK investors in Spanish property take in anticipation of changes to their European status?
Although your home in Spain will always be subject to Spanish succession tax, regardless of who inherits it, a local financial expert can advise on a possible restructure of other assets and wealth to reduce succession tax liability. In December the UK and the EU27 agreed to maintain existing residency rights. A joint statement confirmed that citizens “lawfully residing” on both sides can continue “to live, work or study as they currently do under the same conditions as under Union law”. A piece of news that came as a great relief to British expatriates living in European countries. Those thinking about investing in Spanish property would be advised to act fast.
Spain’s property market continues to enjoy a healthy growth and still offers a wide choice of suitable, and potentially lucrative investment opportunities for every price range. Rumours abound over future UK/EU relations but for the moment there has been very little significant change. Talks of the UK remaining in the Customs Union has served to dilute some of the strongest fears of European investors and the whole issue seems somewhat less frightening. Certainly, under current legislation, the process of buying property and obtaining residency in Spain remains relatively simple for UK citizens. Fast action and sound advice at every stage is the key to ensuring that a Spanish home can not only be a lifelong dream but also a very worthwhile asset.