Tax on Proprietary Transmissions 2013: taxes increase when acquiring a property in the Valencian Community.

 The VAT applied on any purchase of new residences in Spain has increased from 4% to 10% since the beginning of 2013 and also the Tax on Proprietary Transmission (TPT) in the Valencian Community, which is applied on purchases of second hand homes, which has increased from 7% to 8%.

This measure was announced months ago by the regional government and is in full force since the 1st January 2013. The increase in one percentage point will raise the cost of acquiring a property of 100000 Euros in around 1000 Euros.

In a scenario where the regional governments are trying to find ways to reduce their deficit, the increase of this tax is an easy way now that the VAT has reached 10%. The TPT is a tax regulated by the regional communities and differs from one community to another.

Therefore, as the VAT for new homes is more or less the same for all communities, the will to put the TPT on the same level can be the best excuse to increase it, as most of these regional governments are risking the suffocation of their public accounts, and some of them have been obliged to ask the central government for financial aid.

The recent ups and downs of all taxes affecting properties since the government of Zapatero have helped some communities like Andalusia to raise the TPT. It was nearly a political fight, as most of the regions with governments of the Popular Party did not agree with this raise, as they were at that time declaring that raising taxes was not the way to reduce the deficit or to leave the crisis behind.

Nevertheless, now the Popular Party has increased the VAT for properties to 10% and it is probable that many regions will take advantage of this to raise the TPT around that level. Those communities which have asked for financial aid are the ones with more possibilities to do so, like Catalonia or Murcia. Murcia has a TPT between 2% and 7%, depending on the social situation of the acquirer and Catalonia has 5%, 7% and 8%.

Castilla Leon and Castilla La Mancha are also thinking of increasing it, as well as Andalusia and Balearic Islands. These last two regions cannot increase it that much as they already carried out some raises recently. All of them except Madrid and Aragon are planning to increase it, according to a recent article in Expansion.

In 2011, all communities collected 4000 million Euros through the TPT, 20% less than in 2010. The collection in 2012 also seems to follow this path, with a drop of around 20%.

Source: Idealista

The bad bank and the end of the tax benefits will increase property prices even more.

After four years of downfall in the real estate sector, there are very few analysts who dare make a forecast on the evolution of the market in 2013. Specially when 2012 has seen the worst figures in construction and sales since the boom finished. According to the National Institute of Statistics (INE), there were 269880 operations up to October. Nearly 100000 less than in 2011. And prices continue to fall. The square meter has lost more than 25% of its value in comparison with the maximum figures during the boom. Everyone agrees that the evolution of the number of sales and the prices will be affected by two novelties: the establishment of the bad bank and the end of the tax benefits on the purchase of properties.

The constitution of the bad bank, or Sareb, to whom all banks and savings banks are transferring their toxic assets related to the real estate sector, among them properties and land, can cause a change in the tendency, even though its short term sales policy has still not been explained.

Sareb can choose between taking an inventory of all available assets and selling or giving the market a boost in order to reactivate it; that is, it needs to decide between commercializing  the assets or not and depending on its decision it will have a greater or minor effect on the market, Julio Gil, partner of the real estate consulting firm Horizone, explains

Although the president of the bad bank, Belén Romana, has explained it will not concentrate on the retail market, but will segment the properties in packages so as to maximize their value, and the Ministry of Economy and the Bank of Spain insist that the prices of the absorbed assets are not a reference in the market, the real estate sector believes that the discounts applied on the sale of these assets will influence the rest of operations, pushing prices down.

“The prices established by Sareb will be a reference”, Gil says, who believes “prices will continue to fall”. Mainly because of the increase of the unemployment and the lack of credit, but also because 2013 starts with tax novelties which affect the sector. Since yesterday, property buyers will not benefit from the deduction for the acquisition of their principal residence, and also the “superreduced” VAT, which is applied to these transactions has increased from 4% to 10%. The disappearance of these incentives, along with the paralysis of the sector and the lack of financing – the stock of unsold properties remains in 700000 units – will force sellers to apply higher discounts.

There are also some other pending details, such as the measures to be approved by the Government on housing or the legislation on real estate investment companies (Socimi).

Very few share the views of the Secretary of State of Economy, Fernando Jiménez Latorre, who last year assured that the prices of properties had already reached their rock bottom. “The fall of prices will be very similar to the one in 2012”, a representative of RR Acuña & Asociados declares.

The negative economic and unemployment forecasts foresee new set-backs. Prices will continue to have a downward tendency. And they should drop between 0,5% and 1,5% monthly during all year, as declared by Manuel Gandarias, director of the Studies Division of Pisos.com.

Source: ABC