8 January 2016 – Expansión
BUDGET 2016 / Spain’s autonomous regions are forecasting a 7.2% increase in tax collections relating to house purchases in 2016, with Navarra, the Balearic Islands and Madrid leading the way.
Spain’s autonomous regional governments are predicting significant increases in house sales and consumption in their budgets for 2016. A report prepared by the Ministry of Finance based on the accounts submitted by the autonomous regional governments, shows that income from the Property Transfer Tax and Stamp Duty (ITP and AJD, respectively), which are levied on the purchase of second-hand and new homes, will grow by 7.27% in 2016, to amount to €5,865 million, representing an increase of €400 million. Meanwhile, the autonomous regions expect to raise €21,959.35 million from VAT, an increase of 14.1% compared with the previous year.
The autonomous regions forecasting the highest rates of growth are: Navarra (26.7%), the Balearic Islands (18.2%) and Madrid (13.3%), followed by Castilla y León (10.7%), Galicia (10.1%), Andalucía (9.2%), the Canary Islands (9.1%) and Cantabria (2.2%). By contrast, revenues from the same taxes are expected to decrease in Murcia (12.1%), La Rioja (4.4%), Valencia (2.9%) and Aragón (1.8%).
The Ministry of Finance has analysed the projections submitted by all of the autonomous regions, with the exception of Cataluña, Asturias, Castilla-La Mancha and Extremadura, because either they have not submitted their budgets or their budgets have been rejected.
These forecasts show that the autonomous regions forecast an increase in the sale of second-hand homes, on which ITP is levied, as well as new homes (AJD and VAT). They are also predicting a significant increase in consumption, equivalent to more than three times the rise forecast by the State’s General Budget for 2016.
The forecasts made by the Institute of Business Practice (IPE) in its Real Estate Pulsometer (published in December) show that house sales will increase by 17% in 2016 and house prices will rise by 6.6%. The Balearic Islands (24.5%), Madrid (23.5%) and Cataluña (22%) are expected to lead these increases.
These percentages are consistent with the projections made by the autonomous regions in their own budgets, given that the majority of the regions are not going to increase their rates of ITP-AJD; instead they expect revenue growth to stem from increases in activity. In fact, Navarra, the region that forecasts the highest increase, plans only to make a technical change to ITP, despite increasing other (non property-related) taxes in 2016. These tax rates are not forecast to rise in Madrid, Castilla y León or Galicia, nevertheless revenues are projected to grow by more than 10% this year.
The rate of ITP is forecast to rise in Aragón only, from 7% to 8% – and AJD will increase from 1% to 1.5% there too. In the Balearic Islands, the regional government has created a new ITP band for properties worth more than €1 million, which will be levied at a rate of 11%.
The collection of taxes from housing increased during the first half of 2014 for the first time since the beginning of the crisis, by 5.9%; these same revenues plummeted by 40% in 2008. Experts at Fedea (‘Fundación de Estudios de Economía Aplicada’ or the Foundation for Applied Economic Studies) have warned against the danger of inflating earnings forecasts on the basis of real estate activity.
Original story: Expansión (by Mercedes Serraller)
Translation: Carmel Drake