Tag: AJD

Congress Agrees that the Banks will Pay All Mortgage Costs, Except the Appraisal

13 November 2018 – Expansión

The political parties today agreed by majority that the new Mortgage Law will establish that notary expenses linked to the signing of mortgages will be paid by the banks and that the appraisal costs will be paid by customers.

Moreover, the notaries will carry out a questionnaire with each borrower to ensure that he/she understands all of the clauses in the mortgage contract, at no additional cost.

The Mortgage Law was presented again today at the Congress’s Economy Committee after the Government approved a royal decree law which stipulates that the Documentation Registration Tax (AJD) will be paid by the banks and not by customers.

The new Mortgage Law reflects that decision and makes it clear that the financial institution will pay for the first copy of the notary deeds; the customer will cover the cost of any copies he/she requests. Meanwhile, the registry costs will also be paid for by the bank; and the borrower will pay the appraisal expenses since he/she will be able to choose the appraisal company freely.

Nevertheless, several other important issues still need to be agreed, such as those relating to early repayment fees, late payment interest and the early termination clause of mortgages and which allows the foreclosure of homes depending on the debt that has been acquired by the borrowers (…).

On the other hand, the political parties will also have to decide about the entry into force of the new standards, given that the financial sector is asking for a margin of 6 months versus the 15 days that the draft bill is proposing.

The Mortgage Law, which is a transposition of a European directive, seeks to provide greater protection for consumers and promote transparency in the granting of mortgages, which is why the political parties have agreed that appraisal companies can be independent physical persons or legal entities (…).

Original story: Expansión

Translation: Carmel Drake

Spain’s Banks Must Pay the Mortgage Tax from Now On

10 November 2018 – Expansión

The Royal Decree approved by the Council of Ministers last Thursday, which modifies the Law governing the Tax on Property Sales and the Documentation Registration Tax (ITP and AJD), comes into force today, following its publication in the BOE. The Decree establishes that the banks, and not the customers, are responsible for paying those taxes.

From today, the purchaser of an asset or right, and in his/her absence, the persons who initiate or request the notarial documents, or those in whose interest they are issued, shall be subject to the tax. When it comes to loan deeds with mortgage guarantees, the bank shall be considered the taxpayer.

In terms of new features, the Royal Decree introduces a new article in the exemption section, which means that “loan deeds with mortgage guarantees, in which the borrower is one of the persons or entities listed in section A) above” shall not be subject to the tax.

Those entities include the State and regional and institutional Public Administrations and their organisations for welfare, culture, Social Security, teaching and scientific purposes. Financial institutions will not be allowed to deduct this payment from their Corporation Tax charge from 2019 onwards, given that tax changes are applied to complete fiscal years. The tax that the banks will have to pay will amount to €2,500 on average per loan and will, according to the Minister for Finance, María Jesús Montero, contribute to the collection of €2 billion every year for the regional coffers.

The Government justifies the “urgent” need for “regulation” to dissolve the “legal uncertainty” created by the Supreme Court following its ruling to force banks to pay the tax, before resolving a few days later that it was returning to case law and therefore obliging citizens to pay it. “This succession of events has led to a situation of legal uncertainty, which affects the mortgage market as a whole, and which must be addressed immediately”.

Original story: Expansión

Translation: Carmel Drake

FAI: More than 8,000 Mortgages Paralysed by Supreme Court Ruling

26 October 2018 – Eje Prime

Real estate companies are warning of the impact of the legal battle over mortgages. The Federation of Real Estate Associations (FAI) estimates that more than 8,000 mortgage operations have been paralysed across Spain as a result of the decision taken by the Supreme Court that it should be the banks that pay the Documentation Registration Tax (AJD).

Similarly, the body has warned of the consequences generated by the delays and has asked entities to act “responsibly” towards their clients, given that “they may incur breaches in any “contratos de arras” they have already signed because of the delays in the signing of the mortgage loans”, according to Europa Press.

In this sense, the President of the FAI, Nora García Donet, stated that in light of the “uncertainty” generated, “the banks have delayed more than one third of the signings planned for the coming days”.

The FAI, constituted in March 2013, comprises twenty regional and local real estate associations from all over Spain. Currently, the entity groups together more than 850 real estate agencies and 3,730 professionals.

Original story: Eje Prime

Translation: Carmel Drake

Juan Velayos: “Neinor will Not Buy Land in Municipalities that Oblige 30% of Developments to be used for Social Housing”

19 October 2018 – El País

Next week, the ‘Meeting Point’ real estate fair is going to be held in Barcelona and the atmosphere is palpable: property developers are angry about the obligation to allocate 30% of new developments to social housing, a measure approved recently by the Town Hall of Barcelona, which may be extended to other municipalities. In an informative breakfast on Friday, the CEO of Neinor Homes, Juan Velayos, added fuel to the fire. Velayos explained that this “manifestly illegal” measure, will generate legal uncertainty and hinder the purchase of land for construction. In the case of Neinor Homes, Velayos confirmed that his firm will not buy land in any municipalities that adopt the obligation to allocate 30% of developments to social housing.

The measure approved by the municipal government led by Ada Colau will oblige property developers to reserve 30% of all new and renovated residential developments spanning more than 600 m2 to social housing. “The need to create social housing is a reality in the city, but the measure is very unfortunate. It is great for winning votes, but not for resolving the problem of housing”, said the CEO of Neinor Homes. In his opinion, the obligation established by the Town Hall, which does not discriminate by area or reflect the specific needs of neighbourhoods, only serves to restrict the action of property developers. They will not have the same incentives to buy or build and, in his opinion, that will affect buyers, who will see prices continue to rise.

For the time being, the measure does not affect Neinor Homes, given that the real estate company only has 40 homes in the city of Barcelona. Its activity is focused on the municipalities of the metropolitan area. When asked about the possibility of those cities also adopting the measure, Velayos said that Neinor “would not buy land, or it would only buy it for a much lower price, because it would be land with a worse output”. “Municipalities that adopt this measure are going to deter investment”, he added. Velayos also criticised the ruling from the Supreme Court that establishes that it should be the banks, and not customers, who bear the cost of the Documentation Registration Tax (AJD) for mortgages. In the opinion of the CEO of Neinor, this is another measure that “will generate legal uncertainty” and it is the buyers who will have to take out more expensive mortgages.

Uncertainty due to the independence process

Despite this “legal uncertainty”, which has also been linked to the independence process in Cataluña, Velayos insisted that the region “is a very important location”. Neinor Homes has 34 developments in the autonomous community, comprising 2,700 homes in total. Of those, four developments, containing more than 200 homes, have already been sold.

In Spain, Neinor owns land for the development of 180 projects and 13,500 homes. Of those, 5,000 homes are under construction. The land owned by the property developer is worth €1.8 billion. The firm plans to hand over 1,000 homes in 2018 with more than 100 developments underway, followed by around 2,000 homes in 2019 with 120 developments underway, before reaching its “cruising speed” with the delivery of between 3,500 and 4,00 homes in 2020 and 120 developments underway.

Original story: El País (by Josep Catà)

Translation: Carmel Drake

Political Uncertainty Deters Real Estate Investment

31 May 2016 – Expansión

The political uncertainty in Spain is hanging over the real estate sector, which, despite continuing to be active, is not shining with the same splendour that it did in 2015. Specifically, real estate investment during the first quarter of the year exceeded €2,100 million, which represents a 25% decrease with respect to 2015, according to data from CBRE.

The segment most affected by this slowdown was offices, where investment declined by 70% during the first three months of the year, to €180 million. Meanwhile, investment in retail amounted to around €770 million, almost 45% less. By contrast, investment in the logistics sector amounted to €200 million, compared with €80 million in the same period a year earlier. In other sectors – residential and hotels – investment amounted to more than €1,000 million, compared with €885 million during Q1 2015.

Pedro Lacambra, manager at Ibercaja Gestión, explained that the Spanish real estate market is showing signs of a slowdown, which is accentuated in certain business segments, such as offices. The expert said that Socimis account for 40% of all investment in offices, and that they are having to raise new funds to grow and invest in assets. Moreover, he said that the office business requires greater demand for space from existing companies, as well as the appearance of new companies and multinationals arriving in Spain. For Lacambra, the current panorama of political uncertainty does not encourage any of these scenarios.

Meanwhile, Daniel Pingarrón, market strategist at IG, considers that the political uncertainty is weighing down more on the Socimis and real estate companies than on players in other sectors. “ The stock exchanges and financial markets are more globalised and depend a lot less on politics and local factors. By contrast, the real estate sector is more sensitive, as we have seen with Operación Chamartín and Operación Campamento”.

In this sense, the analyst thinks that some investors are waiting for the uncertainty surrounding the formation of the future Government to be resolved before entering Spain.

Taxation of the Socimis

The analyst at Selfbank, Victoria Torres, explains that the political uncertainty that currently exists in Spain is one of the factors that is significantly affecting the real estate sector, which is very sensitive to the legislation in force. “There is a fear that a change in Government could increase the tax charges for Socimis. For that reason, we are not seeing any massive sales, but rather defensive moves to reduce positions until after the General Election”, explains Torres.

Torres thinks that these companies are helping to boost a depressed sector thanks to the tax benefits that they enjoy, amongst other reasons. Socimis pay Corporation Tax at a special rate of 0%, receive a 95% rebate on Stamp Duty (AJD) and Property Transfer Tax (ITP) on capital gains, and do not retain the dividends distributed to their shareholders, which include both individuals and corporations.

For Torres, the new concerns over the sector come at a key moment for the firms, especially Hispania, which is preparing a €231 million capital increase. (…).

Gonzalo Sánchez, analyst at Gesconsult, shares the same view. For him a more or less similar Government would benefit these companies. “Behind the Socimis are overseas investors, who want to have their money where they can see it and to avoid the chance of any nasty surprises”, he added. (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Tax Collections From Property Taxes To Rise By 7.2% In 2016

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