Thursday, 12 December 2013

Spanish house price index and October sales

Have prices stabilized in Spain


Data issued this week by TINSA one of the biggest valuation companies in Spain showed that in general house prices continue to fall in Spain but at a slower pace than in previuos years.

In a few pockets, which include the Islands both Canaries and the Balearics, the slow down in the decline is pronounced suggesting in these areas that we are about to enter a era of stabilization and possibly in 2014 increases in the average price per square meter. This data is backed up by the increase in the purchase of Spanish property in both of those geographical areas.

In the Coastal areas where prices rose at their quickest level in the boom times average pirces per square meter have now dropped back below 2002 levels suggesting again that a period of price stability and increased sales could be on there way.

Property sales in Spain

In general for sellers in Spain the news on number of house sales relating to dwellings remains in the doldrums. For potential buyers in Spain this may be seen as a positive as it means it remains very much a buyers market. Lawyers in Spain and agents report that it is still the case that offers well below asking prices are being accepted by sellers and the data suggests this trend will continue.

Overall property transfers are up 

Whilst it may appear on the surface good news that overall property transfers in Spain were up month on month this is because the amount of properties being transferred under "other titles" is increasing each month. In the section other titles sits the transfer of property ownership to Banks as they reach their court action conclusion.

The increase in this area is bad news all round as any sustained growth on prices or house sales will have to be supported by Spanish mortgage lending. Whilst Spanish Banks continue to have high default ratios it is difficult to see them changing their current stance, where tight criterias, and high pricing have depressed the lending market considerably.

Read the full article:  Property sales and house prices in Spain

Tuesday, 3 December 2013

Divorcing or separating in Spain

If you are an expat living in Spain undertaking a formal separation or a divorce can be a minefield

Where should divorce proceedings take place in Spain

When considering divorcing one of the first things to establish is what jurisdiction will hear your proceedings. Legal advice in Spain should be taken to ensure the proceedings happen in the right country and within the right region of Spain. Who you are married to and where they are from may have less bearing than other matters like where you live and under what martial regime.

Court rulings

Like most countries it is always a good idea to get any agreements between the parties ratified by the courts. Whilst it may seem like a good idea to avoid the cost and time of this process when relationships perhaps remain quite good, failure by one of the parties to adhere to the agreements can only be enforced if there was a legal agreement in the first place.

Split of assets

Because of the emotions that run high during a break up often it is diffcult without third party intervention to agree what assets are common to both parties and what value should be placed on these.

Coming to agreements on assets is often the most lengthy part of any proceedings and can be sped up and agreed if a detached third party sits between the two parties. Of course a good Spanish lawyer will always work with the client who has appointed them, best interests as paramount, but they can also provide clear guidnace and advice across the whole spectrum and not be so hung up on individual parts of it.  

Children and dependants

The best interests of any dependants will always be a key focus for a parent. Whatever the issues between the partners most couples will want the best possible outcomes to prevail for the children. Spain has clear laws on custody rights, maintenance and visitations.

Read the full article: Family matters and Divorce in Spain 

The importance of having a Will in Spain

The laws covering inheritance and inheritance taxes is different in Spain to many other countries.

Why is it important to have a Will in Spain

Even if you have a Will in your own country of residency or domicilty, if you hold assets in Spain you should also ensure you have a Will written in Spain. The Will in Spain needs to work in conjunction with any other Wills you have written but should specify clearly what happens to the asset in Spain in the event of your death.

Failure to hold a Spanish Will can cause issues after your death, can lengthen considerably the time it takes for probate to be finalised and may in fact mean the assets do not finally go to the person you would have wanted to inherit them.

If I am married surely my partner just automatically inherits

In Spain it is not necessarily an immediate family member who is the only one with rights to the assets or part of them. Spain has no spousal exemption so a jointly owned asset between a married couple attracts immediate death duties for the 50% owned by the deceased and the asset cannot be transferred 100% to the joint owner until the death duties are paid. IHT taxes are the responsibilty of the beneficiary, not the estate, so assets cannot be sold to pay any death duties due.

What are Death Duties in Spain

Inheritance taxes vary from region to region and also can be affected by the relationship of the person who is the beneficiary, to the deceased. It is always best to take legal advice from a professional in Spain who can help you construct a suitable Will and help you understand and provide for any taxes that will apply.

Advice should be taken when considering buying a property in Spain at the outset to ensure the ownership is set up in the most cost effective manner to help mitigate as much Inheritance tax as possible.

Read the full article: the pitfalls of not having a Will in Spain

Friday, 22 November 2013

Minimum floor rates on mortgages in Spain

Over the past few weeks there has been a number of news articles about abusive clauses in Spanish Mortgage deeds.

What types of clauses are being considered abusive 

One of the most publicised clauses is minimum floor rates which is where a Spanish Bank incoperates into the mortgage deed a specified rate below which the variable rate can never fall. As mortgagees started to find payments diffcult to meet many started to look at why in an environmnet of such low overall rates in Europe this was not being reflected in their mortgage payments.

Slowly this practice of ensuring that the bank in Spain earned minimum income from interest payments immaterial of what the level of variable rate was in the current market, came to light.

Why is this abusive

On a case by case basis the Spanish courts are ruling in favor of the mortgagee on the basis that whilst the practice itself is not illegal the failure to ensure the client understood what they were signing was.

Other areas of abusive clauses can the adding compulsory products like life cover where it is not a need whilst again not making this specification clear to the client before signing.  

What are the Banks in Spain doing to respond to the courts findings

Little by little Banks are starting to remove the clause of minimum rates from new deeds of those buying property in Spain and some are actually removing them from existing deeds. There is however no national directive as to what banks should or should not be doing so all cases are looked at on an individual basis.

The loss of the minimum rates will have an impact on the earnings of the banks who extensivley used them for some the removel could see next years profits wiped out completley. 

Veiw full article Spanish mortgage minimum floor rates 


Monday, 11 November 2013

Is Black money indicative in the Spanish purchase market

How did Spain look a few years ago.
Black money, so money passed in cash for the purchase of a property which was then not recorded on the deeds, was epidemic in Spain a few years ago.
Most sellers would look for anything up to 30% to not be recorded officially, and would encourage buyers to participate by telling them they would also save on purchase taxes.
What sellers and their lawyers failed to explain to the buyer was that at sale capital gains tax would be worked out based on the lower recorded level on the deeds and sale price not the actual price paid.
Notaries, Banks and lawyers all turned a blind eye to the activity and it was not unknown for large suitcases full of money to openly taken to Notary and counted out in the office.
What is different now
Spain, since the economic crisis began, has started to come down heavily on tax evasion across the board. A number of high profile court cases involving Lawyers and Notaries caught in participation of tax fraud hit the headlines making it clear that the Spanish authorities would no longer suffer its professional bodies knowingly being involved in such activities.
Aside from trying to clean up the purchase market and ensure full taxes were paid the Spanish Government also needed to show the international communities, it not only paid lip service to money laundering regulations, but enforced them. Notaries are now required to evidence the legitimate source of any cash deposits for the buying of property in Spain, and to clearly record how the full monies for the purchase was sourced.
How do the authorities in Spain check no black money passes hands
Whilst it is impossible to be 100% sure that outside the formal transaction black money has not been passed the Spanish authorities now undertake a number checks after completion to minimize the possibility.
The most relevant and most controversial of these is checking the deed price against the Catastral value which is the minimum price of the property as recorded at the Town Hall and used for purposes such as calculating IBI. If a property is recorded as being sold at a price below the Catastral value this will highlight the file as one to be looked at in more detail.
The issue with this practice has been that whilst, at one point, the values recorded at Town Halls were much lower than the prices being paid for property, on many occasions this is not now true. With prices in some areas falling by 50% it is often the case the minimum value is in fact higher than the price being legitimately paid by a buyer.
In some regions Andalucía, being one of them the tax authorities are blindly using the recorded minimum value to calculate the tax payable.
What is happening to buyers in Spain who bought at a price below the Town Hall level
Many buyers in Spain have had nasty surprises after completion when a letter drops on their mat demanding further purchase taxes be paid. This can happen even though the buyer has in fact paid full taxes on the true purchase price. There is however no arguing the tax bill with the tax office and it will have to be paid if the tax authorities pick up on the transaction, even though this is clearly unfair on anyone who was lucky enough to buy a property at a steal.  
A good Lawyer in Spain will always make one of their first checks Town Hall recorded value and advise a client that purchase tax should be reflected against this price even if the purchase price is lower. If the amount paid in tax is finally to be against the purchase price the lawyer will warn that it is possible at a later date that further taxes and possibly fines may be applicable.
This situation is a backlash to what happened in the past as the authorities use this particular measure to monitor tax evasion, without perhaps taking into account the significant and real drop in purchase prices.
What is happening where investment funds or buyers buy from SAREB
A good question to ask is what is happening in terms of tax when the bad bank SAREB sells large portfolios of property at massive discounts to investors, or when another Bank in Spain does so direct. One assumes that in these circumstances it is agreed, at point of deal, with the tax authorities that the price being paid is the price on which tax will paid. This would seem somewhat unfair on those buyers caught out by the way in which the tax is normally applied. On the other hand, who knows perhaps these investment funds may find they have problems a little way down road where a regional tax authority rather than the national one decides further tax should be paid.
The Future
It is important for property sales and recovery in the future that the Spanish tax authorities find a more transparent and fair way of ensuring full taxes are paid. As part of the tax overhaul promised by the government next year the practice of making it up as you go along has be stopped and regional tax authorities prevented from deciding black money took place without any real evidence this was the case.

Spanish property purchase news

The buying and selling data for properties in Spain September 2013
Monthly data out today showed that whilst property transfers in Spain increased slightly in September, in comparison to both year on year figures and month on month, the level of actual sales continues to come under huge pressure.
Incorporated into the monthly property transfer figures issued by the INE are foreclosures, inherited properties, commercial property and swaps.
When the numbers are broken down into the number of properties bought in Spain the data looks far from rosy.
What do the property purchase numbers look like
Total property transfers were 126,150 which was an increase of 3% in comparison to September of 2012, however actual sales of properties showed an annual accumulated decrease of 8.8% in comparison to the same time in 2012.
The number of actual sales in Spain between August to September did show a small increase of 1.1% which is the first time sales have been higher in September in comparison to August of the same year, since 2009.
How were the property sales in Spain broken down in September
Of the properties sold in Spain 44.8% were new builds and 55.2% were re-sales. Resales are holding up better than news builds and have increased 4.9% year on year.
In 2012 the Spanish Government put in place tax measures to assist the sale of new builds by lowering IVA and providing breaks on future capital gains. These incentives helped increase new build sales in 2012. The removal of these incentives in 2013 are now showing in the figures. This trend will continue for the rest of year, as sales of new builds were buoyant in October, November and December 2012 as buyers rushed to beat the withdrawal of the tax breaks.
How are the regions house sales holding up
Andalucía for yet another month had the highest amount of sales. The Andalucía region sold 5091 properties in August a small increase from previous year of 0.5%.
The Canary Islands showed the largest increase year on year up by 32.3%.
Only Andalucía, Canaries and Cataluña showed any year on year increase at all, suggesting sales are helped in those regions by nonresident buyers who are looking for holiday homes rather than permanent residences.
If overall Spanish property transfer are up is that good news
Perhaps more worrying than the stagnant residential house sales in Spain is the level of property transfers that are falling into the others pot. This is because the others pot includes Spanish bank foreclosures.
The data suggests further long term problems as Banks accumulate more and more stock from defaulted Spanish mortgages on their books. This will continue to put pressure on the Banks overall profitability as well as the oversupply and pricing of the housing stock.
Of the 30,180 Rustica properties transferred in August only 8,173 were actual sales and of the 54,486 Urban properties transferred in August only 23,805 were actual sales.

Monday, 14 October 2013

Property sales and Transfers Spain

The August data on transfer of property rights from the INE in Spain was released today.
What does the INE report include
The data issued by the INE is an overview taken from land registry in Spain, of the total amount of properties in Spain transferred during the month of August and includes data relating this to the previous year and the previous month. The information whilst showing August could relate to actual sales in the last couple of months because of the time lag between Notary and registration of the property transfer.
 The information in the monthly report contains the total transfer of property rights not just the buying of residential property in Spain.
The data within the report covers all areas of transfers including, Bank foreclosures, so where a mortgagee has defaulted on their Spanish Mortgage. The data also includes the transfer of commercial property as well as inherited property and land purchases. One of largest groupings making up one third of the total includes bank repossessions where the Bank has concluded the litigation, the Subasta date has passed without a buyer being found, and the Bank has purchased the property from the courts.
Purchases of homes in Spain
House sales, so those properties actually bought for residential or holiday use, saw large drops in August in comparison to August of last year and between July and August of this year.
 Sales of residential property in Spain fell in August 2013 by 15.4% when viewed against the same month of 2012. Possibly more concerning is that the data shows that house sales also fell between July 2013 and August 2013 by 8.4% and showed the biggest drop between these two months since the crisis began some 5 or 6 years ago.
New builds lagged heavily behind resale’s a trend that has continued since the withdrawal of tax breaks on new builds at the end of December 2012. During 2012 the government in Spain, to help kick start the sale of new build property, dropped IVA on the purchase of new builds from 7% to 4%. In January 2013 not only was this reduction withdrawn but in fact a new IVA level of 10% was implemented.
Because transfer of property data comes from the Land registry and does not therefore necessarily reflect actual sales within the month they happened, January and February 2013 appeared to show an improvement in overall house sales. This data was in fact a reflection of the higher level of sales made in December 2012 and November 2012 as people rushed to beat the tax increase.
Is there any good news
Not really. Year on year sales data seems to indicate that sales are up from 2012. This however is not necessarily a true reflection of what is happening. Firstly the figures include sales that actually happened at the back end of 2012 and secondly one of the groups showing an increase by 11.4% is the group that includes Banks taking over properties they have repossessed.
Regional differences
One stark point coming from Augusts report is that the coastal areas traditionally the first port of call for non residents buying in Spain are holding up much better than the other areas of Spain where property is more traditionally bought by the indigenous population.

Thursday, 10 October 2013

New immigration laws Spain

Spain last week issued its new law paper on Visas and Immigration from EU nationals.
The new laws are laid out on a 96 page long document and covers the new requirements that citizens residing outside the European Union must meet for a Visa outside a tourist Visa to be obtained.

Who does the new law affect
For residents of number countries keen to consider Spain home the new law may make living in Spain easier and a reality. Currently those nationalities most eager to have a Visa include Indians and Chinese as well as Russians and Brazilians.
It will now be possible if citizens meet the following requirements for them to be considered for a residency Visa for up to one year renewable yearly for a maximum of 5 years as long as the criteria by which it was granted is maintained.
The key points when you are applying for Spanish residency that must be met are
·         You buy a property and your personal cash investment is € 500k or more

·         You buy government bonds for a minimum of € 2 million Euros

·         Share capital to the value of minimum 1 million Euros

·         You deposit in Spanish Bank € 1 million Euros.
Under the new law as outlined in the paper any one of the above criteria gives you access to one application. Whether one application includes all your family is not yet clear or defined. You should take legal advice when buying in Spain or wanting to meet any of the alternative criteria.

How do I maintain my Visa
To maintain the Visa you must demonstrate each year that the value of the criteria by which you met residency has been maintained.
Restrictions as to freedom of movement and what type of Visa you can gain are unclear. Not only must Spain meet its own immigration rules but Spain must also abide by the wider European immigration rules that certain nationalities are subject to along with meeting all money laundering regulations. Under the legislation there are a number of new types of Visas and again it is not clear which is suitable or offered in each individual circumstance.
A completely new government department has been created to manage the implementation of the new law although information on how to access this department is scant.
It would appear at present until the practicalities of the new law are more clear that any application should be made initially to the Spanish Consulate within the country in which you reside which is the current process all applicants undertake.