As we said in our last post, we are considering buying a house in Spain and are trying not to rush into things. However, there are many factors influencing our decisions. One of those is the fact that 2010 marks the end of automatic entitlement to tax relief on property purchases, (la desgravacion fiscal por compra de vivienda), in Spain.
From January 1st 2011, anyone with a declared annual income (renta annual) in excess of twenty four thousand euros, will no longer qualify for automatic mortgage tax relief.
In a nutshell , this basically means that:
– anyone with a declared annul income over 24.107€, that purchases a property in spain after 31.12.10 will no longer be entitled to the tax relief previously offered in relation to the interest on mortgage payments.
– anyone who purchases a property in Spain, with a declared annual income equal or inferior to 17.724€ will be entitled to a total deduction of tax relief and in the following year, a total of 15% up to the amount 9.040€
– anyone with a declared annual income between these two amounts, 17.724€ and 24.107€, will continue to enjoy mortgage tax relief calculated in a regressive manner. ie. a calculated percentage of relief that diminishes once we reach a salary of 24.107€
Confused yet? Even having read this many times I still was …
So, if we consider that the current mortgage tax relief assumes an annual rebate of up to 1.350€ based on 15%, capped at 9.015€. This would mean that over a 40 year mortgage we would receive a tax rebate of over 50.000€. Now, that is a lot of money to miss out on!
Some autonomous regions, such as Navarra, are continuing to offer the rebate but can we rely on this happening?
Property experts continue to disagree on the immediate future of the Spanish property market. Will prices continue to fall or will they even out? The only fact they seem to agree on is that prices are unlikely to reach previous highs and are not likely to increase in the immediate future.
Mortgages are obviously much more affordable at the moment due to the fact that the eurobar is at around 1.5% compared to 5.38% in September 2008. However, what will happen in the coming months? Who knows and how much risk are we willing to take? What may seem like an amazing deal today may become a noose around our neck in the future ….
Anyway, we have sent an email to the estate agent to ask his advice on our proposed offer before we actually make it. What will happen next? Who knows … we’ll keep you posted.
Finally, it looks like we have a buyer for our house in France. They have paid the deposit, signed the pre sales contact (compromis de vente) and are measuring up for the work they plan to carry out. So, fingers crossed … it is looking good! But please do not ask me how much money we have lost.
So, once again, we are in search of a new home.
Having considered the option of continuing with a long term rental , we have decided that we want to buy a house in Spain. Despite the fact that there are very negative changes, for us, in the mortgage tax relief criteria “desgravacion fiscal vivienda” that will come into place in 2011 and our situation with Capital Gains Tax (plusvalia) to be paid if we do not reinvest in Spain before the end of the year, we are determined to do our research and not rush, nor be pushed, into anything that is not 100% what we want.
Having lived in the Mijas area for the past eighteen months and having spent a lot of time looking at all other areas along the Costa Del Sol, we have decided that this is where we want to be for now. I am not going to be unrealistic and say “forever” … I am a realist, after all!
We have carried out searches all over the internet, we check in all local publications, newspapers, free magazines, property brochures, in both Spanish and English and so have a pretty good idea of what we would like and how much we can “hope” to get it for.
As it is such a time consuming task, we have also enlisted the help of some local estate agents. This last decision however, is proving to be not so much of a time consuming, but time wasting measure … this comment is not directed at all estate agents, but please can you tell me “how you expect to sell me a house when you do NOT listen to neither my requests nor past experiences?”
“Do you really think that telling me that “Entrerios”, which is an inland, relatively under developed rural area, approximately half an hour from the coast , is the new “Sotogrande”, which is a luxury harbor area, is really going to make me buy this house?” … Oh please!
To further rub salt into the wound, despite being told about our current situation, having made a big mistake buying a house in France, he kept telling us how he loved France and how much this area reminded him of France … get me out of here!
Needless to say, our search continues, with other agents, and we have already found something rather exciting. We’ll keep you posted!
Long term rentals in Spain are becoming an increasingly popular way to move here, without committing immediately to buying. Spain is a vast and varied country and even within established areas such as the Costa del Sol the variety of towns and villages is huge. In addition, there’s still uncertainty about the housing market, so many people are biding their time to see whether prices will drop any further before they buy.
Before moving to Spain, it makes sense to visit your chosen area and travel around as much as possible, getting a feel for the different areas and speaking to local residents about where they would suggest. Think carefully about your requirements in terms of amenities and then look where the nearest school is, how long it takes to get to key areas, how many shops and amenities there are and what the local doctor or hospital is like.
When you have got a good idea and a few preferred areas to start off your life in Spain, then speak to a long-term rental company to ask for a list of suitable properties which match your requirements. They could also suggest areas which you haven’t considered on the back of your requirements. A long-term rental will give you 6 months or more to try out the area and see how well it works for you and you could try a few areas in this way until you find the perfect place for you and your family.
If you would like more information about where to rent, just contact us.