Why Is There so Little Interest in Buying a New-Build Property?

The press in Spain has been reporting for a while that property purchases are flowing upwards again. But it seems that the recovery in the market is purely down to the increase in purchases of re-sales rather than new builds.

In fact, last November only 7,767 new-build properties were bought. This is the lowest figure since the gathering of data began. This is 20.6% less than the previous November.

On the other hand, the purchase of re-sale property went up by 41.6% annually, reaching 17,433 units that month. This means that out of the 25,200 properties that were purchased in November 2014, 30.8% of them were new builds and 69.2% re-sales.

Possibly part of the problem is the fact that new builds are no longer considered as such after two years since their construction. This means that if a new property has been on the market for three years without anyone having bought it during that time, it will then be classed as a re-sale property, or a second-hand one as it is referred to in Spanish.

Not only that, but all new builds that have been handed back to the bank are also classed as second-hand if they have had a previous owner prior to the developer. So, that gives some explanation as to why the purchase figures for new properties are so low.

Tax purposes

Whether a property that you buy is a new build or a re-sale also determines how much tax must be paid on the sale.

If you decide to opt for a new-build property, and one less than two years old, you will have to pay 10% VAT to the Treasury. This would go for new-build homes that are purchased straight from the developer as soon as they have been built, or in cases where the property is rented out for the first two years by the developer before then putting it up for sale and the first tenant decides to buy it. It would not apply if a new person who had not lived there wanted to buy the property.

For second-hand or re-sale properties the tax paid is called the Transmission Tax or tax on property transfers. The amount to pay differs in each of Spain’s autonomous regions.

Excess unsold property

The number of unsold new-build properties is still at an alarming figure despite the fact that it is slowly being reduced. By the end of 2013, the stock had fallen 3.3% to 563,908 units, according to data released by the Department of Public Works. Since 2009, the amount has only been reduced by 13% in total, a worryingly low number in so many years. The greatest number of unsold new builds are found in Andalucía, with 16% of the total stock.

Source: www.idealista.es