Investors buying holiday homes to rent out in Spain will not be affected tax wise by the Spanish government’s plans to abolish mortgage tax relief from the beginning of 2011 as it will only affects primary residences.
However, the latest move could eventually be detrimental to the property market in general as prices could go up further to compensate for the money primary owners will lose as a result. The proposal follows another plan to raise VAT on new homes in 2010.
Currently borrowers can deduct 15 percent of their mortgage payments up to an annual limit of just over €9,000. Figures released for 2008 revealed that this provided an average saving of €900.
Specialists have estimated that as a normal mortgage term for a Spanish property is 24 years this adds up to around €20,000 over the period of the loan.
However the proposal to abolish the mortgage tax relief may not go ahead as specialists also believe that the government may be pressurised into backing down before the legislation is passed.
Overall Spanish property experts believe that although property values in the country will continue to decline in the current economic climate there are some signs of stabilisation.
Recently released figures by the Housing Ministry show that property prices fell 7.8 percent year on year in the third quarter of this year compared with an 8.2 percent fall in the previous quarter.
The current falls means there are still holiday home bargains to be picked up by cash rich investors who can put down large deposits.
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