Prices, locations, Q&A about Madrid city property market

admin — Thu, 18 Apr 2013 10:50:37 +0000

There is no universal answer to the question as to whether it’s better to buy now or wait because you’ll just end up joining in with a game with many variables. Disappointed?

What is certain is that the Madrid property market, just like that of Valencia and the Catalan and Basque regions, has its own peculiarities. It is not the same to do a property investment or buying in a town as in the capital, and within the capital, enormous differences exist between the offers that exist in the Salamanca district and that of Villaverde.

The property prices adjustment in course

The fact that the cost of housing continues to adjust month-to-month should not be overlooked, as it is for this very reason that the market is swamped with very attractive housing offers. You should analyse, in detail, the characteristics of the flat and place them in relation to the area in which the flat is located. These clues about the local market should help you in making the best decision.

Which districts or streets in Madrid do I look at if I want to buy a flat as an investment with revaluation expectations?

Madrid can count on certain districts which will always be in demand. It’s all about the more-established residential areas, specifically Salamanca, Chamberí, Charmartín, Retiro and certain parts of the city centre. You just have to look at the high level buildings which will best survive the test of time, just as Manuel Gandarias, director of the Office of Education at pisos.com indicates. “The location and condition of the building and home ownership are the two key factors.”

You may also obtain attractive returns from these districts within a short period of time, from the third of fifth year, whilst “if you propose a long-term investment, between 10 and 15 years, Tetuán and Usera have good prospects”, according to local property finders.

What three streets are at present the most expensive in the capital of Madrid?

Serrano, Velázquez and Castellana could be the trio of luxury property, but we must not lose sight of other streets either, such as Ortega and Gasset or Habana Avenue. The Salamanca district has always produced the most exaggerated prices, especially the quadrant between Alcalá, Príncipe de Vergara, Recoletos and Diego de León, closely followed by Chamberí with the area of Almagro, Alonso Martínez and Eduardo Dato.

What type of property is most in demand by buyers in the Community of Madrid?

Although not all potential buyers have the same needs, it is possible to imagine that standard housing prevails above everything else. For Isabel Gil, agent in Madrid, the most sought after flat measures at 100sqm, has 2/3 bedrooms, 2 bathrooms and, if possible, includes a parking space. We must also highlight the importance of a lift and common areas such as a swimming pool, gardens, gym and security, etc. The website, pisos.com, in its latest report on the most sought after housing in Spain, said that the most desired flat by its users is 90sqm and costs between €120,000 and €135,000.

What are the housing market expectations for 2013 in this region? Is this a good time to buy?

The price trend is still down, but they will become more and more temperate. In fact, in some areas, the discount rates recorded are minimal but they do show a slight upturn.
Buy with the view to do up the property with some small modifications which allow you to put the flat up for rent quickly. The profitability may be low at first but if you buy the property at a good price and you expect a long-term return from it, then it’s a good option.

What is the average time required to sell a flat in the Community of Madrid at the moment?

The average for selling is about eight months. Excluding the current severe mortgage situation and job instability, there are two reasons directly related to the seller that do not help in lowering this ratio: the refusal to lower the price and the reluctance to go to a brokerage agency. “It all depends on what the owner puts in the hands of the professional, who values your home properly,” states a Madrid property finder, estimating that a property priced correctly and with professional advice is sold in three to four months, and they even give cases where the transaction is complete within a month.

Another property finder is also of the same opinion, placing the sales price as the main accelerator and assuring that “you can sell in 10 days, especially if the house is in a price band lower than those offered in the same area.” These experts also point to the opposing side: “We have customers who have spent more than three years trying to sell their house, and because they won’t lower the price, they’ll never sell.”

By how much did prices reduce or increase last year in the capital of Madrid?

The last quarterly report on sales prices second-hand from pisos.com recorded a fall of -6.50% in Madrid in March 2013 in comparison to the same month last year. Consulted brokerage agencies raise this percentage to 10%. Do not forget that the prices at which properties are advertised on property websites are not the final prices, since they would be pending subsequent negotiation between the seller and buyer.

Is this region one of the areas most affected by the property crisis? Why?

Madrid has not been one of the most devastated regions by the ‘property boom’ crisis and less still if you focus on just the capital. It is true that there have been many urban developments on the outskirts of the capital and in neighbouring towns, accumulating an important stock, but in other communities, construction fever was higher. The worst affected area has been the coast.

What is the average price of a flat in Madrid? And in the centre of the capital?

According to the website pisos.com, the price of a typical flat consisting of 90sqm in the Community of Madrid would be around €210,000, whilst in the centre, we would be talking €270,000. Bear in mind that it is not the same for a flat in the district of Salamanca, where prices would move into the €400,000, and for Villaverde, where the average is around €143,000.

100sqm, in the centre of the capital Madrid, facing outside, three bedrooms and renovated.
The district centre is in fact wide in price. It is not the same in Lavapiés as Cibeles. Nevertheless, the range in price would be between €300,000 and €400,000.

100sqm, in a district well served by public transport, facing outside, three bedrooms and renovated.
Madrid has an extensive public transport network, which means that all its neighbourhoods rely on excellent access, so other variables need to be considered, since a flat in Villa de Vallecas is not the same as one in Sanchinarro or Las Tablas.

The price range would be between some €250,000 and €350,000, although if we head in to residential areas of a medium-high standard, these prices would reach up to €550,000.
200sqm in the centre of the capital of Madrid with green area(s) and new builds.

New building sites are not abundant in central areas of Madrid. The majority of developments have been built on appropriate plots where buildings have been demolished.
It is limited land and very exclusive, therefore the prices are very high, between €800,000 and €900,000, or even more if the housing development is luxurious.

Apartment of 45sqm inside, in the capital of Madrid, fifteen minutes by bus to the city centre. Depending on the district, it is possible to find attractive offers in price. For neighbourhoods close to the centre, prices are more modest and we would therefore expect prices between €120,000 and €125,000. If you wish to buy in a more typical area, prices would be between €250,000 and €300,000.

This article is an adaptation from elconfidencia.com

Other articles of interest
Transactions of Luxury Flats in Madrid
The Salamanca district on Madrid offers exclusivity and good prices

Dealing with distressed sellers (II) … and a note about Bargain Killers

admin — Tue, 16 Apr 2013 09:27:37 +0000

Just a few weeks ago a Spanish distressed seller contacted us in order to sell a good 3 bedroom property, an apartment, in Valencia city: newly renovated, with lovely transport links (underground and bus), on a fourth floor with views and a lift, fully furnished, and just 5 minutes walking to the old Turia’s riverbed gardens that cross the city.

The asking price was €95K. The selling price could be dropped to €90K, which was the seller’s limit in order to repay the mortgage and walk away saying, “See you never bank!!” So, the selling price was €90K in order to repay the debt. Good property and good price!

The seller really wanted to get rid of the flat as quickly as possible. There are quite a lot of sellers in that situation now. They want to sell despite the fact that they end up with zero equity (or negative). They assume that no profit will be made from the liability but they want to sell. They cannot handle the pressure of the debt itself in a hard economic climate. It happens.

Local Agents

The seller went to two local agents in order to start searching for a buyer. The agents knew that the seller’s asking price was 95K, and the agreement with Agent A was a 3% commission while Agent B’s margin was 5%.

We must mention that Agent A is the classic one who will try to charge to the buyer another 3%, so his total commission comes up to 6%. That is frequent, especially with rentals in Valencia where agents do this out of habit and people accept it.

Soon after, the seller saw that Agent A’s advertised price was 100K and that Agent B advertised an asking price of 106K. “What is happening?” asked the seller to himself.

What was happening is that the agents decided to make themselves an extra profit of a few thousand apart from the commission that was charged to the seller. They may thought: “The property itself was a bargain, so why not get more commission instead of launching such a juicy bargain into the market?”

Only after the seller put pressure on the agents to reduce the asking price did Agent A decide to put the price back to 95K, whereas Agent B preferred to stick with the 106K.

At that point Agent B was a real bargain killer because the difference from the advertised price and the seller’s asking price was 11K, whereas the margin regarding the selling price (90K) was 16K. Agent B really picked the numbers very well… very well for himself of course! A BARGAIN KILLER

The Spanish Brick launched the deal to our buyer clients in Valencia as soon as the owner contacted us after the events with the local agents. We decided to put the deal on the market with €90K as the selling price. There were 5 showings scheduled in March with clients from 3 different countries and currently a committed buyer.

CONCLUSIONS: What can we learn from this?

It is common for sellers to leave a margin between the asking and selling prices to give some room to negotiate with the buyer: this is what we call the negotiation “margen de cortesia”, or courtesy margin. But not always is like that… and real bargains do not really need that margin because the price itself is so good.

Distressed sellers are clear about their lowest price given the circumstances of the economy. So the market price is really reaching rock-bottom, because there is a certain low price which is the one at which the seller has to commit to the sale.

Agents can really become bargain killers in order to secure a profit. Not all of them, but when prices are low, the commission to be earned is also low and they do not like it specially when in 2005-06 ,at the pick of the market, the commissions were awesome compare with nowadays.

Other articles of interest:
Tips when buying directly from particulars
Dealing with distressed sellers (I)

The Energy Certificate could cost an average €260 per apartment… ?

admin — Tue, 09 Apr 2013 16:02:20 +0000

The Energy Performance Certificate will be compulsory for Spanish houses starting from the 1st of June 2013.
This is a must for home owners and landlords willing to sell or rent their property for a period of at least 4 months.

The cost of the Certificate is a big question mark in Spain at the moment
This means, on one hand, an extra cost for home owners and investors. The cost of certificates will vary depending of the size of the property. For an apartment it could be around 260 euros, according to Certicalia, an online platform specializing in energy performance in Spain. For a house it could easily be above €300.

Update 10 april 2013: According to the Government the cost could be from €90 for a flat to €250 euros for a terrace house.

It was only a matter of time before the certificate was brought into force in order to address the European guidelines in terms of energy efficiency.

According to the Ministry of Works, 60% of the properties in Spain do not meet energy efficiency standards.

Is Spain a corrupted country? What is wrong?

admin — Mon, 08 Apr 2013 23:41:22 +0000

Behind the sunny image of the country of Spain with its lovely beaches, amazing gastronomy and wines, enviable lifestyle, cheap properties and good property investment opportunities, there is a wounded Spain. Of course life goes on so there are still many reasons why it’s easy to break into a smile every day … but people have a feeling of pity inside them: the economic crisis, frustrations with the political system and a wave of top corruption scandals that are digging deeper and deeper in to the morale of ordinary people.

Spain is a country which, for many reasons, has had to put its hand-break on: Spain is trying to find a solution to its political system, keeping the country together and waiting for a miracle to rebuild the economy. Overall, specially in the last weeks, Spaniards are concern about corruption.

These days, the scandals of corruption tarnish not only the Spanish Royal family but the Government and the political party that currently holds the reins of the government, Partido Popular. In fairness, all of the major political parties have corruption issues, including PSOE of course.

Increasing Spain’s pain to the point where it becomes a matter of shame for Spaniards is seeing the PM Mariano Rajoy holding press conferences on the TV screen. As a Spaniard, that in itself is a far larger form of humiliation and disgrace than the corruption issue: the Prime Minister hiding himself.

The relaxed way in which rules are assumed in social circles

The corruption problem in Spain is due to the high levels of Mediterranean culture influencing the rules which are assumed in a very relaxed way. This means that if the limit is 100 … 105 would still be ok. People living in Spain know what I mean.

On that basis – a relaxed assumption of a rule – individuals could start building up from a harmless offense to a crime before you know it. Once you accept your participation in this, it is very difficult to remove yourself from it, especially in organisations such as political parties with close circles which have a strong dose of self-identity.

Another reason for corruption in Spain is evident in universal human nature rather than culture, is that individuals tend to benefit themselves first and not the majority.

The relaxed way in which rules are sometimes assumed in this country is scary if you really think about the consequences. There is nothing to be afraid of, but better to keep your standards and have everything clear according to the rules and the papers.

There are plenty of reasons why you should enjoy Spain now … but do it in your own way.

Rental Yields closed 2012 at their highest level in eight years

admin — Sun, 31 Mar 2013 08:52:05 +0000

Buy to Let in Spain is gaining more interest for investors. According to figures from the Bank of Spain (BDE), profits from home rentals reached 4.3% at the end of 2012, the highest level since September of 2004. Therefore, the path to this increase was consolidated at the end of the last financial year.

In particular, gross profits from these assets have gone up progressively since June of 2008, when they hit their lowest levels of their course, landing at 3.29%. However, renting still has a long way to go to mend itself up to the point that it hit in December of 1998; 6.53%, when it reached the highest level that the BDE had seen within the information that it is in charge of.

According to the experts consulted by the website Idealista, justify this change in that the tendency in the flat rental business is a direct consequence of the fall in value of homes for sale. “Currently we are observing a growth in profits from flats being rented due to the fall in prices of these properties,” states Nicolas Llari de Sangenis, head of bank assets of Savills Consulting.

Llari de Sangenis, from Savills, recognizes that in the short-term, the price correction will follow in some markets, so he doesn’t rule out that in “specific areas,” profits from rentals will exceed 6%. “A profit of 6% on homes for rent would put us at very similar levels in comparison with the other countries in Europe.”

Rental yields in Madrid and Barcelona are greater than in Rome

DT&K — Sat, 16 Feb 2013 00:32:48 +0000

If there is a golden rule for buy-to-let investors in Spain, it is to always invest in markets where the rental demand is strong and constant: if tenants leave, you can potentially get other tenants within a short period of time. That is why cities are great… and if the population in the city keeps growing, the scenario looks perfect, since the higher demand should push rental prices up.

The main Spanish cities are experiencing not only a fall in property prices but also a moderate increase in rental yields on average despite the fact that also rental prices have dropped. Occasionally, we have deals with yields of up to 7% in the cities, but any yield above 4.6% can be considered an excellent starting point in Spain given the current climate. We must say that given the current economic crisis, rental prices have a cap in order to make the market affordable to tenants, except in prime property areas in Madrid and Barcelona where markets behave differently.

Buying a home to rent out in Madrid or in Barcelona welcomes profitability and some investment recovery installments are more attractive than in the Italian capital. According to the facts obtained from idealista.com, the lead housing site in Spain, the gross profit of a home for rent in Madrid and Barcelona (4.2% and 4.1% respectively) is higher than what you get in Rome (3.9%) but less than what is registered in Milan (4.4%).

Some of the main world cities have profits higher than those in Spain, as is the case in Sydney (4.9%), Tokyo (4.5%), or New York (4.5%). On the lower side we find Moscow (3.6%), Hong Kong (3.1%) and Monaco (1.6%).

Profitability of Spanish cities

Among the Spanish cities, Lleida is the most profitable, with a 6.1% profitability. It’s followed by Huesca, Las Palmas of Gran Canaria, and Alicante, with 4.7% profitability in all 3 cases. Behind them we find Cuenca with 4.6% and Cordoba with 4.5%. However, the lowest profitability rates in Spain are those that the owners of homes for rent get in A Coruña (3%), Ourense and San Sebastian (3.2% in both cases), and continuing on we find Santander (3.3%) and Salamanca (3.5%).

According to Fernando Encinar, head of studies at idealista.com, “during the upcoming months the price of the home for sale is going to keep falling, not only in official information but also in private negotiations in which discounts are the order of the day. In parallel, the government looks into measures of the best protection for renters and rental prices are trending toward the low end, which is making gross profit grow. In this sense, investing in a home destined to be rented out is becoming an option that is more and more valued by small and medium-sized investors.”

For the completion of this study, idealista.com has divided the average price of sale by the price of rent in the different markets referring to the annual index of 2012. The result is the gross profit percentage that an owner gets who is renting out his or her home. This information facilitates the analysis of the current state of the market and is a basic starting point for all investors who want to buy properties with the goal of earning money.

Purchase of flats rose by 2.7% in 2012 after an upturn of 34% in December

DT&K — Fri, 15 Feb 2013 23:39:51 +0000

The buying and selling of housing recovered by some 33.7% in the last month of 2012. The reason for this was the anticipated removal of the tax-deductible from regular housing and the increase of VAT from 4% to 10% on new buildings from 1st January, which allowed for the 2.7% growth in transactions to 366,225 properties for the whole year, according to Notarial Statistics.

Despite this stabilization in sales, the fall in prices which followed has become more and more profound. Therefore the value of a square metre, although it registered a slight month on month increase, dropped 15.4% year on year in December, bringing the annual average price of a square metre to 11.8% costing €1,328/m². The type of housing that sold the most in the month of December was flats (+34.2%), especially those that were pre-owned (+68.7%), ahead of detached housing (+31%). Consequently, notaries point out that “the increase in VAT, which only affects the purchase of new housing, had a lesser effect compared to the end of the tax-deductible expenditure for the purchase.”

For the full year, growth in buying and selling was due to a rise in transactions of flats (+4.1%) – up to 15% in resale properties – which offsets the fall in acquisition of detached housing (-3.4%). In accordance with these results, the prices of pre-owned flats fell by 14.3% in December (-15.8% in the year as a whole) but to a lesser extent than new housing, which fell to 24.4%.

Transactions of Luxury flats in Madrid city centre

admin — Wed, 06 Feb 2013 13:15:56 +0000

Interest in buying luxurious flats in Madrid, by those from countries such as the USA and some Latin American countries, is an increasing trend. The centre of Madrid is suffering from a price revision much less strict than other sectors, with the district of Los Jerónimos leading the demand.

The pulse of the luxurious housing market in Madrid is stabilising, reaching the figure of 43 finalised transactions during this past year, compared with the breakneck speed in which they have reduced the second hand homes sales in other business operations, according to Knight Frank.

By area, of the 43 transactions made, 32% were in the district of La Habana, 26% in the district of Salamanca, 25% in Chamberí, 11% in El Viso, 4% in Jerónimos and 2% in Justicia. There was a difference in the transactions – of some 10% on average – between the initial purchase price and the closing prices, data which reflects the gap between reducing current supply and demand. The most representative data can be found in the district of Chamberí, with an increase in the marketing offers of some 7%, whilst the district of Salamanca maintains a stable trend on its proposal of stock.

The single average price reached the barrier of €1,465,000 counteracting the more than 4% of 2011’s respective rise. Turnover in 2012 has reached 67 million Euros, improving the respective volume compared to the previous year. From this, we found an adjustment to price performance which implies a more reasonable approach to demand.

The area of Los Jerónimos is positioned as the most exclusive area with an average price of €6,741/m², followed by Paseo de la Habana with €6,395/m². The district of Salamanca, as well as being the zone with the most luxurious housing stock, has seen a drop in price to €5,900/m². La Moraleja, Mirasierra and Puerta de Hierro are the luxurious areas in least demand.

New buyers in search of the city centre
This data fits together well with the type of people that, according to Ernesto Tarazona, Director of Property and Land at Knight Frank, are looking for these types of properties: people with their own resources and a smaller need for financing, who “come from Madrid’s most decentralised housing developments, and who are now looking to move into properties in the city centre with areas of 250 to 300m².”

Tarazona also highlights the interest of buyers who originate from countries such as the US and other Latin-American countries such as Mexico, Venezuela and Colombia as another reason for the upward trends.

As an example of luxury properties in Madrid prime areas you can see: Luxury apartment in calle Goya

Related articles:
Property investment trend in Madrid barrio Salamanca

Spain suffers the biggest fall in house prices in Europe

admin — Sun, 03 Feb 2013 02:52:27 +0000

In the third trimester of 2012, the cost of housing in Spain recorded a year-on-year fall of 15.2%, which represents the largest fall amongst all the European Union member countries: these countries also experienced an average decline of 1.9% respectively for the same period in 2011, according to Eurostat data, which has for the first time, published homogenous data regarding the progress of house prices of the EU’s twenty-seven member states. This negative percentage rose to 2.5% among the Eurozone countries.

According to data published by the European Office of Statistics, the year-on-year fall in house prices in Spain accelerated through the course of the year, given that in the second trimester of 2012 the rate was at 14.4% up from 12.5% in the first three months of 2012.

In quarter-on-quarter terms, the reduction in house prices in Spain was 3.7% in the third trimester, more than the average decline of 0.7% in the Eurozone and of 0.4% overall in the EU, only just behind the reductions of 4.2% and 3.7% observed in Romania and in the Netherlands respectively.

In short, amongst the member states whose data was available, the biggest annual increase in house prices were as follows: Estonia (+8.4%), Luxemburg (+7.1%) and Finland (+2.1%), whilst the biggest falls were recorded in Spain (-15.2%), Ireland (-9.6%), the Netherlands (-8.7%) and Portugal (-7.7%).

With regards to the second trimester of 2012, the biggest increases in house prices were recorded in Estonia (+2.6%), Latvia (+2.3%), United Kingdom (+1.7%) and Ireland (+1.6%), whilst the most pronounced declines were observed in Romania (-4.2%), the Netherlands (-3.9%) and Spain (-3.7%).

With the announcement of the data regarding the progress of house prices in the EU in the third trimester of 2012, Eurostat “is responding to the demand for comparable and reliable statistics” concerning the performance of the housing market at national level and within the EU.

“The growth of house prices is important for the purpose of our economy and for monetary policy, particularly for monitoring macroeconomic imbalances and the financial sector’s exposure to risk, as well as its relevance for households to measure price changes of the most important component of expenditure and the wealth of families”, explained the community institute of statistics.

The most significant recent fiscal changes for 2013 that affect home buyers and investors

admin — Sat, 26 Jan 2013 00:55:03 +0000

This is an article by Raymundo Larraín Nesbitt, Lawyer – Abogado, about the most significant fiscal changes in Spain already into force in 2013.

Additionally to the list of Mr Larraín, we must mention that there is a special 3% tax on property ownership through foreign companies that still into force, but the Government will revise to encourage overseas buyer and investors. It would be a good plus for foreign investors if the mentioned 3% tax is finally abolished.

But according to the Law Firm Pérez Legal Group, based in Málaga, it is confirmed that the special 3% tax will still into force in 2013. So, unfortunately, the charge will still in place for a few months at least.

(Other article of interest for property investment in Spain is How to squeeze the Tax rate on profits from renting a spanish property)

Batch of changes
The approval of Spain’s Antifraud law (Ley 7/2012, of 29th October) introduced the majority of the most significant changes over the last months. Other laws have also contributed to this. I will review only the main ones with special emphasis on non-resident taxation.

- Cash payment restrictions. Art 7 has capped the amount one can pay in cash to €2,500 (or its equivalent in foreign currency) when one of the two parties is a professional businessman i.e. car dealer selling you a car. This threshold includes VAT. For non-residents this has been increased to €15,000 (you need to demonstrate you hold a domicile abroad) so as not to curtail tourism. Applicable sanctions will be 25% over the allowed caps both to payer and recipient. Spain’s tax office is fostering through its website whistle-blowers. Those who first denounce the other party within the next 3 months will be sanction-free. But only if you are the first to denounce it; first come, first served. If the other party has already denounced you, you will be sanctioned regardless if you denounce it afterwards.

- Lottery winnings no longer tax-free. Previously accrued winnings were tax-free, only interests were taxed. Now all amounts over €2,500 will have a flat tax of 20% as from next year. This 20% will automatically be deducted on cashing in the winning ticket. This includes National state lotteries (such as el Gordo, la Primitiva) and from private institutions such as ONCE, Cruz Roja etc.

- Residence permits for houses. Popularly known as “investor visas”. Non-residents on spending €160,000 or more on a Spanish property will automatically qualify for residency in Spain. This will allow them unrestricted access throughout the European Union bypassing restrictive visa applications. This measure was specifically tailored to attract Chinese and Russian nationals but it has generated the most interest in other countries, such as Morocco. Other European countries have similar investor visas schemes in place, albeit with much higher caps: France requires ten million euros, UK has a one million pound threshold, the Republic of Ireland requires one million euros and Portugal requires half a million euros.

- Tax amnesty. This will be the third wave in Spain’s young Democracy. The PSOE put in place 1984’s and 1992’s and also proposed the third one in 2010 (Zapatero). It has finally been the PP – Spain’s ruling party – which has implemented it under great criticism by the PSOE (!). Tax evaders had until the 30/11/12 to regularise their financial position with the tax agency (AEAT). The measure was a moderate success and has helped to bring in 1,5 billion in tax revenues which would otherwise have gone untaxed out of a self-declared goal of 2,5 billion. Also a further 20 billion in assets have come to light which will be taxable in future fiscal periods. This measure mirrors fellow European countries recent proposals i.e. France, UK, Italy and Germany.

- Abolishment of statutory periods for undeclared assets. Spain had a statutory administrative period of 4 years on all undeclared income after which no taxes could be pursued by the tax office. After this significant change, any undeclared assets held by residents will no longer benefit from the statutory period, meaning they will permanently be fraudulent regardless of how much time has elapsed. This is highly questionable from a legal point of view. In any case this was approved to create an ‘incentive’ for tax evaders to come forth and benefit from last month’s third tax amnesty.

- ‘New’ punitive measures introduced on all undeclared assets held abroad. It has always been an obligation for tax residents to declare all their worldwide income and assets to Spain’s AEAT on filing their annual returns. The reason on why this measure is being labelled as something ‘new’ is because it is being specifically levelled towards the hundreds of thousands of Spaniards who have recently emptied their Spanish bank accounts and transferred all their savings abroad. As a result this has led, amongst other reasons, to the biggest credit crunch Spain has witnessed over the last 50 years following the Bank of Spain’s statistics (since 1962).

The Government has now increased penalties on all those who – being resident in Spain – fail to declare foreign-held assets with a value of more than €50,000. This applies to titleholders, beneficiaries, or even just authorised signatories. You will be fined a minimum of €10,000 on being discovered as well as €5,000 for every undisclosed financial detail recovered E.g. residents holding undeclared offshore accounts with €50,000 or more, or even accounts in other European member countries such as the UK.

- Bolstering Spain’s Criminal Code. These changes have been brought about to punish furthermore tax evaders. Spain had a statutory period of 5 years on committing a fiscal crime (defined as defrauding amounts equal to €120,000 or more). This has now been doubled to 10 years. Additionally one could be jailed one to five years for a fiscal crime. This has now been raised over to two to six years serving a prison sentence. This has been introduced in cases in which the amounts defrauded are in excess of €600,000 and/or the offender has set up specific tax avoidance structures such as offshore trusts, using ‘sham’ company directors (known as ‘Sark Larks’). Traditionally these types of white-collar crimes were difficult to detect because of the lack of resources and manpower. However the culture is now shifting to simply handsomely ‘pay-off’ disgruntled bank employees to gain access to these files as well as having Spain sign agreements with tax havens to tap into the interests of undeclared amounts held abroad. Tax offenders who denounce associates will now see the charges against them significantly reduced on collaborating with tax officers. The tax office is also fostering the public to anonymously denounce each other.

- Taxes may no longer be deferred in cases of insolvency. Companies and businessman which had filed for bankruptcy could previously benefit of a tax deferment of their obligations. This will no longer be the case.

- Preventive embargoes. The tax office may now pre-empt embargoes to secure its interests if it believes there is an insolvency risk.

- Modules declaration. For those self-employed (‘autónomos’) who declare under the fiscal figure of ‘módulos’ and invoice more than 50 pc of their income to other businessmen will no longer be able to benefit from this special favourable fiscal regime. They need a turnover in excess of €50,000.

- Reduced VAT on off-plan properties scratched. Currently set at 4% this will be increased to 10% as from 2013.

- Publish a list of tax debtors. The Government is mulling the idea of publishing a name and shame list with the largest tax debtors (still hasn’t defined the threshold); much as other countries have already done such as Greece which published a list of the 4,000 tax payers who owed more than €150,000 in taxes. From a legal standpoint this is highly questionable, unless current laws are amended to allow it.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

These are the most significant fiscal changes that have taken place over the last two months according to Raymundo Larraín, which were recently published in spanishpropertyinsight website

Prices, locations, Q&A about Madrid city property market

The property prices adjustment in course

Which districts or streets in Madrid do I look at if I want to buy a flat as an investment with revaluation expectations?

What three streets are at present the most expensive in the capital of Madrid?

What type of property is most in demand by buyers in the Community of Madrid?

What are the housing market expectations for 2013 in this region? Is this a good time to buy?

What is the average time required to sell a flat in the Community of Madrid at the moment?

By how much did prices reduce or increase last year in the capital of Madrid?

Is this region one of the areas most affected by the property crisis? Why?

What is the average price of a flat in Madrid? And in the centre of the capital?