January
2012 HAPPY NEW YEAR
The
economic minister Luis de Guindos appointed by Mariano Rajoy the new
Spanish prime minister, potentially has one of the most challenging
jobs in Europe. De Guindos is a banker which is probably apt when considering
the current plight of the Spanish economy. Spain has suffered a severe
downturn in the property market since 2007. Prior to this the property
and construction sectors helped drive stong growth, but this higher
than acceptable growth was uncontrolled by the Spanish authorities which
resulted in a classic property bubble. This unmanaged boom and bust
cycle was perhaps caused by the inequalities in the european monetary
system which have only become evident in more recent times. Spain did
not have the power to increase interest rates, for example, as these
are controlled by the European Central Bank. The imbalance between the
so called periphery southern european countries and the richer north
has now come home to roost.
There
still remains the unknown amount of debt that Spanish banks hold on
bad property loans. The bank of Spain has indicated that there is approximately
180 billion euros, but it is likey that this, if accurately assessed,
could be as high as double this figure. The Spanish property market
still has downside risks and 2012 will probably not see much seasonal
cheer.
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Effective
from the beginning of the year capital gains tax (CGT) for non-residents
has risen from 19% to 21%. The rates for spanish residents has also
risen. Careful tax planning is always important if you are considering
a property purchase. There are different options available in reducing
tax liabilities and one of the most popular in recent times has been
the purchase of property through company vehicles. As ever advice should
be sought.
FURTHER
MARKET COMMENT
