Property sales increasing as end of tax allowances looms

Two new situations are affecting the market. On the one hand there is a definite acceleration in sales which is resulting from the end of the year approaching. The end of 2010 marks the finish of tax relief for people wishing to buy property. On the other hand there are many people who, even if they sell their property, do not raise sufficient cash to pay off their mortgage.

Local estate agent Luis Armengol, of Fincas Armengol, explained that the people who are worst hit by this latter situation are those who purchased their property in 2005 and 2006, when prices were substantially higher than now. Thus many such people have mortgages for amounts well in excess of the price they can expect to obtain now. The ease with which such property owners could obtain mortgages from the banks at that time encouraged them to become heavily indebted.

Big drop

In some cases house prices have fallen by 40% since 2006. Joan Torres of Bonnin Sanso stated that there have been cases of lenders seizing properties when the occupier has defaulted on the obligatory mortgage repayments. With the rise in the number of cases of negative equity many owners are having little option other than not selling at present.

Affordable

Susana Moncloa of Fincas Moncloa put the more optimistic side of the situation that exists; many apartments are priced so that certain people are finding them more affordable. She also added that financial institutions are showing signs of being more ready to lend once again.

At present one can receive up to 15% tax relief on one's repayments. There is a ceiling of 9,015 euros in any year. These figures will continue to apply beyond 2010 for those citizens earning less than 17,000 euros a year. The Spanish Government estimates that this means that half of Spain's population will remain eligible for the relief.

Next year

At the start of 2011 people who earn more than 24,000 euros will not be able to get tax relief on their mortgages. Those earning below this amount will see a reduction in the amount of relief they can claim. Armengol underlined the benefit of taking out a mortgage before the end of 2010. For example someone with a thirty year mortgage could continue to benefit from the relief right through its term. There will be those who do not rush to buy for these fiscal reasons, believing that prices have yet to bottom out and money can thus be saved anyway.

Many people are unaware of the change in fiscal allowances at the end of the year.