The new Spanish government has approved a series of economic measures designed to stimulate the economy and encourage more foreign investment.

ASEC Group, an international associate of the UK200Group of accounting and legal firms, says this will affect British property owners, and other expatriates.

The main changes include:
• The elimination of the annual charge for Wealth Tax, as from 2008. This is a charge levied on assets and property located in Spain, and is charged on 31December each year; * A new deduction for earned income, including pensions, equal to 0.9 percent of the net family disposable income.
• Improved tax treatment for refurbishment of buildings.
• Accelerated repayment of VAT.
• Greater flexibility for mortgage borrowers to renegotiate the term periods of their loans, and a reduction in the associated costs.
• Improved tax treatment for non residents who invest in public debt instruments.

Data on the Spanish housing market is due to be published by the INE on Monday 28 April which will shows growth in mortgage approvals peaked in March 2006 at 25 percent y/y, but the January numbers this year show that activity fell by 23.6 percent y/y.

In its Global Real Estate Weekly RICS reports that this is against a backdrop of moderating but still positive house price growth. Official Q1 data put house price growth at 0.9 percent q/q although within this, 13 out of 62 regions experienced falling prices (compared to 11 regions in Q4).

Housing markets across the Euro area are generally facing a slowdown. However, there are a number of structural features particular to the Spanish market that are making conditions more difficult.

On the demand side, around 98% of new mortgages are variable, in contrast to the Euro area average of 51%. As a result, the Spanish housing market was always going to be more sensitive to changes in ECB rates than most.

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