Mortgage Moratorium: Much Ado About Nothing
When reading the pompously titled Royal Decree 1975/2008 (Spanish PDF) – Urgent Measures to be Implement in Respect of Economic, Fiscal, Labour and Access to Property Measures -, one thinks that we are opening a bag full of tax discounts and exemptions, job creation proposals and even formulas on how to bring in more business.
The reality is disappointing for when we look into these proposals only one really stands out of the crowd: the temporary and partial mortgage moratorium, limited to a maximum of 50% of the mortgage repayment (or €500) on a €170,000 mortgage, for unemployed at least since 3 months prior to applying for this help, whether salaried or self-employed and also, for the latter group, if they are earning less than approximately €1,500 in the last 3 months (or less than 3 times the minimum approved salary).
But if we then read carefully article 3 of the decree it states that “in any case the application of the measures herein contained will be subject to a prior agreement between the lender and the borrower”, which means that the above will be applied only if the bank wants to! And in anyone’s experience, how many times have we been offered help by a bank?
In summary, the Socialist Government is engaged in a superhuman effort to publish useless bits of legislation which are either always very difficult to benefit from because of the bureaucracy involved, are subject to third party agreement or simply are just not envisaged to save money (like this mortgage moratorium).
Zapatero has not realized yet that Spain was built on bricks and mortar and that he just cannot change the origin of the wealth and prosperity this country has enjoyed in the last 10 years. If he does want the economy to kick start again he better be thinking how to reduce the horrific taxes and costs associated with buying property (which in the worst case scenario go up to 11% of the purchase price) and then gradually try to base growth on a different economic model.
Very good article. I could not agree more that the measures this government has introduced will have no effect on the property market and the economy as a whole.
The most effective measure would certainly be to reduce the transfer tax ( even if only for a limited time).
GDP growth and wages are the key to stabilising home prices and there are no measures to addressthis either. The silence is deffening.
The Marbella property market is of course less tied to the Spainish economy as a whole. However, offering incentives for the many investors that could invest and stabilise the market does not seem to be a priority.
Guy Marrison
http://www.marrisonproperties.com
The latest measure to boost foreign investment was to eliminate non-residents wealth tax (together with wealth tax as a whole). This tax, which as we know not all foreigners pay, is hardly ever a consideration for anyone buying in Spain because the average tax payment is around 500 Euros per year and in fact very few foreigners do actually know they have to pay this tax and if they knew, they would not be the least concerned.
When we go through the prologue of last years measures to “activate” the economy and we read that this specific measure will be a strong incentive to foreign investment we can easily conclude that this Government simply has not a clue of what to do.