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Spain's speculation law presents an opportunity

7th November 2005 | back to article listings BACK    print this article PRINT

A new law that could be introduced in Spain in the near future has come in for criticism from developers, but could pave the way for greater investment in second homes in the country.

The Spanish government has pinpointed speculation as the major factor behind the country's rising property prices, with officials claiming that those who buy land cheaply, but hold onto it in the event that it will grow in value as interest in building on it intensifies, are holding the property market at artificially high levels.

However, the International Herald Tribune (IHT) reports that developers have warned that the new measures, which are being put before the Spanish parliament, will only serve to increase property prices in the region, which could spark a cooling of interest from foreign investors. As prices rise, there is a fear that property investors may decide to look to other countries, where prices are still relatively low, especially if the new laws will make it difficult to make significant gains from their investments.

Despite these concerns, the Spanish government sees the laws in a different light, arguing that the rules are necessary to prevent investors turning their back on the Spanish property market because of artificially high prices. Those in the government are also keenly aware of the changes occurring in the UK next year, when self-invested personal pensions (Sipps) will provide British people with the opportunity to free up some of their pension savings to invest abroad.

Many expect the introduction of Sipps to result in thousands of British people investing in Spanish properties, for second homes, but the Spanish authorities are worried that the interest may wane if prices are high and there is a dearth in housing. By introducing the new policies, the government is hoping to foster more building projects, which in turn can be snapped up by investors looking to the region for second homes.

Explaining the new laws, Gerardo Roger, an architect at the Carlos III University in Madrid, told the IHT: "This means very simply, that land will be valued on what has been invested in it."

So while developers may not pay as much for the land they use to build, they will be able to sell it on at a reasonable profit, in a move that could ensure prices in Spain's property hotspots do not overheat with an influx of new foreign investors. That would be an ideal solution for many of those first time investors looking to benefit from the rule changes taking place in April to allow them to invest their pensions in foreign properties.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/2307.html. Alternatively, please see our full press release archive.

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