Send to a friend

News

Spain to subsidise buyers? - 11 November 2009

The Spanish region of Andalucia has come up with an ingenious way of encouraging homeowners to buy in the region by showering cash on anyone who buys there. While the scheme might not make all of those eager potential UK buyers of holiday homes in Spain jump out of their seats in excitement, it may be advantageous to those who have already bought in the region.

The Junta of Andalucia has announced that local residents buying main homes in the region could save as much as 40 per cent of the cost of a new property over eight years in a scheme that could be compared to the ‘cash for clunkers’ car subsidy scheme operating in the UK and the US.

According to local property watch website Spanish Property Insight, the scheme works by developers who are part of scheme offering their properties to the market at mortgage cost price, wiping out their margins and effectively giving a discount of 20 per cent. Participating banks then offer 100 per cent mortgages on an interest-only basis for the first three years. In the fourth year, the Junta (local government) will offer loans to subsidise mortgages for up to five years and up to a maximum of €15,000.

To qualify, the properties must be brand new, and the mortgage no more than €245,000.

Looking deeper into the small print, the Junta’s generosity does have a limit. In year 9 of the mortgage, the lender has to repay the subsidy to the Junta and add it on to the existing mortgage, so the buyer ends up paying in the end. However, thanks to price inflation, the likelihood is that the buyer will have to pay back less in real terms than hey borrow.

The main criticism leveled against the scheme, as pointed out by Spanish Property Insight, is that this seems to be a way of getting buyer to pay inflated prices for homes today and deferring the burden of payment until a later date with the help of the taxpayer – something which sounds remarkably similar to what caused many of the world’s economic problems in the recent past. The site argues that it would be better to drop prices naturally to a level at which people can afford to buy without taking on a 30-year mortgage on a government subsidy.

The Post Office Overseas Property Money Transfer service this week said that price may have fallen by 20 to 30 per cent, even accounting for the recent weakness of Sterling against the Euro.

Post this article to:

del.icio.us Digg Newsvine Reddit MyYahoo! Facebook


 

Related Articles


Browse our articles written by leading industry experts:

Overseas Property Buying Guides

UK Property Guides

Gardens and Interiors

Cosmetic Surgery Fact Sheets

Looking Good Guides

Money

Business

Community

Travel