In what has been described as a “mystifying move”, governments in the autonomous regions of Catalonia and Valencia have increased the levy on buying a resale property from 8% to 10%.
At 10%, the tax is now the same rate as VAT on new homes, which the national government increased from 4% to 10% at the beginning of the year.
The Catalan administration hopes to raise an extra €50m from the increased tax to plug its regional deficit, while Valencia is looking to bring in an extra €30m this year, and €75m next year.
The tax applies to all homes whether they are worth €100,000 or €1m.
However, Spanish property expert Mark Stücklin has called the move totally counterproductive and said tax receipts could easily go down.
“The higher tax might discourage buyers completely, or encourage them to resort to under-the-table cash payments that are bad for the economy,” he said.
“Undeclared cash payments had been dying out in recent years, but higher taxes might bring them back into fashion. It is just another mystifying move by the Spanish administration.”
Spain relies heavily on overseas investors, with foreigners now making up half of the market in Valencia.
Stücklin said: “There’s nothing like purchases from foreigners to boost a region. This move will discourage people from buying. Spain should be rolling out the red carpet to foreigners with lower taxes and less bureaucracy.”
He said vendors may have to reduce house prices by 2% to compensate for the tax hike.