The government has announced plans to try to tackle the severe problems facing its housing market by temporarily halving the sales tax (IVA) on new homes to 4% to try to stimulate the construction sector.
The Spanish economy was plunged into recession following the collapse of its once-buoyant property sector and the government is also hoping that new building projects will help create jobs and cut the unemployment rate, one one of the highest in the eurozone.
Many villages, towns and cities throughout Spain already have a stockpile of unsold and unrented new homes and business premises, yet the solution to economic problems is always viewed the same way: build, build and build yet more houses and business premises, regardless of the demand.
Yes, it does create short-term employment and valuable income for the various authorities, the sole source of income for many municipal authorities, but it is once again an ‘all eggs in one basket’ approach. Stimulating new, innovative and diverse businesses would seem to be a more logical, and long-term solution in order to avoid the situation whereby if one sector of the economy falters, such as happened with construction, the whole country goes down the pan.
If the existing supply of new houses and premises cannot be sold or rented, what makes anyone think a new batch will fare any better? Unless of course one can persuade people to adopt the same approach to housing as they once had to cars, and now have for various consumer items, and upgrade every year.
The sales tax cut is one of a number of measures agreed at a recent cabinet meeting in an attempt to boost Spain’s weak economic growth rate and generate revenue to help it cut its massive deficit. The tax reduction is set to last until the end of the year.
But what happens after this temporary revenue generation to try and make the government books ‘look better’ for the benefit of the bureaucrats of Brussels?