Finance and the Spanish Property Market

We hear it every day about how property prices have dived and how repossessions are at their highest for years as the so called credit crunch continues to bite us all. But when you look at other countries throughout Europe you see a picture that may be much worse that the UK.

Take Spain for instance that in recent years has relied on foreign investment in second homes from Northern European countries and has seen a high increase in property prices, with the huge demand to have a second home in the sun. The result has seen developments all over Spain which maybe on hindsight has been a bit too optimistic, to go on at a continued rate.

To give and idea of the size of challenge with Spanish property here are some statistics:

Last Year 40% of all real estate agents closed
Property prices are expected to drop by 20% by 2009. (Many believe they already have)
Inflation is now running at 5.1%, compared with the UK at 3.8%
Spanish house sales dropped by over 34% this summer compared to last summer
New mortgages fell by 40%, compared to last year.

It is harder to determine house prices in Spain that other countries due to the process where the true value of a home is not declared at purchase to avoid paying tax on the purchase. Although a legal process it is very common, to the point that most solicitors offer this process.

It is not hard to understand that as many people are finding it harder to afford their first home, and so buying that second home is no longer an option. Even those who would have stretched their budgets, safe in the knowledge that the increase in the property price would be worth the risk, are now more humble about and return from an investment in Spain.

The Finance Minister for Spain has now admitted that they are facing their worse economic crisis ever with the property collapse, many others wonder how Spain ever thought the bubble would continue for ever and questioning why no contingency plan was put in place, or that a reduction in new properties was not planned earlier, at least giving a good chance of ready built homes maintaining their prices.

It is predicted that this current credit crunch will affect Spanish home prices until at least 2010, so new ideas are being considered to try and kick start the mortgage market again, although at this time nothing has been announced.

Although many can see the benefit to kick starting the mortgage industry and there are genuine potential borrowers who want to buy a family home rather than a second one, there are some who would question buying any property where there is no forecast of that homes value increasing, with even the possibility of negative equity.

So it is possible that the absence of mortgage may be protecting some people from buying a property that will just decrease in value, adding more pressure to an already difficult situation.
Of course the bolt on financial organizations are also feeling the squeeze. As homes remain unsold, so do the potential second home insurance policies that would normally be bought to project the investment. The credit card purchase for furniture and other essentials will also remain in the wallet and not deliver interest for banks and organizations.

Finance Budget 2015: Super-Flop For The Automotive Industry

The very first full-term budget of FY-16 laid down by the new central government was lack-luster for the automotive industry.

Many issues were raised in the past by the Indian automobile manufacturers, like the lowering of base interest rates on sale of cars, additional excise cuts, faster implementation of Goods and Services Tax but none of them seem to have been met apart from allocation of Goods and Services Tax.

The Finance Minister of India, Mr. Arun has stressed on the faster implementation of infrastructure projects to promote industrial growth in this budget.

Budget Details

• An assurance for speedy implementation of the Goods and Services Tax has been given by the central govt. which will bring it into effect from April 2016.This implementation will help to create an unbiased and uniform tax structure across all the various states of India.

• The excise duty was lowered by a narrow margin. Now it is 24%for the SUVs, 20% for the mid-sized cars and 27% for the large cars. For the smaller-sized cars, it has been hiked up from 12% to 12.5% this means that car prices will either remain the same or increase marginally, but will not decrease at any cost.

• Excise duty on the chassis for an Ambulance has been cut down from 24% to 12.5%.

• Corporate tax has been reduced (30% to 25%). This will help to indirectly promote growth within the automotive industry and will give them a chance to recover 5% of their funds. This tax-cut is expected to begin from next year.

• The custom duty for all fully built and imported commercial vehicles has been increased to about 20%.

• An impetus for production of green vehicles has been proposed to the tune of INR 75 crore under the Faster Adoption &Manufacturing of Electric Vehicles (FAME) scheme. The excise duty discount EVS will be maintained.

• The demand to ask banks and other financial institutions to lower the interest rate on vehicles and vehicular loans has not been secured.

• INR70,000 crore will be invested in laying of about one lakh Kilometres of asphalt roads across the country especially rural areas.

To summarize, this budget was really measly for the Indian automotive industry. Nothing has become cheap for the hardworking consumers. The companies can somehow hope to recover a lost revenues due to the cut in excise duty but that will amount to INR 1000 per car only.

For companies grappling to meet their demand-supply schedule, this isn’t enough. Only a miracle can now save the automotive industry from the current turbulent state it is currently in. The chump change allocated in this budget won’t make a very big difference!