The change of government in Spain has seen the spotlight firmly fixed on the countries real estate sector, as many people look to the new administration for new initiatives on job creation. Over the past ten years, the Spanish real estate sector was a key contributors to the country's economic well being, and today many are looking for federal intervention in the property market as a way to return the local economy to growth.

As such, there was some welcome news last week, as the new administration announced that the exclusion from VAT reductions on holiday homes appears to have been dropped. When the People's Party were in government opposition last year, they stated that should they return to power, they would look to extend the VAT reduction to the end of 2012, as part of their plans to stimulate growth in the Spanish property sector. However, these extensions were only include primary residences, and were only up to a certain value.

The news was announced in the new Government bulletin, confirming that the VAT reduction would remain in place until the end of 2012. There was no mention of any further ammendments to the current policy. As such, VAT on all sales on all new properties in Spain will be subject to a charge of 4% at least until the end of 2012.

Whilst the news comes as a boost to the beleagured Spanish property market, many are looking to the new administration to announce new initiatives to rejuvenate the sector over the coming twelve months.