Is that clear then?

What better than an election - an early election - to add some confusion to a situation. On the heels of the Spanish opposition PP's promise to reintroduce the principal residence tax deduction (worth maybe 400 euros a year to most home owners and abolished only in January) the governing PSOE has now decided to reduce the value-added tax rate on purchases of new homes, which they raised from 7 to 8 percent a year ago, to 4 percent. Long sentence. Have we got all that?

In point form...

July, 2010 - PSOE guv raises new home VAT from 7 to 8 percent;

January, 2011 - PSOE eliminates income tax deduction for principal residence for most owners;

July, 2011 - opposition PP (almost a shoe-in to win November elections) promises to reinstate said deduction;

August, 2011 - PSOE lowers VAT to 4 percent.

Real estate promoters and builders seem to like this plan. The degree to which it helps out banks which own repossessed homes is not entirely clear. The Spanish legal definition of a new home is that which is described as obra nueva in the deed. Repossessions that actually were recorded as a change in ownership in the property registries will not be able to avail themselves of the new regime. Those that were transferred prior to their first registration will.

We suppose it will bring some buyers out of the woodwork, but nothing works as well as the expectation of higher prices in the future - and it will be a long time before it gets to that along the Mediterranean coast.

For those with an immediate interest, the new measure is already in effect.

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