Valencia’s construction industry faces rising costs as the City Council increases the construction tax from 3% to 4%, sparking widespread concern. Developers warn that this move could worsen housing affordability, leaving buyers and renters feeling the pinch.
Valencia City Council’s decision to increase the Tax on Construction, Installations, and Works (ICIO) from 3% to 4% has sent shockwaves through the real estate and construction industries. This tax hike, announced last Friday, has triggered significant criticism from developers and builders who argue that it will further escalate housing costs in an already strained market.
The construction tax increase, which affects not only new developments but also building expansions and renovations, is being viewed by many as a move that will place additional burdens on both property buyers and renters. In an environment where access to affordable housing is already difficult, industry leaders fear this new tax will make things even worse. Much like the chaos that can erupt at airports when unforeseen disruptions occur, this sudden change in the tax structure has thrown the local property market into turmoil.
Industry Voices Discontent
Construction leaders have been quick to criticize the tax hike, especially since it comes at a time when the housing market is struggling with soaring material costs and a scarcity of affordable homes. Francisco Zamora, president of the Valencian Federation of Construction Entrepreneurs (Fevec), called the decision “bad timing,” emphasizing that it contradicts previous promises by both the Generalitat Valenciana and the City Council to lower taxes.
“This construction tax increase comes at a time when housing is already under immense pressure. The added costs will inevitably be passed on to the final buyer, making homes even more expensive and harder to access,” Zamora stated. He noted that construction costs have been climbing steadily due to rising material prices, and this tax hike will only exacerbate the problem. The situation, he warned, could affect everything from new property developments to renovations, driving up the price of both home purchases and rentals.
The construction tax is particularly concerning for those investing in property improvements. Homeowners planning to renovate their flats could see costs rise, leading landlords to increase rents to recoup their expenses, adding another layer of complexity to the housing crisis.
A Blow to Affordable Housing
The move has also been criticized as counterproductive to efforts aimed at increasing affordable housing. With the market already struggling to meet demand, the construction tax hike seems to undermine initiatives like the Simplifica Plan, which was designed to streamline bureaucratic hurdles and reduce taxes.
Zamora expressed frustration at the paradoxical situation: “We are taxing something that should be a basic right. Housing is already burdened by nearly 30% in taxes, and now we’re adding another layer. It’s outrageous.” His sentiment is echoed by others in the sector who believe that affordable housing will remain out of reach for many, as construction and renovation costs rise.
Wider Economic Concerns
The Valencian Association of Developers (Aprova) also weighed in, estimating that the tax increase could add around €1,000 to the price of a new-build home and up to €200 for renovations. These figures might not seem alarming on their own, but combined with the broader economic pressures, they add up to a significant strain on the market.
“We are moving in the wrong direction,” said a representative from Aprova. “Interest rates are falling, yet the construction tax is increasing, which will only complicate matters for homebuyers.” Aprova also pointed out the need for harmonizing the construction tax across municipalities to avoid creating disparities between regions, which could lead to market imbalances.
The real estate sector is now considering formal action, potentially sending a letter to the municipal government to urge them to reconsider this tax rise ahead of the 2025 fiscal year.
This article is brought to you by Expat Hub Valencia, a property buying agent in Valencia. Using the Expat Hub’s services, you will be able to successfully navigate Valencia’s complicated property market in no time.
© Valencia City Council Raises Construction Tax, Sparks Industry Backlash – valenciaproperty.es
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