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Buy a Property in Spain : a novices guide

When attempting to buy a property in Spain, the process can appear daunting. However, following a few quick rules and tips, the process can be a lot less taxing. 

 

Reasons to buy an overseas property in Spain

 

Where can one start! Multiple motivations lead to people buying a home in Spain. These can include the ability to retire, better weather or improved quality of life. 

Many will also elect to buy a second home in Spain rather than relocate and benefit from cheap and easy flights to Spain with little interruption. Flights run a regular schedule, and therefore even islands such as Mallorca are easily accessible. 

 

The property market in Spain

 

House prices in mainland Spain are anticipated to fall by around 1.4% in 2021. The only country that will see more significant drops in Ireland, where residential or commercial property values are predicted to tumble by 1.6 per cent throughout 2021. Just another European country is anticipated to see property cost decreases during 2021; Portugal is expected to decline by 0.5 per cent in property values. According to the Standard and Poor’s report, all other markets within Europe will see residential or commercial property prices rise throughout 2021.

 

Should you buy or rent in Spain?

 

Whilst this is entirely subjective, the choice between buying a home or renting a house in Spain will boil down to both your finances and your circumstances. If, for example, you are working over the summer in Spain on a short-term contract. You’ll unlikely want to commit to purchasing a home, however, if you’ve rented in Spain for a few years. Are settled in the area and have a 15-30% down payment to purchase a home in Spain, purchasing will be an easy decision. 

It’s a proven fact that the typical mortgage cost is much more affordable than the rental cost in the same area. 

Taking the popular expat area of Murcia, Century 21 estimated that the tenants pay roughly 20% of their income. Whilst homeowners contribute just 11% of their income towards financing their homes. 

 

Popular areas to buy a property in Spain

 

Spanish property prices rose roughly 4.68% in the final quarter of 2019, which showed the market was slower than the previous year. The Instituto Nacional de Estadistica higligted a rise of 1.58% in each quarter. The areas where property appreciated the most include

 

• Madrid 

• Barcelona

• San Sebastien – where the most expensive Spanish property can be located near the Bay of Biscay. 

 

Most expensive areas in Spain

Barcelona – Monthly property rental prices in Barcelona is comparably expensive to Madrid, averaging roughly 1,000 euros monthly for a small apartment. With 3.5%, Barcelona offers a slightly greater rental yield than Madrid in prime real estate, which puts it among the most investable significant cities in European investment.

 

Barcelona’s investment in realty increased by an estimated 750 million euros from 2015-2017 to a total of 2 billion euros.

 

Madrid – Throughout the years, it has come to be the headquarters of many technology firms and telecommunications companies such as Nokia, Ericsson, and Motorola.

 

It is also Spain’s most populous city and key destination targets for international investors in the property market. In the first two quarters of 2018, there were nearly 5,000 residential or commercial property sales to foreign investors.

 

The present value of the property market in Madrid is the highest it has ever before been. Prices are rising to show this – at the beginning of 2019, the average rate of leasing was 13.51 euros per square metre.

 

San Sebastien – San Sebastian is the other central city in the Basque area, and is recognised as a great destination, sometimes compared to Nice or Monte Carlo. It has numerous excellent seafood restaurants as well as sensational views throughout the Bay of Biscay. It additionally holds one of the most well-known food festivals worldwide, the San Sebastian Gastronomika. The typical rental yield for a residential or commercial property in San Sebastian is 3.4%.

Finding a home in Spain 

For those buyers who are time short or searching for a more unique and rare property in Spain, you may wish to enlist the services of a specialist property buying agent. This agent will typically work on a retainer basis and present you with the best options available both “on and off the Spanish market”, in your desired area. This agent will then provide you with property valuation and bidding advice- and assist you with financing and legal matters through to sale completion. Specialist buying agents typically operate at the pricier end of the market on properties over €1,000,000. Professing to negotiate at least their fee off the final purchase price of the property – and provide home buyers with access to properties that are not for sale on the open market. This is an excellent service, particularly for those unable to travel due to work commitments or unfamiliar with the Spanish property market and buying process.

 

Least expensive areas in Spain

 

Almeria – often viewed overlooked by many expats and second homeowners. Almeria is typically Spanish when compared to other expat hot spots. It offers an abundant selection of beaches. Properties can be picked up from €60,000, making it one of the cheapest places to buy a home in Spain.

 

Castellón de la Plana Surrounded by historic buildings and a cathedral, this city is called home by roughly 170,000 inhabitants. The area enjoys 300 days of sunshine per year, and its primary beach Solé Rototom back onto beautiful green parks. Properties also represent excellent value, with a 60m2 2-bedroom apartment costing around €70,000.

 

Lleida – this famous city situated just west of Barcelona, boasts the former capital of culture. The city hosts a handful of Spanish festivals each year and benefits from many high-end shops, restaurants, and bars. The average 60m2 two-bedroom apartment will be priced at a reasonable €75,000. 

 

Where expats buy in Spain

 

It is estimated that foreign purchases totalled roughly €17.1 Billion in 2019, slightly less than in 2018. Approximately 1.4% of Spanish GDP. Many (over 50%) purchase without a mortgage. The most popular areas for foreigners to purchase include.

• Alicante and Valencia

• Tenerife province

• Malaga and Costa del sol

• The Balearics 

• Girona

The most active foreign nationals in the Spanish property market include.

• British 

• French 

• Moroccans

• Germans

• Romanians

• Italians

• Belgians

• Swedish

It’s estimated that foreign buying activity totalled 18% of all property purchases in Spain during 2019.  

 

Property Prices in Spain

 

Property prices in 2019 continued to appreciate despite an increase in property foreclosures. The Capitals and larger cities saw roughly a 4.6% increase year on year. Bringing the average property value to approximately €1649 m2. 

Metropolitan areas increased in value by 2,5% yearly, meaning the average property price increased to €1382 m2.

The Mediterranean coastal areas increased moderately by 0.3% year on year. Property values rising to €1468 m2.

The Balearics continue to prove popular with foreign buyers and Spanish second home buyers enjoying an 11.3% increase, rising to €1604m2.

The remaining municipalities broadly saw increases of rises of 1.3% to roughly €1420 m2 for a property.

 

Newbuild property or resale?

 

When searching for your perfect home, you’ll almost certainly be faced with both a host of resale properties and also newbuild villas and apartments. Please see a list of positives for both-

 

Benefits of buying a Newbuild

• More efficient homes – all newbuilds must now conform to A or B energy ratings

• Better interior finish – newbuild homes will benefit from modern materials and fresh coats of paint 

• More ergonomic layout including well placed electric points and Wi-Fi connections

• Better infrastructure – many newbuild communities will benefit from improved transport link and services

• Stage payments – the average newbuild will take 12-18 months to build, meaning payments will be spread over the time taken to build

 

Benefits of buying a Resale property

 

• More character – many older properties benefit from ‘Spanish features.’

• Save money on installing electric and water metres 

The current or previous owner will have fixed

 • Fewer teething troubles – the majority of issues on a resale

• Better location – as towns become more congested newer properties can be located further from town centres, especially if the development is large

• Property could be furnished – Occasionally, if the vendor is moving to a different style of property, they may be open to selling or giving the furniture as part of the purchase

• Put your stamp on the property – a resale property offers the owner ability to decorate and change the interior or exterior

 

 

 

 

Top tips when buying a home in Spain

 

Location is critical – when the purpose of buying a property in Spain solely leisure and enjoyment. An infinity pool or expansive land can easily cloud one’s judgement. It is, however, advised to do research on the area and potentially purchase a smaller property in a better and eventually more liquid location. Whilst a resort property can be attractive 8-9 months of the year, will you want to live there? Research the area and always request the average selling time for the area. If you do eventually want to sell, you don’t want a battle on your hands. 

 

Handle your foreign exchange transfer properly  Once your offer has been accepted, you should discuss the solutions available from a foreign exchange broker. They can proactively supervise the money transfers to Spain, or at minimum, provide an idea of the savings. Acquiring a Spanish residential property will usually take 30-60 days to complete, and the timing of your money transfer to Spain is crucial. A broker will certainly assist you in the direction and find a great moment to exchange your money. Potentially saving you thousands on your Spanish residential or commercial property acquisition.

Rental property or primary residence – if you consider purchasing to rent the property out, ensure the property has the appropriate licenses. It is also worth considering the amenities needed when on holiday. Does the property fulfil them? These may include Bars and restaurants within walking distances as well as pools and beaches.

If looking for a primary residence, schools, shops, and hospitals will potentially be higher up the list of priorities when purchasing a property in Spain. 

Be aware of the community laws – before committing to a property in a community, be sure to get a copy of the rules and regulations. Whilst the inability to have a BBQ on your terrace might be an annoyance. The inability to rent your home out might be a dealer breaker. This negative also a great time to get clarity on the community fees, which could also impact your budget or halt interest in the property. 

 

Selecting a legitimate Spanish property estate agent 

 

There are a few pointers which can identify whether your estate agent is a high quality one which correct accreditations these include –

• Ensuring the estate agent or realtor is registered as an API (agente de la propiedad inmobillaria)

• Always visit the estate agent’s office avoid selecting a representative that works out of a bar or his home; also verify the estate agencies fiscal number 

• Never engage with an agent that is ‘selling for a friend’ or an unlisted property

• Track record is vital; select an agent that has been trading successfully for at least a few years and look online for any reviews

• Judge a book by its cover; if you feel unconvinced by the About Us section of the company’s website, question further or walk away 

• Don’t fold under pressure – a good estate agent will find you the home you want, not one they need to sell

 

Choosing a legitimate Spanish property solicitor

 

• Always make sure you meet the solicitor before committing. It would be best if you felt comfortable that this expert will look out for your interest.

• Find someone independent legal expert connected to a property company or developer who might not be as impartial as you might have hoped.

• Check the expert’s credentials – Spanish solicitors must belong to a local bar, credentials can be verified on the Colegio de Abogados  

 

Getting your NIE to purchase the property in Spain

Once the property purchase is secured, you will legally require an NIE, an abbreviation of Numero de identidad extrajero or identity number. All international buyers need an NIE number to purchase, and your solicitor can either advise or you can apply online.

For many, the face to face option will be more appropriate as the process can be pretty involved. If you choose to go down the route of applying in person, this can either be done at the local police station or the Spanish consulate at home. A solicitor may also be happy to accompany you to move the process along. 

Typically, you will require the following information to get your NIE number

 

• Two copies of the EX-15 NIE application form 

• Property purchase contract for your new home 

• A copy of your entire passport and landing card (non-EU citizens)

 

Can Foreigners buy in Spain?

 

Of course! There are no limitations on buying residential or commercial property in Spain, whether commercial, property or land. Contrarily, Spain urges financial investment by immigrants, both resident and also non-resident. It’s worth keeping in mind that you can apply for a Golden Visa if you purchase a home valued greater than EUR500.000.

 

Is now a good time to buy in Spain?

 

During the last few months, prices have cooled due to appetite and the limitation around travel due to COVID-19. The drop hasn’t been significant, or anywhere near the 10-15% decline, some had anticipated. As an example, appetite on the Costa Blanca continues to support price increases, with many foreigners now focusing on purchases before the conclusion of Brexit in December 2020. 

Spain’s COVID 19 contingency plans will play a massive part in the coming months. A return of regular foreign visitors should support the local resorts and, in turn, the property market. 

Costs involved in buying a property in Spain

Compared to many areas of Europe, estate agent’s fee’s when buying a home in Spain can be staggering, with the unscrupulous charging up to 7% or more. Fortunately, there have been fixed fee Spanish estate agencies that work in a much more ethical and transparent manner. 

Other significant Spanish property buying costs include

Transfer Tax (10% most locations), Notary Charges, Spanish Land Registry Charges, Legal Fees. If you choose an independent solicitor, they will provide you with an all-inclusive cost from the start. Making sure that you understand the final price you will undoubtedly pay for the residential or commercial property.

 

 

Buying your perfect property in Spain

 

Locating your perfect property in Spain will be entirely dependant on your requirement. Many second home buyers will be attracted by a beach, bars and nightlife but should be conscious that resorts are only open 8-9 months of the year. A home that could be ideal in May or June might be deserted in November or February. Far from suitable if using the property as a primary residence. 

Likewise, those relocating for work won’t appreciate droves of holidaymakers taking parking places and emptying the shops in the peak summer. So they should potentially consider the population explosion during the summer months in Spain. 

Fortunately, property choices in Spain in the majority of locations can be ample. Take the time to research the area. Understand the limitation of relevant properties and make sure they cater to your needs. 

 

Property surveys for a property in Spain

 

Many buying a property in Spain will enlist the services of a surveyor to ensure the property is fit for purpose and meets the sale value. Surveys worth considering include – 

• Building survey – most common when buying a home in Spain, the building survey will highlight any problems or issues for the interested party. 

• Structural survey – usually only used for obvious structural issues to estimate the gravity of the problem. Commonly only helpful to buyers who are considering an older property of fixer upper. 

• Valuation – nearly always combined with a building survey. The purpose of a valuation survey is to ensure the property meets or surpasses the sale value. 

• Mortgage Survey – this is carried out by the Spanish bank that considers lending to the potential new owner. The potential borrower pays the survey but serves to ensure that the lender is lending correctly. They are typically quick assessment rather than in-depth property inspection. 

 

 

Getting a mortgage for a property in Spain

 

Non-resident Spanish mortgages – for non-residents that pay their taxes outside Spain, the maximum home loan amount is 70% of the purchase cost. However, some financial institutions have a maximum amount of 60%. For fiscal residents who pay Spanish taxes, the optimal home loan is 80%.

Spanish home mortgages for senior citizens  If you are aged 60+ and in receipt of a state or private pension plan. You can still have a Spanish mortgage in your name. It is also feasible to appoint a guarantor such as a family member to protect the borrowing. Guarantors can have potential inheritance tax benefits if they are a part-owner of the property.

Spanish Building and construction property mortgages – for those wishing to build their own houses, financial institutions supply building and construction property mortgages. These are in-depth and more involved. We advise speaking to a specialist Spanish mortgage broker; however, you can broadly borrow 60-70% of the land and build and construction prices combined.

 

Is buying a property in Spain a good investment?

 

Providing you do your local research, and the property meets your property requirements should prove a great lifestyle choice and long-term investment. Estate agent fees must be managed as 7% fees can put a dent into future sale revenues. 

If you opt to rent the property out on a seasonal basis, yields can be impressive. Still, the costs for property management and maintenance can eat into profits. 

Generally, especially on the Balearics, prices are on the increase, and demand is high. However, in many cases, potential buyers shouldn’t lose focus on the main reason for buying in Spain.

 

Moving your furniture to your property in Spain

 

Several removal companies can help you move your furniture to Spain once you’ve found your perfect residence in Spain. When sourcing a removal company, please ensure diligence is done, and they can satisfy the following-

• They apply no concealed fees, and the removal estimate remains the same.

• Your items are insured to their value, and any breakages are covered.

• When filled, you have a point of contact both at the depot and en route to Spain.

• The business promoted on trust fund pilot or has recommendations/testimonials to supply.

Make sure that a full quotation is given in advance and the move isn’t estimated over the phone.

 

Opening a bank account in Spain to buy a home

 

Several financial institutions and current accounts are available, with the most popular financial institutions being Banco Sabadell, BBVA and Santander.

If visiting a local branch to open up an account, it’s worth bringing the following to ensure a smooth account opening process

– Proof of address

– Photo ID ideally passport for applicants

– Your recently acquired NIE number

– You may also need to reveal proof of employment or a pension plan

Once these documents are supplied, you can expect to be in your brand-new house within a couple of months enjoying your brand-new life in Spain.

 

The home buying process in Spain

 

The buying property buying process in Spain will take roughly six to eight weeks to complete the purchase. This can be delayed if buying in a military zone, with delays of up to 4 month to be expected.  This a summary of the steps 

1. Get an offer accepted on your dream home

2. Contact a lawyer 

3. Sign a pre-purchase agreement 

4. If needed, apply for a mortgage

5. Lawyer will do the necessary research 

Final steps to buy in Spain

1. Sign the Spanish property deeds

2. Payment – make the final payment via your bank or foreign exchange

3. Key handover – keys after payment and signature

4. Register – the property will then be registered in your name (Registro de la Propiedad)

5. Tax payment – your Lawyer will pay and taxes linked to the purchase

6. Utilities – the Lawyer or real estate agent will arrange a connection to the water, gas and electric services

 

Moving into your home in Spain

 

Once the Lawyer confirms you are the new owner and submits the keys, you can now move into your Spanish home. If your home is on the main road or requires the use of additional parking bays. Ensure either your Lawyer or estate agent arranges with the local council to reserve these bays or, if needed, reroute traffic. 

Can I rent out my property in Spain?

Providing your community approves property rentals, there is no reason you cannot rent your properties to tourists. The Balearics is less straight forward with fewer property rental licenses being granted. Therefore, it’s very advantageous to consider purchasing a home that already possesses a licence. 

 

Transferring money to buy a home in Spain

 

Once you’ve found your dream property in Spain, you’ll need to enlist the services of a foreign exchange broker to arrange the money transfers to Spain. Subject to your project, there will be two or more payments that need to be made. 

The first will need to take place a few days after the reservation contract is drawn up and typically is around €6000. This contract serves to reserve the Spanish property. 

The second will be due after the buyer and vendor sign the purchase contract. After this, roughly 10% of the property value will need to be transferred to Spain. 

Finally, upon completion and Spanish deeds being signed, any outstanding money will have to be transferred to Spain to complete your ownership. 

If purchasing with a mortgage, a foreign exchange broker will offer a recurring payment plan to transfer money regularly and pay the euro mortgage in Spain.

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