Buying a home in Spain is a major, and life-changing, experience. Here are some tips:
• Think carefully before making any decision and ensure that your family is behind you.
• Research is vital. Choose the area you’re most interested in, and then take several holidays there.
• Once you know which area and property you’re interested in buying, be certain you have enough funds for the purchase. Don’t forget to consider such aspects as the cost of moving your possessions to Spain.
• Don’t be rushed into making a decision, and don’t let yourself be pressured. Certainly don’t sign anything until you’re ready.
• Pensioners should make certain that they can have their pensions paid into a Spanish bank. It’s most important that your have health insurance in place and that you make a Will.
• Sometimes circumstances change, and you might find you want to return to the UK. Before committing yourself to purchasing a home in Spain, make sure you would have sufficient funds to make the move back home should you decide that Spain isn’t for you afterall.
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The Spanish economy
Until 2008, the Spanish economy was the fifth largest in Europe, and attracted plenty of foreign investment. Since then times have changed and now the country only has the fourth largest economy in the Eurozone and a quarter of the nations workforce is currently unemployed.
In regards to property, the average price of housing in Spain reduced by 11.3% last year over 2011. According to the Spanish Real Estate Market Index (Imie), properties in Spain have become cheaper by a whopping 33.3% since reaching their peak in December 2007.
As a result, and with the current oversupply of new-build property, buying in Spain at the moment would really be a matter of lifestyle as opposed to investment.
In 2002, Spain exchanged the peseta for the euro.
The import and export of local currency is unlimited, but the export of amounts exceeding €6,010 per person per journey, in any currency, requires a declaration to the authorities.
Travellers’ cheques are normally acceptable in Spanish cities and tourist areas. To avoid additional exchange rate charges, it is best to take euro travellers’ cheques, or consider a prepaid currency card.
There are banks and ATMs in every city and town, and in many villages. Bureaux de change can be found in larger towns, cities and tourist areas. Virtually all credit and debit cards are widely accepted throughout Spain.
Taxation on property in Spain
In Spain, taxes are levied by three tiers of government: central government, autonomous regional governments and local municipalities. The Spanish tax system is particularly complex, and you are strongly advised to seek professional advice tailored to your individual circumstances.
Personal taxation: non-residents
Non-residents are taxed at a flat rate of 24 per cent on their Spanish-sourced income – for example, rental income from property in Spain, income from a business in Spain and interest on funds deposited with a Spanish bank.
Those who own a Spanish property exclusively for their own personal use and have no other source of taxable income in Spain pay a version of income tax called imputed income tax, which is calculated on the property’s valor catastral, or rateable value. Although they do not earn an income from the property, the Spanish authorities take the view that they nevertheless derive a benefit from owning it, and should be taxed accordingly.
In addition, non-residents are liable for patrimonio (wealth tax) on their Spanish assets, including property, and for capital gains tax should they dispose of an asset at a profit.
The impuesto sobre bienes inmuebles (IBI) is an annual property tax levied by the local municipality and used to fund local services. Like imputed income tax, it is calculated on the valor catastral, so it varies widely from one property to another. Owners might pay as little as €100 (£85) per year for a small country property, but a luxury home in an expensive development on the waterfront in Marbella might cost as much as €3,000 (around £2,500) or more per year.
Buying a property in Spain
The purchase process
Before you begin the purchase process, you will need to obtain a fiscal number (numero de identificacion de extranjeros). You should also retain the services of an independent lawyer who speaks both Spanish and your native language.
In the case of an off-plan purchase, you will be asked to sign a reservation contract and pay a small fee, at which point the property will be taken off the market for a limited period (usually 30 days). This allows time for legal checks to be carried out and a contract of sale (escritura de compraventa) to be drawn up, and for you to make the first of a series of payments (known as stage payments, because they are made at agreed stages of construction). This first payment is normally ten per cent or more of the purchase price and is non-refundable.
In the case of a resale, once your offer has been accepted, you pay a small deposit. Your lawyer then carries out the necessary legal investigations. When these are complete, you sign a contract of sale, which states the price and what it covers, the deposit (generally ten per cent) and when you will pay it, and the date of completion. Should you breach the contract, you forfeit your deposit. Should the seller breach it, they must pay you twice the amount of the deposit.
Once completion has taken place, various fees and taxes are payable, and the property is then registered at the Land Registry.
Some sellers of resale property in Spain will encourage you to under-declare the value of the property to the authorities, and pay a proportion of the price in cash in order to secure a slightly cheaper price. This is illegal, and is done purely so that the seller can avoid paying part of the capital gains tax that they will owe on the property. Not only is it possible to be prosecuted in the new climate of clamping down on illegal real estate practices, but you will be liable to pay the capital gains tax on the full amount of the difference between the declared value at the time of purchase and when you sell the property. If sellers insist on taking cash ‘under the table’ walk away from the deal.
As a general yardstick, anyone buying property in Spain should allow between ten and 14 per cent on top of the agreed purchase price for the various fees that must be paid.
The buyer pays:
• Legal fees (usually between 1 and 2 per cent)
• IVA (Spain’s equivalent of VAT) at around 7 per cent, plus stamp duty of 0.5–1 per cent, on a new property,
• Stamp duty at 6–7 per cent (depending on the property’s location) on a resale home
• Notary and property registration fees of about 1 per cent
Be aware that if the property is located within a complex, there will be maintenance charges. These will usually cover such costs as swimming pool and garden upkeep.
Costa del Sol
Probably the best known of all the Costas, the Costa del Sol runs from Nerja to Gibraltar. Its name reveals the secret of its popularity. It really is the Coast of the Sun, with a climate that has drawn people from the four corners of the earth for some 40 years. In fact, there are times when visitors to Marbella must wonder whether they are in Spain or some international resort set on its own.
There is an enormous amount to see and do along the Costa del Sol. This is an area of tourist resorts and white villages, and it is the latter that many people fail to visit. Casares and Manilva are just two excellent examples.
The Costa del Sol is an amalgam of so many cultures and lifestyles that the only way to appreciate it to go there.
One of the most popular Costas with British buyers, but is by no means a ghetto for fish ‘n’ chips and Robin Hood pubs. Its popularity with expats from across Northern Europe makes the Costa Blanca a cosmopolitan and varied place to live.
This is reflected in the diversity of the town along the coast – from the brash but established bright lights of Benidorm to the classy sophistication of Moraira and the family resorts of Javea and Denia, there are so many different types of towns along the coast and also running parallel to the coastline inland that there really is something for everyone on the Costa Blanca.
Alicante airport has served the area for years, and is now supplemented by the low-cost flights landing in Valencia at the northern end of the Costa. This gives tourists and property buyers great access to the region throughout the year, and with the Mediterranean motorway running alongside the coast for virtually the whole length of the Costa Blanca, moving around within the region is also easy.
The Balearic Islands
Househunters should consider Mallorca, Menorca, Ibiza and Ibiza’s little sister, Formentera. The four islands have very distinct characters. Mallorca is the grown-up of the family, with its Opera House, the castle in Palma that King Juan Carlos uses, and its international smart set.
Menorca has a much drier climate, with a cooling breeze that takes the edge off the baking heat of the summer. The island has always pursued an independent path, thanks to its production of leather goods and gin.
For a while, Ibiza had a reputation for cheap tourism that did nothing for its image. However, there has been a crackdown in the last couple of years, and now it is following Mallorca’s example of improving what it offers to those buying a home there.
Formentera is an ideal getaway destination. It is quite possible to cycle around the island in a day, passing a mixture of attractive new developments and mellow old farmhouses.
Updated January 2013
Spain is one of Europe’s most attractive countries, with much to offer those who settle there, as the hundreds of thousands of foreigners who have bought a Spanish property in the last three decades can bear witness.
There have been some problems with the property market, owing in part to the over-purchase of some people acquiring too many off-plan properties and then having being unable to complete on them as a result of the global credit crunch. This has led to a surplus of apartments and villas throughout the nation. Other issues that have been well-publicised in Spain revolve around the granting of illegal licenses for property development in certain parts of the country and corruption at the highest levels of local government.
However, property in Spain will always be popular with overseas buyers who are looking to relocate or who are buying for lifestyle reasons. While investors may choose to look elsewhere in the world, Spain remains one of the best countries for a relaxed way of life.
Spain still has much to offer the property purchaser, from small apartments and traditional fincas to palatial frontline beach properties and golf villas.
Popular locations in Spain
The Spanish Costas have always been among the most popular of tourist destinations. During the 1970s and 80s, Marbella, among other resorts, became very shabby, and it took the arrival of Mayor Jesus Gil for it to clean up its act. Many areas along the Spanish coastline have since followed suit, and today things have changed very much for the better.
The Spanish islands, including the Balaeric and Canary Islands, have long been popular tourist destinations, and are proving to be great locations in which foreign buyers can settle. In the Canaries in particular, the climate stays warm and sunny throughout the year, but anywhere in Spain is likely to be warmer than the UK for most of the year.
Also, in recent years there has been more interest in Spanish cities as destinations for leisure property as well as being a good investment to rent out to tourists on short city breaks. The arrival of low-cost airline flights to many of Spain’s cities has opened up the tourist market, while student properties near universities are also popular investment opportunities.
© Copyright Buy Associates Limited 2013
Spanish is the native tongue of Spain, and everybody in the country can speak it. There are, however, a few regional dialects that many people speak as a first language – although they are most likely to be fluent in Spanish too. Catalan, Galician and Basque are the three main regional languages, but there are numerous less popular ones, such as Asturian, which are under threat of dying out due to lack of use.
English is widely understood in all of the main tourist destinations, and even when it isn’t the Spanish are likely to take the time to try to communicate. It is advisable to have a phrase book to hand for those tricky situations or, better still, try to learn the language – especially if you are planning to live there on a permanent basis.