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Buying Property in SpainThere are countless reasons why individuals choose to purchase property in Spain, whether it is primarily an investment property, a retirement home or a second home to retreat to and enjoy the Spanish sunshine, there are many factors that can make the choice of moving to Spain an easy decision to make. From the nightlife and cosmopolitan atmosphere in the notorious Puerto Banus to the traditional relaxed and tranquillity found further inland, for those who seek the long summer days and comfortable winter nights, the south of Spain appeals to many. From an investment standpoint, the Spanish property market has been enjoying unheard of success over the past two decades, with no end in sight. Investment returns of over 8% to 15% per annum are commonplace as are undervalued and increasingly lucrative off-plan purchase options. With current mortgage rates near all-time lows, the investment potential is better than ever. Purchasing a property in Spain does however pose several differences when compared to other European or Western countries, and it is recommended to consult the buyers guide prior to delving into any purchase. Even buying a property in your home country can be difficult - legal issues, fluctuating property markets, mortgages, estate agencies. When purchasing in Spain, added to these conditions, there are also language difference, market structure differences, as well as taxation differences. It can be overwhelming. The following will provide a few basic guidelines and useful information prior to purchasing a property in Spain. Off plan market The basics of the off plan market is that you would buy a property that isn't built yet, therefore you effectively buy it "off the plan". These properties may be partially built, or not yet even begun. A local property developer (the company that builds the apartments, villas or townhouses) will have scale models, floor and terrain plans and often even a show home available for you to view. The normal process of an off plan purchase would involve a visit to Spain whereby you would be taken to view a variety of developments (either in progress or the land upon which the development will be built) by a sales consultant of an estate agency. It is important to note that usually, these sales consultants are engaged by the agencies as independents, other-wise known as “self employed”, and are not employees. These sales consultants work on a commission basis, and therefore it is in their best interests to promote the most profitable (for them) developments, not necessarily the most appropriate for you. It is common for estate agencies to offer incredibly discounted trips otherwise know as “fly-bys” to “qualified” purchasers in order to lure them to Spain and entice them to purchase properties through their agency. If you are serious about purchasing a property in Spain, seeking out an estate agent that would be willing to do this could be a worthwhile exercise. Be sure to expect a list of qualifying questions about your financial situation prior to receiving the packages they have on offer. As an investment, (especially someone entering the property market as an investment medium for the first time) buying a property off-plan in Spain is that you pay a lot less than you would when the property is fully completed. The flip-side of this of course is that the property (usually part of a development) is usually at least 12 months from completion, and in many cases even longer. Prior to sending your money overseas to secure your off-plan investment, it is strongly recommended that you consult the buyers guide. Property Developments in Spain Developments, often synonymous with “urbanisations” are enclosed communities which usually encompass several properties, (this can range from 10 villas to 50 apartments or townhouses) which share a pool or pools, communal gardens, secure car park, and in many cases, many other facilities. In the UK, and in other countries, there would be a “council tax” or similar, within a development, the ongoing costs are labelled “community fees”. These monthly fees can vary dramatically from one development to the next, and when purchasing a property within a development, this can make a large difference in the overall costs, so it is best to investigate these costs at the onset. These fees include the gardening, pool maintenance, and general maintenance of the grounds such as tiled walkways, communal cleaning (hallways, etc.) and security. The Spanish generally place an extremely high value in the appearance of the grounds of these urbanisations, and therefore the up-keep prices may be substantially higher than one might expect, yet the results are often breath-taking and well worth the price. When purchasing a property off-plan, the past 10 years has seen substantial return on investment at first stage completion. In many cases, individuals have purchased a property off-plan with 15 months to completion, and then sold the property immediately following completion with over a 20% gain. It is important to note that sales of this nature result in a capital gains tax. Resale properties have been enjoying similar inflated rates of return due to the increasing demand for property in the area. Additionally, as many regions within Spain, especially those in the South, have an enormous amount of tourism trade, most properties can be easily rented on short or long term contracts whereby the rental income can far surpass the mortgage repayment requirements. If this is within your plans, it is a very good idea to scout out the rental prices in the area with which you wish to purchase first, and see what the going rental rates are in the area. Rental of properties in Spain is done primarily on a monthly basis, and long term contract agreements are often set at 11 months. The obvious benefits of beautiful weather, quality of life, and the historical and cultural beauty of Spain are to be taken into account of course. |
