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Spanish Property Buyers GuideMaking the decision to move to another country is a difficult and life-changing decision. Before packing you bags and sending over your belongings, it is advisable to spend a good time visiting the area first, and learning about the goings on of the community and how you will fit in to it. The following few pages will assist in providing some detail about making this move and some detailed information about the steps involved in buying a property in Spain specifically. Once you have decided to purchase a property in Spain, there are many considerations to take into account, and many decisions to be made. Ensuring that you are working with reputable and trustworthy companies is always the first step. Prior to dealing with any estate agency, lawyer, development company, bank, building company, mortgage company or any other business or individual that you plan on working with, it is always advisable to request they provide you with a list of references. In this way, you can (and it is wise to do) follow-up on the references and confirm the claims. Before you even look to purchase a property in Spain, it may be helpful to know that there are a few “different” types of properties available. A quick summary follows here: Apartments: Standard apartments in Spain are no different than the rest of Europe, and are generally detailed by their location, their number of bedrooms and number of bathrooms. A “studio” apartment would have a combined bedroom / living area. The vast majority of apartments are built as part of Urbanisations, (or small communities) and will have monthly community fees payable. Many restrictions on such things as exterior decorations, satellite dish installations and awning or lighting changes can be quite difficult, and often impossible. The urbanisation or building will have a “President” assigned and this individual is responsible for overseeing the goings on of the building. Duplex Apartments: A common trend throughout many areas in Spain is to have a growing number of duplex apartments. They are often 2 or 3 levels high, and often do not have elevators or wheelchair access from one floor to the next. Most of these are built in the traditional Spanish-style and are desired by many as they offer the same feeling of a townhouse, yet at a reduced price. Most duplex apartments are found in the same type of urbanisation as standard apartments, and most restrictions apply. Townhouses: In many of the inland and mountainous regions, townhouses are very popular, and often built as part of an urbanisation or development, offer most of the luxuries of a villa, yet are attached or semi-detached from another townhouse. In most cases the townhouses on either end of the block will enjoy more sunshine and better views. Villas: The most typical of housing in Spain is the villa. In any other area of the world this would simply be described as a detached home. A villa can range from the most simple 1 bedroom bungalow built on a 75m2 plot to the most luxurious 15 bedroom mansion on a golf course or the beach. Any villa will have land and will generally be close to or within a short distance of the nearest town or city. Fincas: Often translated as Farmhouse, the finca is the typical rustic home. These are generally located off the beaten path, and are mostly built as self-sufficient (with many obtaining their water supply from wells, electricity from solar panelling, and information and telephone via satellite. The vast mountainous and plateau regions of Spain are ideal for these wonderful retreat homes. In sizes ranging from small 1 bedroom rustic homes to modern 4 bedroom villas, the definition of Finca comes primarily from the location, and generally fincas will be built upon a large portion of land. Parcela: A parcela is not to be mistaken for a property; this is simply a plot of land. Be certain to ensure that if you are looking to purchase a parcela in Spain, that you have received documented evidence of the necessary building permits before purchasing. A plot of land without a building permit can still make an excellent home for a caravan or trailer. Ensuring that the land has sufficient road access is another important consideration.
After you have decided what type of property you wish to purchase in Spain, before handing over your deposit money to an estate agent, it is a good idea to go through the simplistic steps as follows:
Once you have gone through the above steps, be prepared for the following initial costs. These will of course vary on the type of property you have chosen, but the following will give you a good idea what to expect:
In many cases, the buyer will also pay the sellers fees. One more important consideration is that of the mortgage. Many banks will attach a commission charge or arrangement fee at the onset of the mortgage. Check with your mortgage company to ensure that all costs are explicitly detailed prior to committing. It is important to note that after the initial cost, there are ongoing annual costs of owning a property in Spain, not only any mortgage payments you may make. The following will explain in more detail:
The local town hall charges an annual real estate tax which is referred to as “IBI”. When purchasing a property in Spain, the previous owner is obliged to give you copies of previous bills, so you will have a good idea of what your future “IBI” payments will be. This “Impuesto Bienes Sobre Inmuelbes” tax generally includes rubbish collection and other standard town services. When living within an urbanisation or community, there are also monthly or annual community charges that will be applied; these fees will include maintenance on the buildings, gardens, swimming pools, communal areas, etc. There is yet another tax that you will be required to pay, as a “wealth tax”. This will be payable annually and is based on the value of the property, generally, for assets totalling less than 160,000 Euros, the tax is at 0.2%. Additionally, for all non-residents, whether or not you let your Spanish home you'll still have to pay income tax based on an assumption that you're letting it. This property income tax is called “Impuesto sobre la Renta de las Personas Fisicas (IRPF)”. The local town hall will charge you according to the rateable value of your property (known as the "catastral"). They will assume you're making 2% of this value each year from letting your property and charge you 25% of that "income" regardless if you are actually earning it or not. Apart from the taxes and community fees, the utilities in Spain also merit mentioning. In many parts of Spain, water is regarded as a precious commodity and therefore the prices have soared in recent years. All properties are metered and most water authorities charge a quarterly rate for minimum consumption. Note that this charge will be applied regardless if you do not use any water at all. This rate varies from area to area, so requesting a copy of the previous water bills from the seller is a good idea. Electricity is billed every two months, normally after the meter has been read. Gas is cheaper than electricity but it's rare to find a mains supply except in the major cities. Archaic but still commonplace in Spain is the use of bottled gas. With many petrol stations and other locations providing trade-in services for these bottles, and delivery is also an option. When purchasing properties in Spain that are not yet constructed, or nearing completion of construction, many developers will offer you up to 80% over 20 years if you are a non-resident. The local banks and lending institutions will offer generally anything up to 60% for European residents, and 50% for non-European residents. The vast majority of loans are long-term and secured on the property. When seeking out a mortgage loan, be sure to consult various banks, and it is advisable to research the interest rates, and seek financial advise as to whether or not to take a fixed-rate loan or a floating rate loan. Information that will be required from you when looking to secure a mortgage from the banks or other lending companies will be copies of your passports, residence permits, tax identification numbers, payslips, or evidence of income and or proof of financial position and ability to repay the loan. Also, the bank will require a “nota simple” or a copy of the title deed of the property. Another extremely important factor of the purchase financing conditions is currency. If you are purchasing from any country that does not operate with Euros, then this can be an important consideration. Especially if you are purchasing a property in Spain as an investment or as a second home this could have a serious impact on the actual cost of the financing. There are several companies operating in Spain that offer services of fixing exchange rates for you. You can find these by searching for currency brokers or consulting your financial advisor. There are both advantages and disadvantages to obtaining a mortgage in Spain instead of your home country. With a mortgage in Spain, there are often commissions and initial costs to set up, yet generally speaking, Spain enjoys lower interest rates when compared to most European countries. Also, another thing to consider when seeking out a mortgage with the intention on purchasing a property in Spain is, in what name(s) to purchase. You can purchase a property in your own name, with a partner or spouse, or you could form a company to purchase the property through. There are tax implications and various advantages and disadvantages to each. It is recommended that you consult a financial advisor (otherwise known as a “gestor”) in Spain in order to weigh the pros and cons and make the decision that best suits you financial position.
Although the trend is now changing, it is still the case that many properties in Spain are in fact not registered. The overwhelming majority of resale properties are sold by Spanish people that have been living in their homes for generations. A lawyer will assist in investigating the details of the property at the local town hall. This process can take a great deal of time as the town halls have been inundated with requests in recent years. New developments and off-plan properties are generally easier to investigate, but still require a fluent level of Spanish and a knowledge of the zoning laws and building permits, so this is much better left in the hands of a legal representative.
When purchasing an off-plan or new development property, the lawyer or legal representative should ensure that:
When purchasing property in Spain, it is mandatory for the owner to arrange for Fire insurance when taking out a mortgage. Comprehensive household insurance is available to protect your home and contents. It is also highly advisable to arrange for life insurance policies which can be taken out to guarantee payment of the loan in the case of death.
Currently, if you spend more than six months a year in Spain, you are obliged by law to apply for a residents permit. (It is important to note that this law is currently being abolished). There are several advantages for obtaining this residence status within Spain, as the abovementioned ‘income tax’ on imagined property rental is not applied. As well, the wealth tax is reduced. Also when it is time to sell the property, the standard capital gains tax that is applied on all properties sold in Spain is a full 15% less for residents as opposed to non-residents. (20% as compared to 35% respectively). One further note, if you are over the age of 65 years, and you have lived in your property for at least three years, as a resident, you are totally exempt from capital gains tax and you heirs can avoid paying inheritance tax on 95% of the property valuation. (This applies only in cases where the inheritor is also a resident of Spain, and agrees not to sell the property for at least 10 years). |
