Guide to buying a Property in Spain
a property in Spain is a big decision but it doesn't have to be a difficult
process. Take things slowly, ask lots of questions, read around the subject and
make sure you take legal and financial advice. The following steps apply to
anyone who is considering a property investment in Spain whether it's for a
holiday home, retirement home or investment property.
1. Decide why you are buying
Before you even think about looking at brochures, visiting property exhibitions or searching the Internet, take the time to make a list of all your requirements so you know exactly what you are looking for. This may sound basic but the reasons for your purchase will affect all the subsequent decisions that you have to make. Some people buy property purely as an investment; others want to relocate, some want a second home in the sun.
2. Choose your location
If you’re looking for investment property, for example, it’s important to choose a property of the type and location that will give you a maximum return. As a general rule, properties by the coast attract higher rental incomes. If you want a property to retire to, consider buying somewhere further inland to get more for your money and think about how far you’re prepared to travel for shops and other amenities. If you plan to make a permanent move and take up employment in Spain you may be more interested in properties that are close to the major population centers.
3. Fix your budget
There are always hidden and additional costs when you buy property and Spain is no exception. As a general rule, allow 10% - slightly more for new and off-plan properties - on top of your purchase price, to cover various taxes and legal fees. You can get a mortgage in the UK or in Spain and, for the latter, it is normal for banks to advance a loan of up to 80% of the declared value of the property. For more information on mortgages please contact us directly.
4. Do your research
Once you have a clear idea of what you want to buy and where, spend some time on detailed research. Magazines, Sunday supplements books, guides and the Internet are all useful sources of information.
5. Visit the property in person
Never buy any property without making a personal visit at least twice. While you’re there, spend some time in the immediate area, get to know people, ask questions and find out what the local amenities are like. See how the environment changes throughout the day. Are there busy times where traffic becomes a problem? Is there a noisy bar or club nearby? Where’s the nearest hospital?
6. Find a good local lawyer
Spanish property law is complicated so make sure you have a good local lawyer to look after you interests. Lawyers will usually charge you 1% of the sale price of the property but it’s an excellent investment for peace of mind. Be aware that under Spanish law only the person named on the title deed has the right to sell the property and that some investors have been tricked into paying large sums of money to people who were merely tenants of the property.
7. Negotiate terms
Once you’ve chosen a suitable property, the price and conditions will need to be agreed. It is quite acceptable to make an offer subject to mortgage approval and, for properties that are still being built, you’ll want to agree a schedule of stage payments rather than pay the whole amount up front. If you haven’t already appointed a lawyer, you must do this now or run the risk of entering into an agreement that cannot be enforced under Spanish law.
8. Exchange contracts
With the offer accepted and the deposit paid, the next step is to exchange private contracts, ‘Contrato privado de compraventa’, which states the agreed price and what is to be included in the sale. This usually happens within two weeks from the offer being accepted and its where your lawyer really starts to earn his money by conducting property searches and making sure that there are no outstanding debts attached to the property, for which you may be liable. This is confirmed in a document called a Nota Simple. In most cases you will now be required to pay a non-refundable deposit of around 10%.
9. Final completion and registration of the title deed
Final completion Escritura de compraventa´ takes place when the title deeds are signed before a notary and you pay the balance of the purchase price. The signed deed is lodged with the land registry and your lawyer will take care of the remaining formalities such as payment of the relevant transfer taxes.
10. Expected Annual Costs
Local Taxes – IBI - Payable annually. Calculated on the rateable value (catastral) of the land assigned by the Spanish Tax Office. It is advisable to ascertain annual local rates for a property before purchase as this differs from town hall to town hall.
Property Owner’s Income Tax – Payable annually – if you own a property it is assumed that you derive income from it and you must pay tax on this - between 0.25% and 0.5% of the value catastral (normally much lower than the value on the deed).
Community fees - The fees are usually calculated on the pro-rata size of the apartment. Expenses can vary substantially, according to the services such as lift maintenance, porter and cleaning charges.
Insurance - As a guide, an average annual cost for a 250,000 Euros apartment would be in the region of 250 Euros. In an apartment building, the responsibility for insuring the building usually lies with the Community. If this is adequately covered, the individual's insurance policy need only to cover damage to the apartment interior, contents, and third party liability.
Electricity, Gas & Water - There is a minimum rate applied (whether you are in residence or not), based on the potential amount your property could use. As a rough guide, the estimated minimum charge for an apartment is likely to range between 20 and 30 Euros per month for each utility.