Buying Property

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Buying a house in Spain

In Spain, as in any other country, it is usually a good idea to rent a flat for a few months before buying a property so that you can get to know the area. This is particularly wise in Spain as property transfer taxes mean that you may well end up losing a lot of money if you sell your house too soon after you bought it.

There has been something of a property boom on the coasts of Spain in recent years and house prices have doubled in some areas in 18 months. The boom In Spanish property prices is spreading inland too, but in general inland property prices are cheaper and haven't been rising as fast as they have on the coasts

For anyone considering buying a home in Spain, the single most important piece of advice is to find a good solicitor. Do not simply rely on the estate agent's "recommended" lawyer. Most of the horror stories about people buying houses that don't exist or that have an enormous mortgage attached to them involve people who did not follow this simple advice. It is also a good idea to ask a surveyor to carry out a survey on any property you intend to buy, although this is not a requirement for a Spanish mortgage.

Spanish Mortgages

If you live in Spain then you'll be able to get a mortgage from a Spanish bank. Interest rates on Spanish mortgages are much lower than in the UK, but most banks will only lend up to 80% of the value of the property. Alternatively, if you own a home in Britain, then you should be able to get a British mortgage for a Spanish property - ask at your bank. Read more about spanish mortgages here.

Buying Property in Spain: the Procedure

Buying property in Spain is not really that complicated. Firstly you should make sure your solicitor checks the property registry, which will show immediately if the seller owns the property and whether there is an outstanding mortgage (mortgages can be sold on with the property in Spain). Then, unless you are paying in full and in cash immediately, a private contract is drawn up containing all the details (description of the property, purchase price, date of completion etc.)and you will be expected to pay a deposit. The amount of the deposit can vary, but is usually around 5-15%. Finally when you have paid in full, you will get a public deed of conveyance (escritura) which will be issued in front of a Notary Public and will then be passed to the tax office (see below) and on to the property registry.

Be aware that you will also have to pay tax when you buy a property. The amount you pay will vary depending on the type of property and the nature of the seller. If the seller is a property developer you will pay 7.5% in VAT and stamp duty unless the property is a piece of land or commercial property, in which case you’ll pay 16.5%. If the seller is not a property developer on the other hand, you should pay 6% in property transfer tax.

On top of the tax you will also have to pay the Notary (usually between E400 and E800) and the property registry inscription fees (65% of the notary fee). You may also be asked to pay the "plus valia" (or "value added") tax, which is a tax on the increase in value of the land - even though this is supposedly the seller’s responsibility. If you are asked to pay this tax, make sure you establish exactly how much it will be as it can vary substantially.

Spanish Property: Taxes

When you own property in Spain you have to pay an annual "property tax" (patrimonio). Patrimonio tax is currently 0.2% of the declared value of the property, although there is a fairly generous allowance if you actually live in the property. You will also have to pay local Community Charge, although rates are very low.

When you sell a property, Capital Gains tax is also payable - currently 35% of the profit on the sale of your property. If you are a non-resident when you sell the property, then 5% of the sale value will automatically go to the Spanish tax office (hacienda) as a deposit against capital gains.

Buy-to-Let in Spain

If you want to buy your property in Spain in order to let it out to holiday-makers, there are a number of other things you should consider. This article - Legal implications of letting your Spanish property to holiday-makers is a good place to start.