Buying a house in Spain
Much has been written about the state of the Spanish property market, and prices have fallen a long way since the heady days of 2007.
According to the latest report from Tinsa, a major property valuation company, average property prices across Spain have fallen by
32.4% since the peak of the market in December 2007, and by 39.5% on the Mediterranean coasts. During that time, the biggest single
drop in prices was in the year to August 2012, which recorded a 14.7% drop on the coasts.
If that doesn't put you off buying a home in Spain, then it is still a good idea to rent a home for a few months before
buying 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, even if the market stabilises.
For anyone 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.
If you live in Spain then you may be able to get a mortgage from a Spanish bank. However, like British banks, Spanish banks
have restricted their lending practices in recent years due to the collapse of the property market. Alternatively, if you own a
property in the UK, you may be able to get a mortgage from a British bank.
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 youíll 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 sellerís
responsibility. If you are asked to pay this tax, make sure you establish exactly how much it will be as it can
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.
Choosing a Spanish Estate Agent
Property for Sale in Spain
Checklist for moving to Spain