Spanish-property-guide
Guide to buying property in Spain
Relax in Spain
Congratulations, you are thinking about moving to Spain and starting new life with your perfect place in the sun. Beware though that moving to another country can be a very complex, daunting and difficult process. Living in Spain is a totally different experience to having a holiday there.
In order to make your dream move to Spain a reality we recommend the following 3 golden rules
- Learn Spanish:-
By learning Spanish you will be more widely accepted by the locals and you will simply enjoy life so much more rather than just living in a UK ex-pat enclave.
- Research, Research, Research:-
Learn about the property market, learn about Spain, understand the legal process of buying a property in Spain and research the area, schools (if needed), local facilities, job opportunities, transport links, crime, attitudes to outsiders, climate and so much more. Remember that you may also be living in Spain in the winter not just the summer.
- This is your home in Spain – Embrace the culture!:-
You are not one holiday, that is a completely different experience, this is going to be your home, so embrace the local Spanish culture, try to understand it and try and become integrated, the Spanish can be a very warm and friendly people, get to know them!
The Property market in Spain
Property prices in Spain are increasingly on the up but there is talk of the bubble bursting. Nobody can be 100% sure of what the market is going to do in Spain as property price growth varies from region to region.
The Increase in property prices in Spain 2000 to 2005
2000, first half 6.5%
2000, second half 5.6%
2001, first half 3.2%
2001, second half 5.5%
2002, first half 4.4%
2002, second half 9.9%
2003, first half 8.1%
2003, second half 7.2%
2004, first half 6.2%
2004, second half 5.9%
2005, first half 4.5%
Source: Sociedad de Tasación
Introduction to the house buying process in Spain
At a glance
- Decide to buy
- Work out finances
- House hunting
- Discuss with lender and Spanish solicitor
- Complete application and obtain approval in principle
- Satisfactory valuation and full approval
- Arrange life assurance and fire insurance
- Sign loan agreement forms
- Arrange completion date with solicitors and vendor
- Completion at the notary
The key steps to buying a house in Spain
Once you have decided on the property that you want to buy, the process is this:
- Nota simple informativa
This is basically a document that you get from the property registry (Registro de la Propiedad), like our own land registry. This document confirms if the property is debt free, if it as the buyer has described and that it is actually owned by the seller.
BEWARE OF PROPERTY BARGAINS AS MANY OF THESE MAY HAVE BEEN ILLEGALLY BUILT, CHECK ALWAYS WITH THE REGISTRY.
- The Contract and deposit
This is a basic contract much like when you exchange contracts in the UK. This contract involves a deposit being given by the buyer for a pre agreed percentage of the property value. A common agreement in Spain (called contrato de arras) is if the buyer backs out of the contract, they lose the deposit; if the seller backs out, they have to pay double.
- Arrange a Spanish Mortgage
If you are new to Spain and buying property in Spain, then it is probably easier to arrange a Spanish mortgage with a UK bank. However if you are going to arrange a mortgage with a Spanish bank you will need a lot of paper work.
- Finalising the sale
Now is the day of completion and this is all about agreeing to the contents of the deed. Then after proof of identity has been established, the seller produces the deed and . The buyer and seller sign the contract now it’s taxes time!.
- Taxes
If you are buying you need to pay transfer tax (impuesto de transmisiones patrimoniales) and stamp tax (impuesto de actos jurídicos documentados).
If the seller is an individual, the buyer pays a tax of 6% (7% in some regions) of the price specified in the deed. If the seller is a real estate developer and the building or land to be built on represents a first-time transfer, then the buyer pays VAT tax instead, meaning 7% for housing, 16% otherwise. If for housing, you have to add a stamp tax, in this case reduced to 0.5%, depending on the region (for Madrid it’s 1.5%). Some special conditions apply for the Canary Islands.
For the seller: a local tax called the plusvalia.
With a copy of the deed in hand, the seller must go to the City Hall (or wherever local taxes are paid). After filling out the form, the seller will receive in the mail a notice of how much they have to pay. This amount is calculated based on the number of years the property was held, and on the property’s valor catastral. Be aware that each town has a different procedure regarding payment of this plusvalia.
- Register the property!
It is strongly advised that you register your title at the local office, in order to protect your property ownership. There is a small fee for this.
Questions about mortgages in Spain.
- How much can I borrow?
Typically you can borrow 70 to 80% of the property value for a property in Spain in an urban area but much less nearer to 50% for a rustic property.
You can choose from mortgages similar to the UK e.g. fixed rate.
- What is the interest rate?
The good news is that interest rates in Spain have been lower than the UK for a while now. The interest rate in Spain is called EURIBOR. This is based on the European Central Bank base rate and changes every month. It hovers around 3.5%
- How do I arrange a mortgage for Spanish property?
You can use a UK bank such as Barclays, Natwest, HSBC, or alternatively go directly to a Spanish bank for a mortgage.
- What documents do I need for a Spanish mortgage?
Work contracts and pay slips from last 3 months
Pre-agreement /contract with seller
Proof of payment of property tax is up to date (IBI)
National Insurance number DNI/NIE
Latest income tax return
All sorts of other documentation such as other property ownership, records of assets, employer certificates and work history, details of other mortgages and loans you may have
This is also the period when you are likely to encounter appraiser (tasador). They are a bit like a surveyor in the UK. They are by trade a licensed architect and it is their job to ensure the banks loan is safe and viable. Their work on appraising the property is typically 250-550 euros.
- How long does it take to complete?
Quicker than the UK typically 4-6 weeks
- How much is buying a Spanish property going to cost me?
If you buy without a mortgage then expect to pay around 10% of your property value, with a mortgage you will pay around 13%
- What are the purchase costs of buying a property in Spain?
7% IVA (VAT)
1% Stamp duty
1% Legal fees
Notary fees
- What are the costs of a Spanish Mortgage?
- 1% – 1.5% Set-up fee
- 1% Stamp duty (1% of mortgage value + 1% of total accrued interest)
- Valuation fee
- Notary fees
- Arrangement fee
How can I find a Spanish lawyer?
Whatever you do make sure you get an English speaking Spanish lawyer They will sort out the ownership legalities, the debts (if any are outstanding) and ensure the transaction runs smoothly and act as your power of attorney.
7 Top tips for buying a property in Spain
- Use an English-speaking lawyer
Do your homework before you start shopping around. There’s no point trying to buy a house without knowing how the buying system works. The things you’ll need to know include how much you can borrow, what you have to spend, and how to get a mortgage agreed in principal. A lawyer can help you with all of this.
- Don’t buy the first property you see!
Make sure you see a lot of properties so that you can get an idea of the market and what you can get for your money. Visit the house at night and in the morning for nightlife and traffic. Think how hot it will be in summer, is it in a very touristy busy area?
- Consider Off plan
Why? Because you can buy at today’s prices and today’s exchange rates.
The best time to buy is spring do not buy in the height of summer as prices go up and more people are looking to buy
- Look beyond the popular Costas
Try instead Costa de la Luz, the coastal towns around Murcia, and the Northern Atlantic coastal areas. You’re more likely to find a well-priced property in these regions.
- Rent first
If buying in a well-established city and traditionally Spanish area, rent first and get acclimatised to the city and area. Also try this in winter, get used to living in Spain is it really for you?, make sure before you are making the right decision before you commit a lot of money into buying in Spain.
- Check all associated costs
Are you buying a property in which you have to pay for upkeep of the whole block? Find out about communal areas and planning permission. If in doubt ask!
- Take your time
You are going to be living in Spain, It is a slower pace life, and things take longer to happen. You should therefore take your time when looking for property and never be bullied into buying a property.
Good luck, we sincerely hope your dream move to Spain is a successful one.
