Buy a House in Spain

In this article, we will provide you with all the information you need to know when buying a property in Spain. You can find information on Spanish property prices, legal steps, how to purchase a property there, and much more in our article.

Spain is a country with a strong reputation and international recognition. Many foreigners prefer Spain for retirement, education, or work. Currently, there are approximately 6 million foreigners living in Spain. Spain is highly popular among foreigners due to its high quality of life, low living costs, and excellent healthcare and education systems.

An Overview of Homeownership and the Real Estate Market

Homeownership rates in Spain are quite high, with approximately 80% of Spanish citizens owning their own homes.

Spain was one of the countries most affected by the global financial crisis, losing around 30% of property value. However, since 2016, property values in Spain have been steadily increasing. The COVID-19 pandemic had a negative impact on the market in 2020, but official figures show that average prices increased in the second half of the year.

Property prices have increased by 2.1% annually, with existing homes seeing an approximately 1.8% increase since 2016, while newly constructed homes have seen an approximately 4.2% increase.

Is It a Good Time to Buy Property in Spain?

If history has taught us anything, it’s that the Spanish government has the ability to recover from the brink of crises, which means that property prices can rebound even if they dip in the short term. Predicting the future is, of course, impossible, but investing in real estate in a stable country like Spain is often a wise choice.

Should I Buy or Rent Property?

Spain is a bureaucratically complex country. Since the property market has been volatile in the past, it’s always a good idea to do some research before buying any property. Another important factor to keep in mind is that Spain has a relatively high capital gains tax.

Before the pandemic, there was an issue with a “holiday home” rush, where many investors bought properties to rent out in tourist areas, leading to steep rent increases in popular regions. Regional governments were planning to implement stricter rules to prevent this, but these plans are currently on hold due to the pandemic.

Spain has 17 autonomous regions, each of which can set its own rules for foreigners buying property. For example, in the Balearic Islands, only Spanish residents are allowed to apply for “buy and rent” licenses. The Madrid government has also recently introduced some measures, including a limit on stays of up to five days.

If you plan to stay in Spain for a short period, you may consider renting property, as rental prices are relatively affordable considering the high quality of life.

Can Foreigners Buy Property in Spain?

Yes, the Spanish government generally welcomes and even encourages foreign investors. If you’re interested in buying a holiday home, you may need legal assistance with the bureaucratic aspects.

The process of buying property in Spain as a foreigner is relatively straightforward. First, you need to obtain a Foreigner Identification Number (NIE), which is also known as a Número de Identificación de Extranjero. This number is your Spanish fiscal number and is necessary for any financial activity in Spain. You can apply for it yourself or appoint a representative to obtain it on your behalf.

Spain has one of Europe’s most successful Golden Visa programs. The Spain Golden Visa is a residency program that grants residence rights to the holder through an investment in real estate. To qualify for the Golden Visa, you must invest at least 500,000 Euros in Spanish property. Afterward, if you legally reside in the country for at least 10 years, you can qualify for citizenship.

Buy or rent properties with no commision

Property Prices in Spain

The price of a property will largely depend on the location where you make the purchase. Some of the most expensive places to buy property in Spain include San Sebastian, Barcelona, and Madrid. You can find much more affordable properties in places like Alicante or Valencia. Below is a table of average property prices per square meter in various regions of Spain:

Buying Land in Spain

As a foreign buyer, you may prefer to purchase land and build a property on it in Spain. This method is quite popular in Spain, especially in places like Costa del Sol and the Canary Islands. However, this is a situation that should be approached with caution as there can be issues with obtaining permits and navigating the legal processes.

How to Protect Yourself from Pitfalls?
There are several steps you can take to ensure you make the right investment. We have prepared a checklist to help ensure you make the right deal:

Check the property registry (Registro de la Propriedad);
Verify that the appropriate planning permission was obtained before construction;
Check for any outstanding debts on the property;
Verify the credentials of the lawyer or real estate agent you plan to work with;
Have an expert or architect verify that the property complies with building codes and was not constructed cheaply.
You can generally obtain this information from the property registry. To access this information, you may need to request it via email, phone, fax, or in person. You can also have a trusted lawyer check these details for you.

Land Prices in Spain

Land prices in Spain vary depending on the location and the seller. Since bargaining is a tradition in Spain, there is often some room for negotiation. Below are the prices per square meter (m²) in different regions:

Andalucia: €171
Catalunya: €184
Castilla y Leon: €66
The Canary Islands: €245
Madrid: €338
Valencia: €158

Taxes and Other Costs in Property Purchase in Spain

In Spain, there is no set fee for real estate agents or lawyers; it’s all negotiable. Additional expenses like registration fees and legal fees also vary from region to region. As the buyer, you will be responsible for covering most of the costs. Here are some expenses:

Property Transfer Tax: This ranges from 6% to 10% for existing properties.
VAT or IVA: This is 10% for new properties.
Notary fees, property registry fees, and property tax: These amount to about 12.5% of the purchase price.
Legal fees: These range from 1% to 2% of the purchase price, including VAT.

Financing Your Property Purchase

Some Spanish banks and international banks offer mortgages to foreign buyers. As a foreign buyer, you will often find that you need to borrow with a lower loan-to-value ratio compared to residents in Spain. This means you’ll need a larger deposit for your property purchase. Depending on the type of mortgage, foreign nationals can typically get loans for around 60-70% of the property value, while Spanish residents can go up to 80%.

An interesting point about mortgages in Spain is that banks often don’t complete the contract until you become a property owner. Therefore, it’s essential to include a clause in your purchase contract stating that you can cancel the purchase if you cannot secure a mortgage.

Property Debt

Many foreign investors have faced the issue of “property debt.” You buy a property and then discover that there is significant debt associated with it. In Spain, when a property is sold, the debt is transferred to the new owner. It’s crucial to ensure that the property is debt-free. Make sure any outstanding debts are addressed and included in the terms of the purchase contract.

Finding the Right Property in Spain

The Spanish real estate market is well-prepared for foreign buyers, with many websites and real estate agents offering services in multiple languages.

Some English-language property websites even list properties in Spain, though they are typically focused on holiday properties. It’s a good idea to also explore Spanish property websites.

Finding and purchasing a property can take time. While it’s possible to buy a property remotely and move directly, taking the time to visit, inspect the property, and assess compliance with regulations is usually better. This might mean staying in a hotel or short-term rental until your property is ready.

Here are some Spanish property websites you can use:

Thinkspain
Servihabitat
Idealista
Kyero

Real Estate Agents in Spain

There are numerous real estate agents in Spain accustomed to working with foreign investors. They can often provide valuable insights about the region and assist you in your property search. However, always remain cautious to avoid scams. Never trust agents who demand upfront payment or claim they can get you the property faster than others.

Remember that you have the right to choose your bank, notary, and other professionals. You don’t have to accept everything the real estate agent suggests. Additionally, always negotiate fees, as they may try to convince you to pay more.

Property Purchase Processes in Spain

The process of buying a property in Spain is relatively straightforward. In this section, we’ll provide you with a step-by-step guide on buying property in Spain:

Step 1: Find a Property and Make an Offer

After identifying properties you like, you’ll need to make an offer. This offer is typically made through the seller’s real estate agent. Prices are often negotiable.

If the price doesn’t seem favorable, try offering slightly less than what the seller is asking for. However, avoid going too low, as it might offend the seller. After verbally negotiating the price and reaching an agreement, it’s advisable to formalize the agreement in writing. Having a notary present during this stage is always a wise choice.

Step 2: Signing the Preliminary Contract and Paying the Deposit

Once you’ve agreed on the price with the seller, you’ll sign a preliminary contract known as “contrato privado de compravento.” After this, you’ll typically pay a deposit, which is usually 10% of the property value.

Step 3: Mortgage

As mentioned earlier, you can only apply for a mortgage in Spain if you already own the property. It’s essential to have discussions with your bank before paying the deposit and signing the preliminary contract. However, you won’t be able to complete the process until you’ve paid the deposit and signed the preliminary contract.

Step 4: Signing the Contract

After completing the mortgage stage, you’ll sign the sales contract, known as “escritura de compravento.” This signing usually takes place in front of a notary.

What You Need to Know About Property Purchases

Notaries, Lawyers, and Agents
While having a notary is technically not mandatory to complete the sale, it’s always a good idea to have a reliable lawyer to help with due diligence. As the buyer, it’s your responsibility to register the property, and a notary or legal advisor can assist with this process.

All lawyers practicing in Spain should be registered with the local bar association (colegio de abogados). You can ask for their registration numbers to verify their status.

Property Inspection

A property inspection is a crucial part of buying a home. Technically, you can purchase a property in Spain without conducting an inspection, but it’s not recommended. Performing a thorough inspection can prevent costly issues down the line.

There are two types of inspections for existing properties: a valuation report and a building survey.

A valuation report provides an independent look at the property’s market value.

A building survey is more comprehensive and delves deeper into the property’s structural integrity and potential issues. While it’s slightly more expensive than a valuation report, it’s highly recommended. It’s important to have detailed information about the property, especially when making such a significant investment.

Home Insurance

Getting insurance to protect against worst-case scenarios is always a smart idea. Banks often require you to have a building insurance policy in place before approving your mortgage. A building insurance policy covers the structure of the property against risks such as fire, natural disasters, and other damages.

There is also a type of insurance known as contents insurance, which covers your personal belongings within the home. If you plan to regularly rent out your property, this type of insurance is advisable.

Setting Up Electricity, Gas, and Water Services

This can be one of the more tedious aspects of buying a property in Spain. There are various electricity, gas, and water providers to choose from before finalizing an agreement. Sometimes, you might find that there are existing systems you can take over from the previous owner.

Waste disposal is managed at the municipal level, and there are annual fees you’ll need to pay to the municipality for garbage collection.

Buying Newly Constructed Homes in Spain
Unfortunately, real estate fraud is common in Spain, especially targeting novice investors. This often involves selling unconstructed or unfinished properties without the necessary permits. Below are some tips to help you avoid scams:

Never sign a contract you don’t fully understand.
It’s always wise to hire a third-party legal advisor when signing any contract.
Inquire about planning permission from the local municipality.
Verify the legitimacy of the company and ensure the project is registered in the property registry.
Arrange for a reliable third party for translations.
Obtain written proof that you will receive a refund if the property isn’t constructed for any reason.

Selling Property in Spain

The primary concern when selling a property in Spain is the Capital Gains Tax (CGT), which applies to the profit made when selling your home. CGT rates are as follows:

Up to €6,000: CGT at 19%
€6,000–€50,000: CGT at 21%
Over €50,000: CGT at 23%
For example, if you buy a property for €400,000 and sell it for €550,000, you would pay €150,000 in CGT. Due to the tiered system, the tax would amount to €33,260.

Capital Gains Tax Reductions

There are a few situations in which you can claim reductions in CGT, typically to account for inflation:

If you are purchasing another property in Spain.
If you are 65 years old or older and have lived in the property as your main residence for more than three years.
Otherwise, regardless of how long you’ve been living in the property, you will be required to pay CGT. Additionally, you will need to pay the tax even if you are no longer a resident of Spain, meaning you may owe CGT even if you no longer live in Spain.

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2 Comments

Laura Dern

13 Mart 2023


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- Harold Nelson
  
  13 Mart 2023
  
  
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