spanish property buying guide
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Buying a property overseas can add significantly to your quality of life and give you, yourfamily and friends many happy times for years to come. Owning a place in the sun toreturn to time and again in a country you love is a joy.It is however a big step and something you should not undertake lightly. There aredecisions you will need to take and therefore information you need to know.
The CountrySpain is a justifiably popular destination for both holiday makers and property buyers. Itreceives almost 53 million international tourists a year, which is more than the wholepopulation of Spain (approx. 46 million). Meanwhile, some 800,000 Britons live in Spain,making it one of the most important host countries for UK expatriates abroad. The Costadel Sol in 2014 attracted over 9 million tourists.There are certainly good reasons for Spain being a popular destination for Britons toown property, even before you consider the deluge of cheap homes right now.
The Climate Spain has a generally benign climate. This is particularly true of the long Mediterraneancoastline, which is blessed by warm winters and hot summers that allow for an al frescolife throughout most of the year.
A Guide to buying on the Costa del Sol
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Proximity to the UK
Easy and quick access to and from the UK is critical for any British owner of Spanishproperty, whether that property is a holiday home or permanent residence. Spain is 2.5hours from the UK and has several international airports that have flights throughout theyear, including low-cost carriers.
Infrastructure Over the past thirty years, Spain has been transformed into a genuine first world country.It has a superb road system, good healthcare and schooling and political stability. Mainselectricity, water and landline telephones (with ADSL) are common to most propertiesand the shops and commercial centres offer all the services that you would expect to findin the UK.
Value for money Day to day living in Spain remains inexpensive compared to virtually anywhere else inEurope, despite the sophistication of life available.Toleration of foreigners. Spain is used to foreigners and has developed an extensive,user-friendly, English language infrastructure, backed up by the services on offer by themany Britons living and working full time in Spain. This, and the relative ease of learningSpanish to a basic level, makes Spain somewhere easy to live for the non-linguist, withthe attraction of Spain being further enhanced by a surprisingly traditional culture in whichfamily and community life still hold true.
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Costa Del Sol
The Costa Del Sol is the best-known of all the Costas in Spain with towns such asMarbella, Torremolinos, Benalmádena, Fuengirola, Mijas, Puerto Banus and Esteponavirtually household names in the UK.
Malaga is the main city and has an international airport that services the coastline, whichhas seen massive development over the past twenty years. Gibraltar airport, situated a30 minute drive from Estepona can serve the east side of the Costa Del Sol.
Whilst front-line Marbella commands a premium, you can buy three-bed apartments inless prestigious positions for around €170,000, but in a more affordable area such asBenalmadena, you can acquire a two-bed apartment from €100,000, or a three-bed villafrom around €210,000.
With over 320 days of sunshine, hot summers and mild winters has made the Costa delSol the first choice for expats to holiday, live or retire. It has 150km of coastline, 13UNESCO parks and biospheres, its locality to skiing in the west and Gibraltar in the eastand its 54 golf courses proves that the Costa Del Sol has something for everyone on anybudget.
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The Spanish property market
Spanish property prices rose to absurd levels during the Spanish property boom, whichcame to a dramatic halt in 2008. Since then Spain has suffered a severe economiccrisis, which has further damaged property values, with the result that property prices arenow similar to those existing in 2004. Indeed, house prices have dropped by as much as35%-50% since the boom and now offer exceptional value for money.
Prices vary wildly between different areas of Spain and even between different parts of atown, estate or area of coastline. A number of factors affect the pricing of property inSpain, with location being the most obvious and influential factor. So, for example, afrontline beach apartment will fetch greatly more than one only a couple of roads back,just as a flat in the centre of a major city such as Valencia or Barcelona will bear littlecomparison with that of a centrally located flat within an inland town.
Equally, as a general rule, prices drop markedly the further away from a beach that ahouse or villa is located. Indeed, this effect can be dramatic and you can often buy aproperty half an hour from the Mediterranean coastline that is very significantly cheaperthan one within the ‘golden’ fifteen minute from the beach radius.
Meanwhile, the Spanish banks have become the biggest estate agents in the countryand are now ‘dumping’ their properties on the market, in some cases with huge pricedrops.
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Finding property in Spain
The key to finding the right property in Spain is to recognise that the property market andland law are markedly different from the UK. Indeed, whilst the vast majority of propertiesin Spain are safe buys there is an unhealthy minority that are not – that are either illegalor have serious potential liabilities.
So, to buy safely in Spain, far more research is needed than in Britain. Equally, youshould always use a first-class lawyer and specialist (English speaking), to investigateevery aspect, before paying anything for it.Estate agents
Needless to say there are many estate agents operating in Spain, of all nationalities,with British agents or agents with English language ability common in most coastalareas. So, finding an agent with whom you can communicate is rarely a problem.However, throughout many areas of Spain registration of an agent is not compulsoryand, even in the areas in which it is obligatory, the industry is considered unreliable. It isimportant to ensure that your agent is legal and a registered company and operates froma fixed office.
Occasionally, you, as the buyer, may be asked to pay an arrangement fee to the agentwho shows you a property and this is normally a percentage of the sale price (forexample 3%) and is sometimes called a ‘buyer’s premium’.
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Lawyers
Once you have narrowed down the area within which you want to buy, you should find alawyer who can act for you. This is a vitally important move, with the services of anexcellent lawyer critical to the success of any purchase of a fully legal, sound, Spanishproperty, devoid of any potential liabilities.When looking for a lawyer, make sure that you find one who is: fluent in English; aspecialist in conveyancing; completely independent of the seller/developer and yourestate agent; and fully insured to a public liability premium well above the value of yourpurchase (and always ask to see the policy).
Power of AttorneyJust as in the UK, you can authorise someone (normally your lawyer) to act on your behalfwith regard to your legal matters in Spain. This is often wise, as travelling to Spain tosign documents can become inconvenient or mean that you miss an essential signingdate through ill-health or travel disruption.A Power of Attorney can be either general or limited to a specific function (for example,the signing on your behalf of the escritura (Deeds) to your intended property.
Building surveys in SpainOddly enough, there is no specific profession in Spain to compare with that of buildingsurveyors in the UK, who specialise in analysing the state of existing buildings. This ismainly due to the fact that many properties form a part of a community and it is thecommunity that is responsible for the buildings.
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NIE
You cannot buy a property in Spain without a NIE number (Numero de Identificación deExtranjero), which is an identity/fiscal number for non-Spaniards. So, apply for this assoon as you start looking for a property.
Currently, you can apply for your NIE number in person or your lawyer can do so usingpower of attorney (although the rules on this tend to change from time to time). An NIEnumber is obtained from the Policia Nacional, who has offices in all major towns andcities throughout Spain. Most estate agents and lawyers will help you apply for your NIEnumber, which is help worth accepting. Although the application process is simple, it canappear complicated, as the application form is in Spanish and the correct office (andqueue) can be awkward to find.
Banks in SpainThere are a number of different banks in Spain, including some well-known internationaland UK banks. Some banks specialise in providing a service to English speakers.When choosing a bank, make sure that you have a dedicated account manager who canspeak English and that all your banking communication is in English (bank statements,Internet banking etc.) and that you can have a Sterling account.
Always check the costs of maintaining your account (as these can vary greatly betweendifferent banks) and particularly investigate the charges associated with transfers ofmoney from the UK to Spain and their receipt into your Spanish bank.
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Mortgages
Mortgages are available for the purchase of properties in Spain but the variety and type ofmortgages on offer have decreased markedly over the past few years, along with thepercentages being lent by the banks.
Currently, Spanish non-tax residents are being lent a maximum of 70% of the “lower of ”valuation or purchase price. Tax residents in Spain are being offered a maximum of 80%.However, to achieve the maximum percentage you have to be an A1 client with ‘spotless’documentation and a low debt/income ratio, so it is wise to expect a lower offer.
Lifetime mortgages no longer exist (except in a pension format) and equity release isdifficult to obtain, except in the case of new properties or for renovation works or possiblya divorce settlement.
Meanwhile, interest only mortgages are hard to extract from the banks although with onebank five years interest-only is still possible. Plot and build mortgages are available butyou now have to buy the land outright before you can obtain any financing for theconstruction costs.
100% mortgages are available but these are exclusively offered by the banks on their own(normally repossessed) properties. Because of the complexity of the mortgage market, itis wise to go to a professional mortgage broker and certainly you should try at least twobanks before settling on a particular mortgage.
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Currency transfers
When you begin your property hunt, all your funds are likely to be in pounds still, so atsome point you will need to exchange them into euros and have them transferred to anaccount in Spain.
So why are currency firms so much better at doing this? For starters, they consistentlyoffer £/€ exchange rates that are 3-4 per cent better than any bank, and charge no orminimal transfer fees. This means if you asked a currency firm to transfer £100,000 intoyour Spanish bank account, you’d receive €3,000-€4,000 more than if you asked yourbank to make the same transfer. Or if you have a target amount of euros to send to Spain,using a currency firm will cost you 3-4 per cent less in pounds than using a bank. Thebenefits work the other way too, so when repatriating euros into pounds.
Forward buying euros means the cost in pounds of your property won’t change with theexchange rate fluctuation before you come to complete. Otherwise, if you’re waiting forthe euro to weaken (or strengthen) before you make a currency transfer, you could askyour currency firm to call you when your preferred exchange rate is achievable.
As a final benefit, using a regulated currency firm is as safe as using your bank to sendmoney to Spain. Currency firms are classed as Payment Institutions and must be eitherregistered or authorised by the Financial Conduct Authority (FCA). They must adhere toFCA regulations, including holding clients’ funds in a segregated account at all times, soyou know your money is always safe with them.
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Buying costs
Allow 10-12 per cent of the purchase price of your intended property to cover buyingcosts. Buying costs include the notary’s fees, Land Registry fees, mortgage fees (ifapplicable), legal fees and transfer tax (ITP), which is 8 per cent of a property’s price up to€400,000 (then 9 per cent of any amount from €401,000 to €700,000, and 10 per cent ofeverything from €701,000 upwards).
No transfer tax is levied on new build properties but VAT is charged at 10 per cent(always check whether this is included in an advertised price). So, if you are looking at are-sale property that is being sold for €300,000 then appreciate that, one way another, itwill cost you around €330,000 by the time all the costs have been paid.
The buying processYou can purchase Spanish property very quickly, if you are a cash buyer and you have anNIE number. Certainly, it is not unknown for the Spanish (in particular) to see a propertyand be the owner (with full access) later on the following day.However, this is not the way to proceed for any foreign buyer and you should never rush tobuy or be rushed. Rather, you must always allow your lawyer ample time to do their properinvestigations.
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Legal process
Seeking professional advice is highly recommended, as there may be debts linked to theproperty or, wrong information in the property registry.
Reservation AgreementThis is a simple document which confirms the price and conditions of payment. A fee ofbetween €3,000 and €6,000 is payable at this time. The seller will take the property off themarket for a period of time stated in the contract, normally of 8 to 14 days. During thistime, information will be obtained to ensure the description of the property within the“Property Registry” is accurate and correct. The reservation fee is immediately refundableshould there be any discrepancies, or the seller pulls out of the sale.
Private Purchase ContractWhen the “Private Purchase Contract” is signed, a deposit of 10% of the price is paid (ifno other agreement has been made in the reservation agreement). This document is adetailed description of the property, the purchase conditions and, any other agreementsregarding the purchase. The “Private Purchase Contract” is legally binding for both theseller and the buyer.
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Legal process (cont)
CompletionThe closing of the purchase takes place at the notary’s office. Both parties (or who haspower of attorney) will sign the official property transfer. The balance of the purchase priceis paid to the seller. The keys to the property are handed over and the buyer takespossession of the property.
Registration Of OwnershipFollowing the signing of the property transfer, all costs, fees and transfer tax(approximately 10% of the purchase price or 12% if there is a mortgage) will be paid andthe “Title Deed of Purchase” registered at the land registry. Transfer of supply contractsand change of ownership have to be made in the town hall. It takes approximately 2months to receive the original and registered “Title Deed of Purchase”
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