Buying Property in Spain: The Foreigner’s Guide
Dreaming of a charming property in Spain?
From happening tourist hubs like Barcelona, Madrid, and Valencia to tranquil coastal destinations, Spain is home to diverse real estate opportunities. Navigating the process of buying property in Spain, especially as a foreigner, has its nuances.
Dive into our guide to find out the essential steps, insider tips, market comparisons, and pitfalls to avoid when buying real estate in Spain.
Ready to unravel the secrets? Dive in.
How to Buy a House in Spain: Step by Step
Here’s a step-by-step guide to help you breeze through the buying process in Spain.
Step 1: Setting Your Budget
Before anything else, determine how much you’re willing and able to spend. Whether it’s a vacation rental, investment, or your dream home, this will guide your search.
If considering a mortgage, research available options and secure a preliminary offer to establish a clear budget.
Step 2: Getting Your NIE (Número de Identificación de Extranjeros)
Before diving into the market, acquire your NIE, a tax registration number for foreigners. This can be done in Spain or at a Spanish consulate in your home country.
With the NIE, you can also open a Spanish bank account to ease transactions.
Step 3: Assemble Your Team
Find a property lawyer well-versed in Spanish law, preferably a local one, to guide you. This expert will help ensure that the purchase process is smooth and hassle-free.
Step 4: House Hunting and Making an Offer
Once you’ve identified your dream property, it’s negotiation time. Remember, listed prices are a starting point.
Upon reaching a verbal agreement, get this deal in writing, preferably overseen by a notary to ensure legitimacy.
Step 5: Reserve the Property
Sign the “Contrato de Reserva” to reserve the property and remove it from the market. During this phase, a fee is usually held in escrow while due diligence checks are performed.
Step 6: Due Diligence
Let your property lawyer inspect the “Registro de la Propiedad” to ensure no debts are tied to the property and that all legalities are in order.
Now is also the perfect time for a house survey to identify any potential defects.
Step 7: Mortgage and Deposit
If taking out a mortgage, finalize it now.
Sign the preliminary contract, known as “Contrato Privado de Compraventa”, and pay the standard 10% deposit within the typically given 10 days.
Step 8: Signing and Closing the Sale
Both buyer and seller sign the “Escritura de compraventa” to finalize the purchase.
You’ll now cover the balance of the property price and any remaining fees. Your lawyer will assist in registering the sale at the Notaria Publica.
Step 9: Register Your Property
Lastly, to put the cherry on top, ensure you register your newly bought property in the local registry. Congratulations, you’re now the proud owner of a Spanish property!
Remember, while this guide offers a roadmap, every property and deal may have its unique twists. Always rely on local experts, be it lawyers, notaries, or estate agents, to guide you in this exhilarating journey. Happy house hunting in Spain!
Finding and Choosing Property in Spain
Let’s elaborate on Step 1, Step 3, and Step 4 from the previous section. How do you set to find property alternatives and finally make a decision to proceed with one? Here:#1: Define Your Property Goals
Before you dive into your property search in Spain, determine your goals. Are you looking for a live-in property or an investment? Knowing your intentions can significantly narrow down your options and save time. Live-in Property: If you’re planning to reside or retire in Spain, prioritize your personal needs and comforts. Investment Property: Aim for locations with high rental yield and properties that accumulate value over time. Although short term rentals are regulated in certain areas of Spain, they can still make a profitable asset class, especially in touristic Spanish destinations.#2: Begin Your Search
You have multiple avenues to kick off your property hunt:Online Real Estate Portals in Spain:
Online real estate portals are great starting points. They allow you to filter properties based on location, price, and other preferences. As you can imagine, there is a bunch of spam within these portals too, but it will give you an idea. Here are some of the more popular ones:- Idealista,
- Servihabitat,
- thinkSPAIN, and
- Fotocasa
Estate Agents in Spain:
While these agents predominantly represent the seller, they can offer insights about the regional market. However, be cautious about fees, which typically range between 2.5 and 3% of the property price.Buying Agents / Professional Property Finders in Spain:
If you’re unfamiliar with the Spanish property market, a buying agent can guide you. They’ll match properties based on your preferences, ensuring you only visit those aligned with your requirements. However, their services come at a cost. Make sure you understand the fee structure and what’s included.Direct From Seller or Word of Mouth:
Sometimes, the best deals come directly from sellers or through local referrals. Keep an ear out for opportunities in neighborhoods of interest.#3: Visit and Vet
While online platforms offer convenience, nothing substitutes a physical visit to the property. Consider spending some time in Spain to:- View potential properties.
- Engage with locals for first-hand insights.
- Feel out various neighborhoods.
#4: Analyze Property Conditions
Especially for older properties, it’s crucial to evaluate construction standards. While new constructions often meet international benchmarks: Homes older than 15 years might harbor hidden, costly issues. To ensure you’re making a sound investment, consider hiring a surveyor. They can identify any structural problems before purchase.#5: Make an Offer
Once you’ve zeroed in on a property: Negotiate the price. While it’s common to start below the asking price, avoid lowballing so much that it offends the seller. If you reach a verbal agreement on price, get it in writing to protect both parties. Employ the services of a notary. This ensures the legality and authenticity of the transaction.#6: Stay Cautious and Independent
Throughout the process: Be wary of Spanish estate agents requesting upfront payments or recommending shortcuts. Remember, you’re not bound to use services suggested by the agent. You have the autonomy to choose your notary, mortgage provider, and other essential services.
Where To Buy Property in Spain
Spain offers a plethora of options for property seekers. From metropolitans to coastal towns, the choices can be overwhelming. Here’s a concise guide to help you navigate through your options.
First, determine your property goals. Are you hunting for an investment, a place to work, retire, or just a vacation spot? Align your objectives with your property search. It will save time and keep you focused.
Then explore key cities and regions. Here’s a snapshot of the top cities to consider:
Madrid
The heart of Spain, and one of Europe’s largest cities, Madrid holds rich cultural experiences with a wide range of housing choices. Upscale Salamanca is popular amongst professionals. Family-oriented buyers can consider Retiro, while those seeking luxury combined with tranquility might like Pozuelo.
Barcelona
This enchanting city offers historical beauty against the backdrop of the sea and mountains. Though housing here can be pricey, areas like Sarria and Tres Torres offer family-friendly atmospheres, whereas Vila Olimpica is the hub of nightlife.
Alicante
Perfect for sun-seekers and retirees, Alicante promises great weather and a rich expat community. Benidorm and Rojales are the popular choices.
Seville
The romantic city, famous for its tapas, offers lower property prices than Madrid and Barcelona. Its smaller size means you’re never too far from the city center.
Malaga & Mallorca
While Malaga is not elaborated upon in the resources, Mallorca stands out for its alluring coastline, luxury properties, and splendid weather, making it an investor’s delight.
Valencia
This thriving city, in addition to being Spain’s third-largest, has risen in prominence in the real estate sector. Valencia’s urban charm, coupled with its appeal as an investment hotspot, makes it worth your consideration.
Spanish Property Market and Property Prices
Spain’s house price index was 3.70% in June of 2023, according to Eurostat. Based on the data from the National Statistics Institute (INE), the number of mortgage loans granted in July 2023 in Spain was 18.6% fewer than in the same month last year.
The cost of purchasing a home in Spain has risen by 7% in the last year, according to Idalista. Prices have reached extraordinarily high levels in some very dynamic areas, such as Madrid or Barcelona, forcing price increases to be more modest and closer to inflation.
Prices grew by 15% in Alicante and Palma but remained at 14% in Valencia and 13% in Malaga in 2023. Idalista foresees that price pressures will continue to climb in the most dynamic markets in 2024 as there’s an active demand, an increasing number of families, and a declining supply.
According to the latest EY European Bank Lending Economic Forecast, mortgage lending in the eurozone is likely to expand at a decade-low in 2023 and 2024 due to high borrowing rates, weak economic growth, and weakening housing market sentiment. Mortgage loan growth is predicted to be 2.4% in 2024.
Cheapest Cities to Buy Property in Spain
For those considering a property investment in Spain without breaking the bank, the country offers numerous affordable towns. Based on data from idealista, numerous Spanish towns feature homes costing less than €500 per square metre, with top provinces for affordability being Murcia, Valencia, and Alicante. To put this into perspective, UK prices in 2021 hovered above £800 per square metre.
Three towns that stand out for their affordability in 2023 are:
Bullas, Murcia: Famous for its wine and breathtaking natural spots like the Bullas waterfall, property prices here average €462 per square metre. Within proximity are cities like Murcia, Alicante, and Cartagena, offering the best of both rural and urban worlds.
Alcaudete de la Jara, Toledo: The cheapest town to purchase property, homes average at €349 per square metre. It boasts a rich authenticity while being a short drive from Spain’s vibrant cities like Madrid and Toledo.
Fuente Obejuna, Córdoba: Known as the ‘modernist jewel of Córdoba’, it offers properties at an average of €352 per square metre. Its proximity to the historical city of Córdoba and the unique modernist palace are added attractions.
Budget-friendly opportunities aren’t limited to these towns. Regions such as Andalusia, Castile-La Mancha, and others consistently offer properties at a fraction of the price seen in hotspots like Madrid or Barcelona. Happy hunting!
Cost of Buying Property in Spain
Purchasing a property in Spain comes with some associated costs. We’ll break down the main expenses you should be aware of:
Property Tax and VAT in Spain
Existing Properties: A property transfer tax ranging between 6–10% is applicable.
New Properties: Instead of the property transfer tax, you’ll pay a VAT (known as IVA in Spain) at a rate of 10%.
Notary and Registration Costs
Notary Costs: These vary between 0.1% to 0.4% of the property price. However, if you’re taking out a mortgage, you’d pay between 0.1% (for larger mortgages) and 0.4% (for smaller ones) of the mortgage value.
Title Deed Tax and Land Registration Fee: These combined costs range from 1% to 2.5% of the property price.
Legal Fees
Expect to pay around 1-2% (inclusive of VAT) of the property’s sale price for legal services. This is important as there are no fixed fees for lawyers in Spain.
Mortgage Costs
Property Valuation Fee: The mortgage provider usually charges around 500€ for property valuation.
Mortgage Fee: Typically around 1% of the mortgage value.
Land Registry Inscription Fees: These fees are usually between 0.1% to 0.3% of the property’s declared price.
Estate Agency Fees
This is generally the seller’s responsibility and is approximately 3% of the sale price.
It’s worth noting that while some fees are set by regional or national standards, others like legal or estate agency fees can be negotiable. Always make sure to clarify all charges upfront and, where possible, try to negotiate a better deal. Making an informed purchase will not only save you money but will also ensure a smoother transition into your new Spanish home.
Financing a Property Purchase in Spain
Understanding the financial aspects of a property purchase in Spain is key. Here’s a clear and concise guide to help you navigate the world of Spanish property financing:
Obtaining a Mortgage:
While some foreign buyers prefer to purchase without a mortgage, many turn to Spanish and international banks for financing. Some of these institutions even have special deals tailored for expats from specific countries.
As a non-resident, be prepared to face different terms than local buyers. While Spanish residents can borrow up to 80% of a property’s assessed value, overseas buyers may be limited to 60–70%, depending on the mortgage.
Mortgage Agreement:
It’s pivotal to know that Spanish mortgage lenders typically finalize agreements only after you have secured a property. To safeguard your interests, ensure your property purchase contract has a clause allowing you to withdraw if you can’t secure the mortgage.
Navigating Property Debt:
Spain has a unique law where any debt associated with a property gets passed on to the new owner upon sale. This has unfortunately led to many foreign buyers unknowingly inheriting significant debts. To avoid such pitfalls, always ensure the property you’re interested in is free from debts. Should there be any outstanding amounts, ensure they’re clearly addressed in your purchase contract to avoid unexpected financial burdens.
Moving into Your Spanish Property
Congratulations on your purchase. The next chapter involves moving in and settling down. Here’s a straightforward guide on what to expect and how to go about it.
Insurance:
Building Insurance: Essential for peace of mind, building insurance safeguards your property against unforeseen calamities like natural disasters and fires. It’s often mandatory if you have a mortgage.
Contents Insurance: Though not legally required, consider contents insurance as an extra safety net, especially if you plan to rent out your space or are frequently away. It covers the possessions within your home.
Utilities and Telecommunications:
- Taking Over Existing Utilities: Sometimes, the previous owner might have had utility policies which you can simply continue. It’s a time-saver and worth checking.
- Comparison and Setup: For utilities like gas, electricity, and water, take a little time to compare providers to find the best deal for your needs.
- Waste Disposal: Managed municipally, remember to account for the annual rubbish collection fee.
- Professional Assistance: For certain setup tasks, hiring a professional can make the process smoother. Platforms like TaskRabbit can connect you with local experts, but ensure they have the necessary qualifications for specialized jobs like electrical or plumbing tasks.
Property Surveys:
- The Value of a Survey: Buying property without a survey is risky. A survey ensures you’re not hit with unexpected and expensive issues later on.
- Valuation Report: This preliminary survey gives you an independent perspective on the property’s market value.
- Building Survey: Delving deeper, a building survey assesses the property’s structural soundness and any potential concerns. Though pricier than a valuation report, its thoroughness makes it a wise investment.
Moving into your Spanish property is more than just relocating—it’s about ensuring the safety, functionality, and value of your new home. Approach each step methodically, and soon, you’ll be sipping sangria on your Spanish terrace without a care in the world.
Pitfalls of Buying Property in Spain
Here’s what to be wary of and how to sidestep potential issues.
- Too Good to Be True Deals: If a property seems undervalued, approach with caution. Unrealistic deals can mask deeper problems.
- Unregistered Realtors: Ensure your chosen realtor is registered with recognized bodies, like the API association of Spanish realtors.
- Misleading Off-Plan Sales: There have been instances of properties being sold off-plan that never see completion.
- Illegally Built Homes: Some homes, built without proper permissions, are often sold to unsuspecting foreign buyers.
- Subpar Construction: A property’s exterior might conceal poor construction quality, leading to unexpected repairs later on.
How to Avoid the Pitfalls
- Local Recommendations: Lean on local knowledge. Seek recommendations for property lawyers familiar with the nuances of the market and experienced in assisting foreign clients.
- Due Diligence: Never skip this step. Ensure thorough checks on the property, especially about any potential debts.
- Surveys: Engage a professional to assess the construction quality of the property. This is essential to prevent unforeseen repair costs.
- Credentials Check: Confirm the credentials of every professional involved – from lawyers to real estate agents.
- Land Registry Inquiry: Access the land registry, Registro de la Propriedad, to ensure all is in order with the property. Whether via email, phone, fax, or in-person, this office can offer vital insights. For ease, you can also delegate this task to a trusted attorney.
Buying Land to Build a New Property in Spain
While many opt for ready-made homes, a growing trend involves acquiring land to build a unique dream property, especially in coveted regions like Costa del Sol and the Canary Islands. However, this path, while promising, can be strewn with pitfalls. Here’s what to know and how to navigate the journey of buying and building on Spanish land.
Land Registry Checks: The Registro de la Propiedad is your primary source for verifying land legitimacy. You can reach out through email, phone, fax, or in-person. For non-Spanish speakers, it may be beneficial to have a Spanish associate or attorney assist, as the national website, www.registradores.org, is exclusively in Spanish.
Planning Permission: Ascertain that proper planning permissions are in place before initiating construction. This will prevent the painful scenario of seeing your new property demolished.
Understanding Land Prices:
The cost of land is not consistent across Spain, influenced by factors like location and the seller’s disposition. Traditionally, there’s always some wiggle room for price negotiation in Spain. To give you a ballpark:
Andalucia: €171/m²
Catalunya: €184/m²
Castilla y Leon: €66/m²
The Canary Islands: €245/m²
Madrid: €338/m²
Valencia: €158/m²
Buying a New-Built Home in Spain
One path many opt for is diving into the world of new-built homes—properties fresh from the blueprint. However, before embarking on this journey, act with prudence.
The allure of a brand-new property can sometimes cloud judgment, leading to unfortunate encounters. Spain, like many international property markets, has seen its share of scams related to unbuilt or unfinished homes. While instances of outright deceit are rare, a cautious approach can spare many future headaches.
Essential Steps When Purchasing a New-Built Home
- Verify the Company’s Legitimacy: Before anything else, ensure that the company you’re dealing with exists beyond a mere website or pamphlet. Their projects should be duly registered with the land registry.
- Seek Planning Permissions: A visit to the local city hall can confirm if the project has the green light. Any hesitation or ambiguity here is a red flag.
- Clear Contracts: Never append your signature to documents that baffle you. In the realm of real estate, understanding every clause is paramount.
- Lost in Translation? Get Help: If Spanish isn’t your first language, employ an independent translator. Their role isn’t just linguistic; they can also spot discrepancies or unusual terms in the contract.
- Trace Your Money: Should you advance any sums, like deposits, insist on evidence showcasing its appropriate usage. Transparency is a right, not a luxury.
- Guarantee a Safety Net: Secure documentation that entitles you to a full refund if, for any reason, the property remains a dream rather than a reality.
Selling a Property in Spain
The main fiscal cost faced by property sellers in Spain is the Capital Gains Tax (CGT). This tax is levied on the profit reaped from the sale, and while its tiered structure may seem intricate, a grasp of its essentials can make your selling journey smoother.
Capital Gains Tax (CGT) Breakdown
Up to €6,000: The bite of CGT is relatively gentle at 19%.
Between €6,000 to €50,000: As your gains increase, so does the tax rate, inching up to 21%.
Above €50,000: For profits in this range, a 23% tax awaits.
Example: Suppose you splurged €300,000 on a Spanish villa. Years down the line, you strike a deal and sell it for €450,000. Your profit, €150,000, would be subjected to the tiered CGT, landing you with a tax bill of €33,260.
Reductions on Capital Gains Tax
Capital Gains Tax (CGT) exemptions can be possible in the below scenarios:
- If you are purchasing another property in Spain.
- If you are aged over 65 and residing over three years in the property.
If not in these situations, CGT applies, regardless of residence status or duration of stay. This encompasses non-residents too.
Useful Resources
Buying Property in Spain as an American
Yes, Americans can buy property in Spain. The first step? Secure an NIE (Numero de Identidad de Extranjero). It’s a ‘foreigner’s identity number’, and it’s crucial.
How to Get a NIE
From the US: Visit a Spanish embassy or consulate in major US cities like LA, NYC, or Miami.
In Spain:
- Schedule an appointment at the closest immigration office.
- Complete the EX-15 form and the Modelo 790 Código 012 form. The latter has a fee of around €12.
- Attend your appointment with the filled forms, your US passport, two passport photos, and a reason letter for the NIE (like buying a Spanish property).
Within three weeks, you’ll be notified to collect your NIE from the immigration office.
Tip: Open a Spanish bank account post-NIE. Using American banks for the property purchase can cause delays or refusals. Alternatively, a local lawyer can handle the NIE and banking for you.
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Frequently Asked Questions
What’s the property market like in Spain?
Spain's property market has seen significant fluctuations. Prior to the global financial crisis, housing prices soared, but by the third quarter of 2015, they dropped by nearly 40%. Recently, the market is bouncing back with a 2.6% rise in 2021, and this upward trend seems promising.
Can Americans buy property in Spain?
Yes, absolutely, Americans can buy property in Spain. Spain has no special restrictions for Americans or other foreigners looking to invest in property.
Can expats buy property in Spain?
Yes, expats can buy property in Spain. Expats need a financial number (NIF or NIE), acquired at a police station with a passport. Spain’s Golden Visa program also offers residency for property investments over €500,000, especially appealing to non-EU investors.
Is It a Good Time to Buy Property in Spain?
With an upturn in the property market and Spain's continuous allure for foreign buyers, now seems a promising time for investment.
Should I Buy or Rent Property?
Owning a property in Spain is often seen as a worthwhile investment, whether for personal use or renting out.
What is the property transfer tax when buying property in Spain?
The tax ranges between 6-10%.
Is buying a home in Spain a good idea?
Investing in property in Spain can generally be seen as a low-risk investment option. Your investment would move in line with the overall real estate market, which is rather conservative.
Can foreigners get a mortgage in Spain?
Yes, foreigners can get a mortgage in Spain, though the rates might be slightly higher for non-residents. Comparing offers from multiple lenders is recommended.
What are some of the best places to buy property for sale in Spain?
Choices for the best places to buy real estate in Spain may vary by preference. Madrid offers urban life, Barcelona merges relaxation with city vibes, and Mallorca and Alicante are perfect for beach enthusiasts.
Is it easy to find homes for sale in Spain?
Indeed, it is easy to find homes for sale in Spain. Local agencies, international brokers, and platforms like Thinkspain and Idealista make the search straightforward.
How long does it take to buy a property in Spain?
The process takes 3-4 weeks for straightforward sales, but complex situations involving mortgages, architect certificates, or inheritance issues might extend it to eight weeks or more.
What are the legal requirements of buying a property in Spain?
A notary is vital for property transfers, but buyers should also have a property lawyer to ensure due diligence. It's crucial to verify legal ownership and any potential debts tied to the property, as they transfer with ownership.