Are you considering buying a Spanish property?
We are here to help you avoid making costly mistakes.
As a Spanish Conveyancing Solicitor, I often wonder what it is about Spain that everyone loves…the sun? The sea? The food? The wine? But, before you buy a property there are some important facts you will need to know.
The simple fact is that Spain is such a wonderful place to have a holiday home and retire that people sometimes rush into buying a property without really knowing what they are doing… the perfect climate, friendly host culture, first-class communications, beautiful scenery, beaches and mountains, great food, a buzzing nightlife, fascinating history and culture and so on can make people a little impulsive.
What are house prices in Spain?
Despite the impact that the Brexit vote has had on the value of the pound, property sales in Spain have actually increased by nearly 20% in the past year, according to figures released by the Institute of Statistics(INE). This demonstrates that the popularity and draw of Spain have remained very strong.
Houses prices in Spain have been steadily recovering since the 2008 financial crisis. On average property prices fell by 30% between 20-08 and 2014, but are on the increase once again, making Spanish property a wonderful investment. And despite the rising prices, it is still very good value for money when compared to buying property in the UK.
Catalan has been in the news recently with stories of their political unrest and the uncertainty surrounding the divisions over independence. Whilst this has caused the local market to remain quiet here, it has mostly affected the commercial sector and residential property prices are still great value for those looking for a bargain. Barcelona will always be one of Europe´s most desirable cities in the world.
Can I still retire to Spain?
Of the current 300,000 plus Brits residing in Spain, one- third of them have retired to Spain as the cost of living in Spain is on average 22% cheaper than in the UK, and the rents in Spain are on average 49% cheaper.
Foreign purchases made up a surprising 19.4% of all Spanish property transactions in the first half of 2017. Whilst most of these are from EU countries, many are from outside the EU including buyers from Morocco, Russia and China. So, even if Britain does leave the EU there is nothing to fear about buying a property in Spain.
Will Brexit affect me if I purchase a house in Spain?
The Spanish Foreign minister, Josep Borrell, was keen to reassure us that following Brexit, all British expats living in Spain would have their residency protected, even if the UK leaves with ´no deal ´.
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British buyers usually find the purchase process to be relatively uncomplicated, as there is no requirement to be a Spanish resident to buy a property. The country actively encourages investment in the property market from outside the country, with a Spanish NIE (tax identification number) being the main legal requirement.
However, uncertainty about the final Brexit agreement is causing some Britain’s to delay their property purchase until it becomes clear exactly what deal will be made. Although it’s unlikely that the current situations around mortgage lending or property rights are set to change, there are questions marks about future healthcare provisions and pension.
So, when do you start searching for a property and what are the first steps?
Firstly, find a good real estate agency
Choosing a reputable property agent can help buyers to reduce the risk they face during the homebuying process. Many homes built in recent years do not have the appropriate planning permission – a knowledgeable agent will be able to identify and avoid these properties.
In Spain, there is no law regulating Real State Agents and so anyone can act as an intermediary in property sales. This means it is difficult to hold an estate agent responsible when a purchase goes wrong. It is also not unusual to find that some agents have either no insurance at all or the minimum amount required by the official Spanish agent´s association.
So, make sure that someone you trust refers you to an agent.
How to find a good and honest Spanish Conveyancing Solicitor?
It is not a good idea to let your Real State Agency introduce a lawyer. Most have Lawyers that work on the Real State Agency’s behalf. SO it is better to find someone who is totally independent. A Spanish Conveyancing Solicitor who will only take great care of your own interest.
You could always ask for advice from people you know. Ask around until you find some satisfied clients. Consulates also maintain a list of lawyers who speak the language of their nationality. Lawyer’s fees will be around one per cent of the value of the transactions unless there are some unusual compilations. You should settle the charges with your lawyer before you start purchase proceeding.
Before signing anything ……
Even a small reservation deposit agreement, there is information regarding the property you should be aware of:
- The seller’s Deed, which is ESCRITURA PUBLICA, and a report from the Land Registration office called NOTA SIMPLE. Those documents will inform you about who is the owner of the property and also if there is charges or embargos on the property.
- Before purchasing the property you need to make sure that the vendor has paid the COUNCIL TAX ( called IBI).
- Apply for a CATASTRAL CERTIFICATE, which will provide you with the exact boundaries and square metres of area.
- Make sure that the seller has paid all Community of Property Owners and utility bills before the property is transferred to you.
- We would also recommend getting the latest Statutes of the Community and the minutes of the last AGM.
What is the minimum amount of checking I should do before going ahead and purchasing a property?
- The credentials of any potential lawyers or estate agents used.
- The land registry (Registro de la Propriedad)
- That the property is as it was originally described and structurally strong.
- There are no outstanding debts, such as a mortgage, attached to the property.
- The appropriate planning permission has been obtained.
Where are some of the worst property scams in Spain?
Some of the worst property scams in Spain, as with anywhere else, have involved buying properties before completion, often before the project itself was even begun.
While it’s rare for the intent to be malicious, it is important to think about these things before you purchase property in a development that does not exist. At the bare minimum you should:
- Check that the property is registered within the land registry.
- Ensure that the development company is authentic and officially registered, you can do this by going to registradores.org (Spanish only).
- Suggest proof that any sums of money being paid are either being held or spent appropriately.
- Check that the planning permission has been granted by enquiring at the local city hall.
- Never sign a contract that you do not understand.
- If you need anything translated, have it done by an independent third party.
- Receive concrete evidence that you will be fully refunded should the property not be built/completed.
If you are a non-resident, you can buy land and have a property built yourself, however, it is even more important to get good legal advice/assistance as you will want to make sure that everything you are getting involved with is appropriate and as tight as possible.
Fees and Charges:
Costs are primarily paid by the buyer/purchaser of the property, however, this can vary depending on the region in which the property is situated. Many however are negotiable, there are no fixed fees for lawyers or estate agents.
Costs that are usually paid by the buyer are:
- Legal fees 1-2% (including VAT)
- Property transfer tax 6-10% (existing properties) / VAT (or IVA) at 10% (new properties)
- Notary costs, title deed tax and land registration fee 1-2.5%
On the other hand, there are fees for estate agents. The costs are usually paid for by the seller of the property, this tends to be the only cost for them. Also, estate agents typically charge a percentage price, usually around 3% of the final sale price.
Debts Transfer With Property
In Spain, any debt or mortgage tied to a certain property is transferred to the new once it is sold. Therefore, it is incredibly important to ensure that there are no outstanding debts attached to the sold property, or if there are any, then they must be covered by the terms of the contract. These debts may include things like:
- Payments due to a tenant’s associations.
- Property tax (impuesto sobre bienes inmuebles)
- A mortgage
Residents typically tend to borrow up to 80% of the property’s assessed value whereas non-residents are usually limited to only 60-70% LTV (Loan To Value) depending on the type of the mortgage at hand.
Thankfully, however, it may be possible to borrow significantly more of the property’s value – up to 100% in some cases – if you are purchasing a bank’s reposed property in Spain.
In many cases, the bank assessor’s valuation of the property may determine the mortgage you get, instead of the price that you are paying for it.
If you are looking to find out the real property market value of your property, it’s best to look at three valuation properties that could provide you with an accurate estimation of the property market place. However, if you are looking for to get this valuation, it could cost up to 350 Euros.
The bank should pay for its own valuation, as it has been now confirmed by the Supreme Court.
Mortgage rates (updated March 2019)
Most Spanish mortgages are variable rates linked to the yearly Euribor (European inter-bank offered rate) plus a margin.
For example, at the beginning of 2019; the Euribor sat at -0.37% and variable-rate mortgage rates ranging from 1.8-3%.
Alternatively, there are many lenders who offer fixed-rate mortgages depending on the term of the loan.
Cost of getting a Spanish mortgage – How much is the cost of the Spanish mortgage?
If you are considering using a Spanish mortgage lender, you should give yourself up to 10-15% of the total purchase amount for a variety of different transaction costs.
Typical closing costs include transfer and stamp taxes, a notary fee and registry fee, a bank assessor’s fee and the bank’s arrangement fee and opening fee.
Property transfers in Spain are typically done through public deeds of purchase, these must be certified by a notary. The sale is not actually made official until the notario signs using his firma protocolizada, for which fees apply. As soon as the notary certifies that all the documents are correct and in order, the deed is deemed ready for taxes.
Taxes on Spanish property purchases – EXPLICAR GASTOS Y EXPENSES.
Residential properties are subject to many different Spanish taxes, which are all paid by the buyer of the property. Transfer tax is usually up to 10% of the purchase price, depending on the location of the property.
The stamp tax can also vary due to location and this can range between 0.5-1.5% of the purchase price. Sometimes the buyer can pay the seller’s plus villa tax, this will vary based on the tenure of the seller in that specific transferred property.
The mortgage closing costs can typically include these fees, however, these costs may need to be paid directly to one or more taxing authorities.
How To Apply For Spanish Mortgages
Bigger Spanish banks tend to offer mortgages to non-residents, this is because it is considered less of a risk.
When you are applying for a mortgage for a property in Spain, the best advice is to get ahead of the curb by starting early and shopping around. The official mortgage process can only start after reaching a sales agreement, it is advisable to start developing your mortgage while you are beginning your journey on the Spanish property ladder.
For non-residents, all of these different elements can be very confusing which is why there are many financial products available. The terms of any specific product may result in placing limits on which properties you can qualify to purchase.
Documents To Apply For A Spanish Mortgage
Whether you go through a Spanish mortgage lender or an international one, you will need the following items:
- Records of your current assets
- Details of your current debts and mortgages
- Copies of all your existing property deeds (in Spain and elsewhere)
- NIE number
- A pre-agreement with the seller
- Proof of employment or income
- Any prenuptial agreements (if applicable)
Once you submit your completed file to the bank and it has all been processed thoroughly, the bank will make you an offer for your mortgage. However it is important to remember that this can often be competitive, so don’t be afraid to look at other offers, especially if they are offering good offers too.
Extra costs of applying for a mortgage
While it is not necessary to pay in order to get a mortgage offer, advice or a consultation, you may need to get a property appraisal, a local attorney or a Spanish translator to help you along the way.
These can assist you with making the process as simple and clear as possible, they won’t allow you to be persuaded or misled into paying for more than you bargained for and they won’t allow you to be taken advantage of.
For more information or to speak a lawyer please complete the form attached to this page or call us.