Property in Spain
For family fun with a bucket and spade on the beach there’s really nowhere better than the Spanish costas. If you want to sit in a bar eating little plates of delicious food, you will love it. If you fancy early retirement in warm sunshine even in January, the occasional round of golf, the grandchildren just a couple of hours flying time away, yep, this is the place.
For all its economic problems in recent years, living and buying property in Spain is easy. It’s a modern country with first class health and education services and a modern infrastructure. You can get away without speaking Spanish if you don’t want to and you will easily find a welcoming expat community in any corner of the country.
Wherever you decide on, you will probably have a good choice of property. Spain is notorious for having built far too many houses and apartments in the boom years and being unable to sell them. In truth, the backlogs have been sold in the most popular locations, but you can still buy an apartment in an established resort from €50,000 or a country home for €150,000.
Where to Buy Property in Spain
As always, location is key. For those seeking a property in more authentic Spain, there are hill-top white villages with farmers riding donkeys through them, Moorish wonders such as the Alhambra and the coolest of cities Barcelona and Madrid - and prices have already begun to rise in Marbella, hotpots in the Balearics, and the ever-popular Costa Blanca.
There are a number of property hotspots in Spain to consider right now - in fact, some of them never really cooled off, such as recession-proof Mallorca, still attracting the mega-rich and royalty, and ever fashionable Ibiza, drawing the children of the buyers who discovered it in the Sixties. You can get a two-bed apartment in Mallorca from around €150,000, although you’ll pay more in the charming city of Palma, that is reinventing itself as a more user-friendly version of Barcelona.
Of the mainland Costas, the current favourites are the Costa Blanca and Costa del Sol. The southern Costa Blanca has so many advantages for property hunters, including a plethora of golf courses near popular towns like Villamartin and Playa Flamenca, and just about the healthiest climate in Europe. Prices vary between the desirable areas and the overbuilt areas but are generally low – two bedroom apartments near the sea from €50,000 around Torrevieja.
In Cabo Roig, to take another popular resort, you might pay €90,000 for a spacious two-bed apartment with a sun terrace. Inland a little, in the village of Algorfa popular with expats, a comparable property will be nearer €70,000.
The northern Costa Blanca, less affected by development and with more building restrictions in place, draws buyers to towns including Moraira, Javea, Denia, Calpe and Benissa Costa. In upmarket Moraira, expect to pay €400,000 for a quality three-bed villa with a pool in a good location but in Benitachell you might get a four or five bedroom villa for €300,000.
Inland of these resorts, the Orba and Jalon valleys are increasing in popularity for buyers seeking a more tranquil location than the coastal resorts; and also more bang for their buck. In the Orba Valley you can get a three-bed villa with a pool for around €150,000-200,000, or a large restored finca for €450,000.
Going south to the Costa del Sol, glitzy Marbella might said to be well and truly booming, with new developments back in vogue and great demand for holiday rentals. You can get an apartment on a complex for €100,000 but a spacious apartment in a good gated community in a sought-after location would be nearer €300,000. Popular areas include Estepona, San Pedro, Nueva Andalusia, Mijas Costa and Benahavis. The Anglo-friendly resort of Benalmadena is popular with tourists and expats and you can get a two-bed apartment there for less than €100,000.
The nearby Costa Almeria, a stretch of unspoilt coastline between Murcia and Granada, is not as developed as the Costa del Sol, perhaps not as well-known by the British, yet its fans like the fact its villages retain much of their Spanish identity – it’s the “real Spain” still. Mojacar remains a popular spot, less than one hour’s drive from the airport, and a central location for getting around Almeria as well as a traditional holiday destination - ideal for families and couples in its own right. You have plenty of choice of one or two-bed apartments with a budget of €100,000; villas range from just over €200k.
How to Buy Property in Spain
Buying an overseas property is an exciting thing to do and Spain is a great place to choose. However, it is important to go about things the right way and equip yourself with as much information as possible before settling on that dream home.
One of the most valuable pieces of advice is to instruct your own independent solicitor to assist you with your purchase, just as you would when buying property in the UK. The estate agent will be a valuable source of information on properties, pricing and the surrounding area and will understand the buying process having been through it many times before, but they are acting for the vendor and you need an experienced solicitor – who understands the language as well – to act for you.
The Buying Process
Once you have found your property, the purchase process begins with a reservation agreement. This is a contract that freezes the purchase price and takes property off the market for, usually, 30 days on payment of a fee between €3,000 and €12,000. The deposit is usually held by your lawyer or your agent in a client or escrow account.
Within 10 days of signing the reservation agreement, the full private purchase contract (contrato de arras) is signed between the buyer and the seller. This is similar to exchanging contracts in the UK buying process. Within this time your lawyer should complete all the searches on the property - confirming that the seller own the property being sold, there are no mortgages or charges and that planning consents are in order.
Once both parties sign the main contract, it is binding. The arras contract or full private contract will usually require a 10 to 20 per cent deposit to be paid. The buyer is then committed to pay the balance of the price, and the seller (once the money has been paid) must transfer ownership to the buyer.If the seller pulls out of the transaction he must return double the amount of the deposit received by way of compensation. If the buyer pulls out he will lose the deposit paid.
The property sale is formally completed when the title deed (“Escritura de Compraventa”) is signed before a public official called a Public Notary, or Notario. This will happen at their office and be accompanied by the agreed final payment and all the relevant purchase taxes. The Escritura is then presented by the Notary to the Land Registry for registration and the property is passed to the new owner. Final registation of the title deed can take several months.
With a new-build property, obviously completion can take a lot longer, and the payments are split over stages of the build process, and the developer should provide bank guarantees against each payment. This protects your payments in the event the developer fails to complete the property or goes bust.
Finally, make sure that you have insurance for your property, ensure all service contracts are in your name (telephone, water, electrics etc.) and register your ownership of the property with your local Town Hall (Ayuntamiento) – all of which your lawyer or agent can help you do.
Power of Attorney
Just as in the UK, you can authorise someone (normally your lawyer) to act on your behalf with regard to your legal matters in Spain. This is often wise, as travelling to Spain to sign documents can become inconvenient or mean that you miss an essential signing date 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.
You cannot buy a property in Spain without a NIE number (Numero de Identificación de Extranjero), which is an identity/fiscal number for non-Spaniards. So, apply for this as soon as you start looking for a property.
Currently, you must apply for your NIE number in person (although the rules on this tend to change from time to time; your estate agent or lawyer, who should help you). A NIE number is obtained from the Policia Nacional, who have offices in all major towns and cities throughout Spain.
Who Does What
You can purchase Spanish property very quickly, if you are a cash buyer and you have an NIE number. Certainly, it is not unknown for the Spanish (in particular) to see a property and 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 to buy – or be rushed. Rather, you must always allow your lawyer and building surveyor ample time to do their proper investigations.
Indeed, never lose sight of the fact that it is far better to miss out on an amazing bargain than buy a defective property you’ll always live to regret.
A good estate agent will help you in your search for a property but it is important to remember that just like in the UK, they represent the seller. You need your own representation in the form of an independent lawyer that you choose.
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 coastal areas. So, finding an agent with whom you can communicate is rarely a problem. But finding a good one is key to your success.
Throughout many areas of Spain registration of an agent is not compulsory and, even in the areas in which it is obligatory, the industry is considered unreliable. Does the agent belong to a professional association such as the AIPP (aipp.org)? Under no circumstances should you ever sign any document from an agent without your lawyer present or having reviewed it first.
So what should you expect of your agent? They should be proactive, know the local market thoroughly and be prepared to spend extra time with you offering all sorts of general advice and assistance. Anyone who takes ages to get back to you on your first inquiry does not bode well for the search ahead.
Estate agency commissions vary widely across Spain but tend to be high as the agent does do a lot more for the overseas buyer than a typical UK agent. In some areas it is common for sellers to pay an agent 3% commission, whilst in others the sales commission can be as high as 7% or even 10%. Sometimes (normally on new-build developments) agents may earn as much as 18% on a sale.
Occasionally, you, as the buyer, may be asked to pay a fee to the agent who shows you a property and this is normally a percentage of the sale price (for example 3%) and is sometimes called a ‘buyer’s premium’. As such ‘premiums’ can be a lot of money, you should always carefully look at any contract between yourself and an estate agent (and get it specifically approved by your lawyer before signing it).
Once you have narrowed down the area within which you want to buy, you should find a lawyer who can act for you. This is a vitally important move, with the services of an excellent lawyer critical to the success of any purchase of a fully legal, sound, Spanish property, devoid of any potential liabilities.
When looking for a lawyer, make sure that you find one who is: fluent in English; a specialist in conveyancing; completely independent of the seller/developer and your estate agent; and fully insured to a public liability premium well above the value of your purchase (and always ask to see the policy).
Furthermore, always insist that all advice from your lawyer is put in writing, something that many Spanish lawyers are reluctant to do. This concentrates the mind of any lawyer and helps to ensure a higher standard of professionalism.
Finally, always get your lawyer to inspect any paperwork or contract before you sign it, whether it relates to a property or other services (i.e. banking, estate agent, building works etc.).
Taxes and Fees
When you're close to finalising the exchange you will need to apply for NIE (Numero de Identidad de Extranjeros) – your Spanish tax number. How this is used will be explained in the next section of our Spanish property legal guide.
The tax you pay when you buy a property in Spain will normally depend on whether you are a tax resident there or not. Tax residence is determined by a number of factors – including how long you spend in that country, if your main home is there and if your main economic interest is there. If you become a tax resident in Spain, then you would normally stop paying taxes in your home country and pay there instead.
IVA (VAT) is payable by the purchaser when the vendor is considered a developer who pays IVA and/or this is the first time the property has been sold or transferred. The VAT rate depends on the type of property being sold: it’s 10% for residential properties and 21% for plots of land and commercial premises. Stamp duty is payable at the rate of 1.2% where VAT is payable.
If the house you’re buying is a resale (second transfer) property, then you will also need to pay Transfer Tax (Impuesto sobre las Transmisiones Patrimonilaes), which is usually between 8 to 10% depending on the values of the property and the area. This will need to be paid to the Spanish Treasury within 30 days of the date the title deed is signed. You may also need to pay Plusvalia, which is a tax based on the increase in the value of the land since the last transfer, although this is not normally a huge amount.