Dreaming of a settling in a villa on the Costa del Sol or a sleek apartment in Barcelona’s Ramblas? Our guide to buying property in Spain explains how to make those dreams come true, from the legal requirements to the pitfalls to avoid.
The Spanish property market has many quirks, and it pays to do your research before buying a home in Spain. Knowing what to expect when buying property in Spain can help avoid any pitfalls of setting up your life abroad. Factors to be aware of when buying Spanish property include property scams, high capital gains tax, and fluctuations in the Spanish property market.
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The Spanish property market
Spain suffered during the global financial crisis and ensuing property market crash. House prices dropped by as much as 30%. Nearly a decade on, there are signs that the recovery is finally underway, with indices showing year-on-year price increases in major cities and resorts, and an overall national rise of 4% in 2017.
Transaction numbers are increasing too, with data from the National Institute of Statistics showing sales increased by 16% in 2017.
Home ownership levels are high in Spain, with around 80% of residents owning their own home, and many doing so outright, without a mortgage.
Should you rent or buy in Spain?
Rental opportunities can be limited in some parts of Spain. One estate agency claims that rent prices in Spanish cities increased by as much as 15% in a year. This is partially due to the popularity of short-term holiday lets.
Now, some authorities in Spain are already seeking to curb this trend, with Madrid set to bring in new rules in 2019 to regulate the holiday let sector.
For those buying or selling in Spain, transaction costs are moderate, at around 10-15% of the property value.
For those considering a shorter stay, renting could be a more suitable option if you factor in Spain’s high levels of capital gains tax, which could offset any benefits of buying in the short-term.
You can find more information on rental properties in Expatica’s guide to renting in Spain.
Can foreigners buy property in Spain?
Yes. There are no restrictions on buying property in Spain, whether it’s commercial, residential or land. In fact, Spain encourages investment by foreigners, both resident and non-resident.
You will require a financial number which can acquire by visiting a police station with your passport. This typically happens on the day for Spanish or EU citizens but may take a few weeks for others.
Buy a property, get a visa
Spain currently offers a ‘golden visa’ program for property owners.
This is a form of investor’s visa. If you invest more than €500,000 in Spanish property, buying one or more properties, you will normally then be automatically eligible for a residency visa. This is not a work permit, but it will allow you to live in the country. It’s primarily for retirees and holiday home buyers.
Buying a home in Spain: where to find real estate
As it is easy for foreigners to buy property in Spain, there are websites and estate agents catering to almost every language and nationality.
Many British real estate websites also list Spanish properties, with some online portals listing thousands of options. However, these mostly focus on holiday homes, so you may prefer to use a Spanish site, such as the ones listed below.
As you don’t need to be resident to purchase a property, it is possible to buy a home before you arrive and move in directly. However, this naturally comes with certain risks and we strongly recommend that you view the property you are considering and don’t cut corners on the process, even if this means spending some weeks in a hotel when you arrive.
Online property portals
Advantages and disadvantages of using an estate agent
As estate agents are typically paid by the seller, there’s a strong advantage to using them for buyers.
Estate agents provide a wealth of information about the region, are bilingual, and often deal with overseas buyers. However, regulation is relatively low and unscrupulous estate agents do exist, so be wary of anyone who asks for payments upfront or suggests cutting corners.
Always remember that you can choose your own notary, mortgage provider and so forth – you do not need to use a service suggested by the estate agent.
For a long time, Spain has been popular with overseas buyers looking for holiday homes.
On occasion, the large numbers of inexperienced foreign buyers have provided an opportunity for unscrupulous developers and estate agents to sell properties that are not legitimate.
In some cases, planning permission has not been acquired before building, and properties are eventually torn down by the local government. In others, the quality of the property has not been up to scratch or as indicated, resulting in costly repairs.
The British Foreign Office has issued notices warning expat buyers to be cautious and not take unnecessary risks. They recommend, at minimum checking:
- The credentials of any lawyers or estate agents used;
- the land registry (Registro de la Propriedad);
- that appropriate planning permission has been obtained;
- that there are no outstanding debts attached to the property, such as a mortgage;
- that the property is as described and structurally sound (either a surveyor or an architect can do this).
Most of this information can be provided by the land registry and accessed by making a request by email, phone, fax or in person. You can find the appropriate land registry office by vising the national website: www.registradores.org (Spanish only).
Buying off plan or a new-build home
The worst property scams in Spain, as elsewhere, involve unfinished or unbuilt properties.
While malicious intent is rare, caution is advisable when buying a property which does not yet exist. At minimum you should:
- Check the company exists; check online at www.registradores.org (Spanish only).
- Ensure that the project is registered with the land registry.
- Check that planning permission has been granted by enquiring at the local city hall.
- Not sign a contract you don’t understand.
- Enlist an independent party for any translations.
- Demand proof that any sums paid (e.g., a deposit) are being held or spent appropriately.
- Get proof that you’ll get a refund of your money if the property is not built.
As a non-resident, you may also buy land and have a property built yourself. In this case, good legal advice is even more important as you will need to ensure that contracts with builders are appropriate and watertight.
Debts transfer with property
In Spain, any mortgage or debt tied to a property is transferred to the new owner when the property is sold. It’s thus critically important to ensure that there are no debts attached to the property when it is sold, or that if there are, they are covered by the terms of the contract. Debts may include:
- A mortgage;
- payments due to a tenant’s associations;
- property tax (impuesto sobre bienes inmuebles).
Buying a Spanish property
The process of buying a property in Spain usually runs as follows. First, the buyer makes an offer, usually through the seller’s estate agent. If this is accepted, then the buyer and seller sign a preliminary contract (contrato privado de compravento) and the buyer pays a deposit, typically 10% of the purchase price.
The buyer then arranges any mortgage they require, although they should have already discussed their needs with the mortgage provider. The contract of sale (escritura de compravento) is usually signed in front of a notary, at which point the full sale price, taxes and other costs become due.
The services of a notary are not legally necessary to complete the sale. But it is advisable and required by many mortgages.
The seller is responsible for hidden defects in the property, even if they are not aware of them. However, in practice gaining restitution for such defects can be difficult and costly.
Paying the costs and taxes associated with buying a home can be completed by the buyer or their agent. It is the buyer’s responsibility, however, to ensure taxes are paid.
The buyer is also responsible for registering the property. The notary may provide this service for a fee, and/or may notify the registry office that the sale has taken place, without completing full registration.
Funding purchase: deposits and mortgages
Following the 2008 crash, Spanish banks were reformed with significant IMF involvement. This reduced the number of lenders in operation, and significantly increased the regulation and oversight of the industry. As a result, many banks began to lend less and mortgage rates and terms became less favourable.
Mortgage lenders will not complete on a mortgage agreement until you own a property. For this reason, it’s important to include a clause in the contract allowing you to exit the agreement if you cannot acquire a mortgage.
Fees and charges
The buyer usually pays the fees. They vary from region to region. Many are negotiable – there are no fixed fees for lawyers or estate agents. Costs paid by the buyer include:
- 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%;
- Legal fees 1–2% (including VAT).
The seller usually pays the estate agent’s fees. This is typically their only cost. Estate agents usually charge a percentage, typically around 3% of the final sale price.
Capital gains tax
Capital gains tax is paid on the profit of selling your home, i.e. the difference between the listed purchase price and the listed sale price, and the level in Spain currently varies between 19% and 23%.
- First €6,000 – 19%
- €6,000 – €50,000 – 21%
- €50,000+ – 23%
Thus if you pay €200,000 for a property and sell it for €350,000 you will pay capital gains tax on €150,000. Due to the tiered system this would add up to €33,260 euros.
You may be able to claim a reduction on the capital gains tax to account for inflation; or if you are purchasing another property in Spain; or if you are over 65 and have lived in the property as your main residence for more than three years.
Otherwise, unlike in other countries, capital gains tax applies no matter how long you’ve lived in the property. Your residential status does not affect the application of capital gains tax either, as capital gains tax should be paid in Spain for property owned in Spain even if you are no longer a resident.
Choosing a reliable lawyer
Any lawyer practising in Spain should be registered with the local bar association (Colegio de Abogados).
They will have a registration number that you can ask for and then verify with the bar association. Naturally, registration does not guarantee honesty or competence, but it is a good minimum standard to insist on.
You can find a list of all the bar associations at the national website for Spanish lawyers, Abogacía Española.
Finding a translator
Many governments provide lists of lawyers and translators who speak both Spanish and another language. The British Embassy’s list of English speaking lawyers and translators is a useful resource.
The Spanish government also provides a list of accredited translators (page in Spanish, follow first link in article text for up-to-date PDF).