Recommendations for buying a house in Spain
Currently, Spain is one of the countries that poses the fewest obstacles for foreign buyers looking to purchase a home. It is only necessary to fulfill the following series of requirements:
1. You need to have a NIE.
A NIE is a Foreigner Identification Number (Número de Identificación de Extranjeros) granted by the Ministry of the Interior (Ministerio del Interior). This document can be obtained either in person, through a representative in Spain, or through the Spanish embassies and consulates in the applicant’s country.
2. It’s strongly recommended to have a Spanish bank account.
While not mandatory by law, it is highly recommended that the foreign buyer have a Spanish bank account for several reasons. First, to be able to pay the taxes and other fees associated with housing, as well as utility bills (water, electricity, gas). Second, to be able to apply for a mortgage through a Spanish bank. Third, if financing is not needed, to transfer the amount of money necessary to purchase the property from the home country to Spain.
3. Maximum mortgage fee shouldn’t exceed 40% of your income.
This way if you have any bank debts you should pay, please keep it in mind.
4. Use professional real estate agent services.
Agencies showcasing their properties are used to work with international property buyers and can advise on each step of property purchase. Also some of them have lawyers in staff who can guide you throughout the process.
5. You should know what you want.
When buying a house you need to understand what you would like to get at the end. Please take some time and gather a list of requirements for your future house (like region, floor(s), garden, parking etc). This will help you a lot to cut offers that don’t match even if the image seems to be appealing.
Step-by-step process to buy a property in Spain
1. Find your dream Spanish house
Decide in which region you would like to buy a house and start your search!
2. Send an inquiry and agree on Price
Once you found a dream house (or several), send your inquiry to the agency and ask allpossible questions. Arrange a phone call or even a meeting to discuss both property and the price.
3. Arrange property viewing
Under all circumstances agree to view the property, because you should know what you are buying. If you cannot attend, you can hire an administrator and even a lawyer who can help you.
4. Verify that the house is free of fees
Request a simple note about the property from the Land Registry (Registrode la Propiedad). It usually takes about 2 weeks.
5. Verify that the property is not included into the urban plan
Check with the Office of Urban Planning (Oficina de Información Urbanística).
6. Check that ordinary charges are up to date
Water, electricity, community should be paid.
7. Sign pre-sale contract
Usually an advance is given to reserve the property during the administrativeprocess (about 10% of the final price).
8. Get a NIE
Fill in the form EX-15 downloadable from embassy site. Address Spanish embassy in your country and apply for NIE with a reason to buy a property in destination country and attach EX-15 form. Don’t forget to have your passport.
This takes about 4 weeks. You can also request an appointment with the police in Spain and make it immediately.
9. Sign the act of purchase-sale at notary
If applicable, include the amount of the advance. The total amount of the purchase is paid and the delivery of keys is done at that time
10. Get the public deed for the property at notary
Public deed is created and ratified by a notar and includes details about encumbrances, payments, last property tax receipt and distribution of expenses between parties.
Public deed is used to register the property.
11. Register property in Property Registry
It is important to register the property to protect your full ownership. In most cases it’s done by notary when all the checks are done and papers signed.
Guide to buying property in Spain as a foreigner. Spain is one of the 27 countries that make up the European Union, and one of the 19 that make up the Eurozone. With a territory covering 505,370 square kilometers, Spain is the fourth largest country on the European continent as well as one of the most mountainous, with a median altitude of 650 meters above sea level. The country is divided into the Spanish mainland, the Balearic Islands (in the Mediterranean Sea), the Canary Islands (in the Atlantic Ocean), and Ceuta and Melilla (in northern Africa). The territory is organized into a total of 17 autonomous communities, 50 provinces, two autonomous cities (Ceuta and Melilla), and contains a total population of almost 46.5 million inhabitants, according to the 2016 census.
Which area of Spain would you choose to buy a property?
To the outside world, the two most attractive features of Spain are its beaches and the amount of sun it receives each year. The country has more than 4,900 kilometers of coastline, more than 2,500 hours of sun each year, and a mild climate for most of the year. The only places in Spain to experience less than 2,000 hours of sun each year – as well as greater rainfall than the rest of the country – are the Cantabrian coast and the mountainous regions. After France and the US, Spain is the third most visited country in the world, having received 75.6 million tourists in 2016, according to data from the World Tourism Organization. Tourism constitutes an important part of the Spanish GDP (16%) as well as of the construction industry (5.6%).
Spanish real estate market
High uncertainty remains everywhere. If the Pfizer and Moderna vaccines work, how well will they work, and for how long? How many shots can be administered and how long will it take to cover the population? How badly will the economy have been damaged by the time we exit the period of lockdowns and limitations?
And for real estate investors, of course, what’s going to happen to property prices? Re-entering lockdown wasn’t in the plan back in July; now, Spain’s already under curfew and the state of emergency has been reimposed. We do have stats that show the market had, in fact, started to recover a little in July, August and September. However, they’re tricky to interpret, because of time lags and a very low level of transactions during March and April.
AEV, the Spanish real estate valuers’ association, says mortgage appraisals for the second quarter were down 45%, despite a 14.5% increase in renovation projects. Lockdown meant no one was initiating transactions – properties weren’t coming on to the market, and no one was making offers.
The market has recovered from that to some extent. For instance, CaixaBank’s economists say that total residential property transactions were up 20% in July, month-on-month. But that still represented a 26% fall in volume year-to-date. Even so, prices were still up 5.8%.
TINSA’s figures show transactions up to August. Though they do show a fall in prices, it was less than 1% year-to-date. However, the pain in Spain has been mainly on the Costas, with an average fall of 4% on the Mediterranean coast and islands since March. Major cities, on the other hand, have been far more resistant to price weakness. That’s partly due to the fact that coastal properties tend to be more driven by foreign buying – and with few people able to travel, most sales this year have been to domestic buyers.
How and where to buy property in Spain 2020?
The big picture in Spain is of a continuous upwards trend in property prices, though the market seems to have taken its foot off the throttle with more gentle price rises seen in 2019 than was the case earlier.
But the big picture can be deceptive. Spain is a very patchy market, with huge regional variations. That’s particularly the case when you look at where foreign purchasers are putting their money. Huge areas of Spain are almost untouched by foreign interest (the north, west, and middle sized cities) while foreign buyers are concentrated along the coast, in Barcelona, Comunidad Valenciana, Andalucia, and the Balearic islands. Add Madrid to that mix and you have three-quarters of all sales to foreign tourists.
Even within these areas, property transactions are heavily concentrated; a third of sales in Andalucia are in just one of its eight provinces, Malaga, and a third of sales in Malaga are in just two cities, Malaga and Marbella. New building developments are equally concentrated.
Foreign purchasers account for 20% of the market – significantly more on the coast. That’s fine when you’re in an area where Scandinavian, Dutch, German and French buyers are in the majority, but some areas are far more orientated towards British buyers. Estepona, for instance, is more Scandinavian – Torremolinos is more British. No one knows quite what the impact of Brexit will be, but to avoid uncertainty, avoid anywhere that has more than two cafes selling full English breakfasts! (Let’s be serious: ask the local agents who the main buyers are.)
The end of city centre AirBNB?
Many Spanish cities have seen the whole centre taken over by bars, restaurants, and AirBNB. There’s nowhere for locals to live, or to buy their groceries.
That made good money for investors, with yields on AirBNB in some areas well above 10%. But an increasing number of cities have brought in regulations that make short term letting considerably more difficult – and in the case of Madrid, practically impossible. (In the hyper-centre, if you don’t have a separate entrance to the building for tourists, you can’t let your property short term. This would make 95% of existing lets illegal.) In Barcelona, tourist lets have been entirely banned in the Gothic Quarter.
Soб if you want to invest in short term rentals, you should be looking for villas, not city centre flats. We’ll get on to the subject of exactly where to look a little further on.
How much is it to buy property in Spain?
Real estate investment requires a lot of prior analysis, calculation and a bit of luck, and when it comes to the investment in a different country, it’s another story. Thus, we want to shed more light on this process – how to decide for the purchase, where to search and how much to pay (not only the property price).
But first, what’s all the noise about buying in Spain?
Everyone who visited this charming country is tempted to buy a cozy villa or a minimalistic apartment in order to delight hot days next to the sea or escape from grey Europe if desired. This intention is always supported by all the “Venda se” offers and reasonable prices, e.g. check the offers for sale in Sotogrande and Alcaidesa.
And even more, they say it’s quite profitable to have a property in Spain, as the prices are constantly rising, and you can win if you sell it within the next several years. It’s very much the same you heard in 2006 or 2007 before that bubble, right?
It might resemble the last property crisis, but only from prices view. Prices are rising, that’s true, but we should take into consideration secondary factors that influence the property market. Are they downsides or advantages, let’s try to get the bottom of it below.
What is the average cost of living in Spain?
Cost of living in different regions of Spain
For the purpose of analyzing the cost of living in Spain, the country should be geographically divided into two parts: the north and the south. According to a 2016 Expatistan ranking, the most expensive Spanish cities to live in are Vitoria, San Sebastián, Barcelona, Madrid, Bilbao, and Marbella, while at the bottom of the list are Salamanca, Albacete, Badajoz, Huelva, Sevilla, and Cádiz. This geographical division applies equally to the average income of Spanish households. If the average income for Spain stands at 24,360 euros per year, San Sebastián leads the way with 30,550 euros in average annual income and Córdoba closes the list with 19,685 euros in average annual income.
When buying a house, Barcelona is the most expensive city followed by San Sebastián and Madrid, while the cheapest housing can be found in Cáceres, Badajoz, and Ciudad Real. When looking at the price of rentals, the positions move little, with the most expensive rent found in Barcelona, Madrid, and San Sebastián and the least expensive in Lugo, Orense, and Cáceres.
The cost of housing in Spain
The numbers show that 2016 was a rebound year for the sector, with the national median market price increasing by 4.7% for the first time since 2007. Following in 2016’s footsteps, 2017 began its first semester with a 1.2% increase on appraised home value. These increases are not equally visible throughout the country, however, with 31 provinces trending upwards while the rest have trended downwards.
It is easy to see how Vizcaya, Guipúzcoa, Barcelona, Madrid, and the Balearic Islands top the list with the highest prices per square meter, while Ciudad Real, Teruel, Cuenca, and Jaén close the list with the lowest prices per square meter. In any case, the national average for the first semester of 2017 closed at €1,530 per square meter, a figure that, according to predictions, will increase again in the next period.
Tax system in Spain
The Spanish tax authorities have been getting increasingly active in the last decade. Spain is no longer the land of mañana – when it comes to paying tax, at least. For instance, footballer Lionel Messi was sentenced to 21 months in prison for using offshore companies to reduce his tax liability, and Cristiano Ronaldo got two years. (Messi’s sentence has now been commuted to a large fine.) While so far the focus has been on going after high paid and prominent individuals, it suggests that keeping your tax affairs ‘under the radar’ is getting more and more risky.
There’s some evidence that tax officers have started looking hard at the affairs of holiday home owners in Spain. At the same time, the Tax Office has enlisted new sources of information to help it find the fraudsters. From January 2019, AirBNB opens its books to the tax authorities.
Paying taxes can save you money
Under-declaring your tax can also be a big risk to your chances of a successful eventual resale of your property. For instance, under-declaring the value of property transactions by handing over cash under the table might be tempting. But some municipalities have made retrospective tax demands based on what the municipality thinks should have been paid for the property. Under-declaring will also create a larger capital gains liability when you come to sell. And some local taxes, such as unpaid IBI, will be rolled up and then registered as charges on your property – together with interest.
If you just forget to pay your tax, you won’t go to jail; but you will be surcharged at least 5% of the value of the unpaid tax.
How to request a mortgage in Spain
In the case of newly constructed houses, the financial entity in charge of granting the mortgage will be the same entity that financed the construction project, though the buyer will have the option to subrogate the mortgage of said bank. In the latter case, be careful as it is common for developer banks to charge a fee for not subrogating the mortgage, a practice which the Bank of Spain (Banco de España) has classified as abusive.
For second-hand homes, the buyer is free to choose the bank which offers them the best mortgage conditions.
Spanish banks no longer finance 100% of the appraised value of a property plus associated expenses, but only up to 80%, a percentage which is sometimes reduced to 50 – 60% for foreign buyers.
This means that the future owner must contribute between 20 – 40% out of pocket plus fees, which amounts to around 10-12% of the purchase value. For a house that costs 250,000 euros, this would mean having more than 50,000 euros saved.
The maximum repayment term offered is 30 years.
The website of the Spanish Mortgage Association (Asociación Hipotecaria Española) offers a mortgage simulator that is very helpful for calculating mortgage fees.
1. What documents are required in order to obtain a mortgage? For example, if one comes from Great Britain, Europe or Asia?
The requirements depend on the region of the world where one comes from, nethertheless, overall, 5 types of documents are required:
– A piece of identification – A statement of your income over the last 2 years: your tax returns as well as the details of all of your possible incomes, (retirement pay, pensions, dividends)
– Existing debits (cars, mortgages, lease payments)
– The assets or properties in your possession – An extract of your main bank accounts from the last 6 months
2. During the process of buying a property, at what time should one request a mortgage?
When the choice of the property has been made, the bank can then carry out the feasibility study for the mortgage. In order to do this, all of the documents mentioned above must be assembled. Nethertheless, with the income and debit data the bank can provide an agreement in principal, that will thus allow you to be aware of the amounts that you could be made available to you for the acquisition of your property.
3. What are the approximate processing timelines?
For an agreement in principal, it is necessary to allow 1-2 days.
For a binding agreement, if absolutely all of the documents have been gathered together, 15 days maximum.
4. Does the bank conduct an evaluation of the value of the real estate?
As soon as the request for a mortgage has been accepted, the bank will make a mandatory evaluation of the value of the house. The chargeable evaluation is consequently included in the overhead expenses of the mortgage.
5. Which banks in Spain offer mortgages to foreigners?
The majority of the major banks work with foreigners, some have, moreover, developed specific programmes for non-residents to obtain mortgages. The banks currently have the tendency to offer fixed rate loans. The rate depends on banking products, (life insurance, fire insurance…), and of course, your income. However, no overall rate can be given.
6. What are the amounts covered by a mortgage in Spain?
Overall the banks cover 70% of the purchase price for foreigners coming from Europe and the United States, for the other regions of the world this can sometimes go down to 50%. Depending on the amount of the property, the rules can differ, the banks therefore examine the situation on a case by case basis.
For example, for a property of 120 000 euros, if one has 37 000 euros of funds, the bank could loan 83 000 euros, thus 70% over a period of 20 years.
7. What is the minimum income necessary in order to obtain a mortgage in Spain?
In principal, there is not a minimum amount, however the golden rule for everyone remains that the overall debit cannot be greater than 30% of total income.
8. What is the age limit to obtain a mortgage in Spain?
Usually loans are granted for a period of up to 20 years, the age limit is 75 years old: thus, the maximum age would be 55 years of age for a loan over 20 years.
9. What are the costs for the establishment of a loan, (opening an account, initial payments)?
The overall costs are in the order of 12% of the value of the subject of the real-estate, with this including:
- 8% purchase sale tax,
- 1.5% for the mortgage,
- plus the costs of placing the property on the property register and with the notary that will vary depending on the number of pages.
10. Do you have a final piece of advice for foreigners who would like to buy a property in Spain?
Therefore, refine your research with a Properstar, send your requests for information to agencies, (who are all professionals), also read this very useful article on how to find a professional and trustworthy estate agency, and do not hesitate to contact me for guidance in the mortgage field. You can already arrange all of the necessary documents for the set-up of a mortgage, this will allow you to act quickly when you have found the house of your dreams!
Managing your property in Spain
If you own
Foreigners who own a private home in Spain that is part of a resident’s association (comunidad de vecinos) will not have a hard time managing their property during the time they spend out of Spain.
Resident’s associations in apartment buildings and chalets contract the services of a property management company which then handles all community management including cleaning, maintenance, and repairs in communal areas. For this reason, each member has to pay a monthly fee for community expenses.
If the property is going to be empty for a long time, it is always advisable to hire a cleaning company to carry out internal maintenance. It can also be advisable to take out home insurance to cover any accident or theft that may occur.
If the property is not part of a resident’s association or used for private enjoyment, but rather is used for renting out, the best option would be to contract the services of a property manager or a real estate agency.
Both will take care of the property: attending to cleaning and necessary maintenance, looking for new tenants, carrying out all of the necessary bureaucracy for rental contracts, and collecting the rent while the owner is absent. The commission charged by property managers for these services is usually around 5 to 10% of the rent.