Spain remains a popular destination for homebuyers, both local and international. With nearly 80% of residents owning their homes, the country enjoys a relatively high rate of homeownership, and a significant portion of these owners do so without relying on a mortgage.
While Spain’s property market faced severe challenges during the 2008 global financial crisis, including a dramatic 30% drop in housing prices, it has experienced recovery in recent years. By 2016, the market began to stabilize, and house prices have been gradually climbing since then.
Although the COVID-19 pandemic created some uncertainty in 2020, official data showed a positive trend. Average property prices rose by 2.1% year-over-year, with new-build homes increasing by 4.2% and resale properties seeing a more modest rise of 1.8%.
Despite this, the volume of property transactions has slowed significantly. On average, international buyers used to purchase between 18,000 and 25,000 homes per quarter, but this number dropped below 10,000 in the second quarter of 2020 as a result of the pandemic.
Property analysts remain cautious about the future, with predictions suggesting that house prices may drop by 5% to 10% in the short term due to the ongoing economic impacts of COVID-19.
Is It Better to Buy or Rent Property in Spain?
The Spanish property market has its nuances, and it’s essential to do thorough research before making any decisions. One key consideration is that Spain’s housing market can be subject to fluctuations, property scams, and high capital gains taxes, all of which could impact the financial aspects of owning property here.
Given the uncertainty surrounding the COVID-19 pandemic, now may not be the ideal time for everyone to buy property in Spain. The country’s rental market is also experiencing changes, with rent prices varying depending on the region and type of property.
In recent years, regional governments have been introducing stricter regulations on holiday rentals in response to rising rents in areas popular among investors. Each of Spain’s 17 regions has the authority to impose their own rules on property purchases for rental purposes. For example, the Balearic Islands have enforced policies that limit the granting of buy-to-let licenses to Spanish residents only. Madrid has also enacted new measures, including restricting short stays to a maximum of five days.
If you’re planning a short-term stay or have concerns about the high capital gains taxes associated with buying property in Spain, renting might be the more financially viable option. It could offer greater flexibility while avoiding the added costs that come with owning a property, especially in uncertain times.
Can Expats Purchase Property in Spain?
For foreign buyers, purchasing a property in Spain has become somewhat more complex, especially if you’re looking to invest in a holiday rental property. However, Spain remains a welcoming destination for expats and offers clear rules to help prevent common mistakes when buying property.
The process for expats to buy property in Spain is relatively straightforward. One of the first steps is obtaining a financial identification number, known as the NIE (Número de Identificación de Extranjero). This number is essential for any financial transactions in Spain and can be obtained by visiting a local police station with your passport. Spanish and EU citizens typically receive the NIE on the same day, while non-EU residents may experience a longer processing time, often taking a few weeks.
Spanish Property Market and Prices
While the full consequences of COVID-19 on the Spanish property market are still unfolding, we can still observe some general trends regarding property prices in Spain.
Pre-pandemic data from the Global Property Guide analyzed property costs per square meter across various regions in Spain. According to this data from the third quarter of 2019, property prices in larger cities rose by 5%, reaching an average of €1,649 per square meter. Meanwhile, properties located in the Balearic and Canary Islands saw even more significant growth, with prices climbing 11% to €1,604 per square meter.
The most expensive areas to buy property in Spain are San Sebastián, Barcelona, and Madrid, with prices ranging from €3,000 to €3,600 per square meter in these cities. When it comes to land, Madrid stands out as the priciest location, with land costs averaging €338 per square meter. Other regions with higher land prices include the Canary Islands (€245), Catalunya (€184), Andalucía (€171), and Valencia (€158). The most affordable place to buy land is Castilla y León, with average prices as low as €66 per square meter.
Costs of Buying Property in Spain
The costs involved in purchasing property in Spain can vary by region, and many of these fees are negotiable. For instance, legal and estate agent fees are not fixed and can be agreed upon between the buyer and the respective professionals. That said, buyers are generally responsible for most of the associated costs, which include:
- Property Transfer Tax: 6%–10% for existing properties, or 10% VAT (IVA) for new properties
- Notary Fees, Title Deed Tax, and Land Registration Fees: 1%–2.5%
- Legal Fees: 1%–2% (including VAT)
In Spain, it is common for the seller to cover estate agent fees, which are typically calculated as a percentage of the final sale price, generally around 3%.
Financing a Property Purchase in Spain
While many overseas buyers choose to purchase property in Spain without a mortgage, it is also possible to obtain financing. Spanish banks and some international lenders offer mortgages, and a few even have specialized products tailored for expats from certain countries.
Buying a property abroad is a significant financial commitment, and navigating the process can be complex. Companies like Wise, which specializes in international money transfers, can help you with the financial side of things, especially when it comes to managing large international transfers and saving on exchange rates. Wise can offer valuable support throughout your purchase journey, so consider reaching out to them to learn more.
Mortgages for Overseas Buyers
As an overseas buyer, it’s important to be aware that the amount you can borrow might be lower than what Spanish residents can access. Typically, Spanish residents can borrow up to 80% of a property’s value, but non-residents are often limited to 60%–70% loan-to-value (LTV), depending on the type of mortgage.
Additionally, mortgage lenders will not finalize a loan agreement until the property is officially under your ownership. To avoid issues, ensure that your purchase contract includes a clause that allows you to back out if you are unable to secure a mortgage.
Important Considerations When Buying a Property in Spain
In Spain, any outstanding debts tied to a property are transferred to the new owner when it changes hands. It’s crucial to verify that the property you intend to buy is free of debts or that any existing debts are fully settled by the terms of the purchase contract.
If you need guidance on securing financing, it may be worth contacting a mortgage broker who specializes in working with expats. Some expat-friendly mortgage brokers, such as Habeno or Wypo, can help you navigate the process.
Finding Property in Spain
Foreigners can easily purchase property in Spain, and there are many online platforms and estate agents catering to a variety of languages and nationalities. Some popular websites to explore include:
- BCN Life
- Idealista.com
- Kyero
- Servihabitat
- ThinkSPAIN
British property websites also list Spanish properties, although many focus primarily on vacation homes. If you are looking for a more diverse range of options, Spanish websites are generally a better place to start.
It’s possible to buy property in Spain before you arrive and move in directly. However, this approach carries certain risks. It’s highly advisable to visit the property in person and thoroughly inspect it before committing to a purchase, even if that means spending some time in a hotel upon arrival.
Real Estate Agents in Spain
Real estate agents in Spain are valuable allies when searching for a property. They often provide extensive knowledge about the area, are bilingual, and have experience dealing with international buyers. However, the regulation of estate agents in Spain is relatively loose, and unfortunately, some unscrupulous individuals may take advantage of less experienced buyers. Always be cautious of agents who request upfront payments or encourage you to skip important steps in the buying process.
It’s important to remember that you are free to choose your own notary, mortgage provider, and any other service providers, without feeling pressured to use those suggested by the estate agent.
For a more comprehensive list of real estate agencies and property firms, you can refer to Expatica’s Spanish directory.
The Process of Buying Property in Spain
The typical process for purchasing a property in Spain follows several key steps. Initially, the buyer makes an offer on the property. If the offer is accepted, both parties will sign a preliminary contract (contrato privado de compravento), and the buyer is required to pay a deposit, which is usually around 10% of the agreed sale price.
Calculating Expenses
After making the deposit, the buyer arranges for any necessary mortgage financing, having already discussed their options with the lender. The final sale contract (escritura de compravento) is then signed in front of a notary, and at this point, the full purchase price, applicable taxes, and other associated costs are due.
If you need professional advice during this process, Spain offers numerous expert advisors, such as BCN Life, who can assist you.
Viewing Property and Making an Offer
Once you’ve identified a property you want to buy, you will typically need to submit an offer through the seller’s estate agent. Like in other countries, property prices in Spain are negotiable, and the asking price is often seen as a guideline rather than a fixed amount. Unless the price is already very competitive, or you are in a bidding situation, it’s usually a good idea to offer less than the asking price, but be careful not to make an offer that’s too low.
Price negotiations are often conducted verbally, and once an informal agreement is reached, the terms should be written down by your notary.
Hiring a Solicitor or Notary
Although hiring a notary is not legally required to finalize the sale, it’s highly recommended to employ a lawyer to ensure due diligence is conducted. Many mortgage lenders also require the buyer to have legal representation during the purchase process.
The buyer is responsible for registering the property in their name. A notary may assist with this for an additional fee, or they may simply notify the property registry that the sale has taken place, without completing the formal registration process.
Any lawyer in Spain should be registered with the local bar association (Colegio de Abogados), and you should request their registration number to verify their credentials. While registration does not guarantee competence or honesty, it provides a basic level of assurance.
A full list of registered bar associations in Spain can be found on the Abogacía Española website.
Organizing Your Finances and Paying Fees
After the transaction is notarized, you’ll need to cover various fees associated with the purchase. The estate agent’s commission will likely be the first fee you pay, followed by the notary’s fee. Some weeks after the sale, the notary will arrange a date for you to transfer the full purchase price to the seller.
If you have income in different currencies or from multiple countries, this may complicate the process. However, there are several options for handling the transfer of funds to Spain.
For those residing in Spain, opening a local bank account is often the simplest solution. If you live abroad, you may want to consult with a financial advisor or consider a specialized money transfer service. For example, Wise offers a team of experts who can help manage large international transfers and assist you in saving on exchange fees.
Arranging a Property Survey in Spain
While it’s possible to buy a property in Spain without conducting a survey, it’s highly recommended that you do so. A survey helps to ensure that the property is free from significant issues that might arise later, potentially costing you a lot of money in repairs.
For existing properties, two main types of surveys are typically available. A valuation report is a basic survey that provides an independent assessment of the property’s market value.
A building survey, on the other hand, is a more detailed inspection of the property’s structural condition. This survey will highlight any serious defects that may require attention. Building surveys are more expensive than valuation reports, but they offer a more thorough overview of the property’s overall condition.
Moving Into Your Property in Spain
Insurance
It is highly advisable to take out home insurance when purchasing a property in Spain. Building insurance is often a requirement for mortgage lenders and typically covers the structure of the property against risks such as natural disasters, fire, and other forms of damage.
While contents insurance (which covers your personal belongings inside the property) is not mandatory by law, it’s a sensible investment, especially if you plan to rent out the property or spend extended periods away.
Setting Up Utilities and Telecommunications
One of the more tedious tasks when moving into a new property in Spain is setting up utilities. Depending on the situation, the previous owner might have existing services that you can take over.
Municipal authorities typically manage waste disposal, with annual fees for trash collection. For gas, electricity, and water, you can compare various providers to find the best deals for your needs.
If you need help with the setup, hiring a contractor may be a good option. You can find qualified professionals on platforms such as TaskRabbit. However, be sure to check the qualifications of the contractor, especially for tasks related to electricity, plumbing, or gas, as these often require a certified professional.
Buying Land to Build a Property in Spain
Spain has long been a popular destination for overseas buyers looking to build holiday homes. However, this has also attracted unscrupulous developers and real estate agents who exploit inexperienced buyers. Some properties may have been constructed without proper planning permission, while others may be of poor quality, requiring expensive repairs.
To avoid these pitfalls, the British Foreign Office advises buyers to exercise caution and follow some key steps, including:
- Verifying the credentials of lawyers and estate agents involved in the transaction.
- Checking the land registry (Registro de la Propiedad) for information about the property.
- Ensuring that appropriate planning permissions have been obtained for the land or property.
- Confirming that the property has no outstanding debts.
- Ensuring that the property is structurally sound—either by hiring a surveyor or architect.
Most of this information can be obtained from the land registry by contacting them via email, phone, fax, or in person. For more details, you can visit the official website of the Spanish land registry: www.registradores.org (in Spanish).
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