How to Buy Property in Spain

For those looking to buy property in Spain, securing a Spanish Identification Number (NIE) and establishing a local bank account are paramount.

The NIE, unique to each individual, is mandatory for all financial transactions in Spain and must be obtained before the completion of the real estate transaction.

The Spanish property market in 2024

According to studies published by the IMF, European Central Bank, and OECD, in 2022, Spain witnessed the highest number of property transactions since 2007. However, despite continued significant sales in 2023, they were hampered by less favourable mortgage conditions, limiting the demand for homes.

In 2024, a strong demand for housing is expected, with a low real estate supply leading to a housing shortage. This further widens the gap between supply and demand, especially in highly sought-after areas like the Costa del Sol, Balearic Islands, and Costa Blanca. This situation is anticipated to coincide with stable prices, potentially experiencing some increases in high-demand zones like the Costa del Sol.

Another factor to consider is the lack of new constructions, potentially resulting in the resale of renovated second-hand homes.

Regarding interest rates, 2024 appears optimistic, with an expected inflation of 3.5%. A decrease in Euribor and a reduction in interest rates are anticipated.

Spain will continue to be a highly sought-after destination for foreign investors, attracted by the climate, lifestyle, and diverse investment opportunities.

Can expats buy property in Spain?

The process of acquiring property in Spain is free from restrictions, whether for residential, rental, business, or land purposes. Spain warmly welcomes both resident and non-resident foreign buyers to invest confidently in its real estate market.

Spain extends a warm welcome to foreign buyers, including expatriates. The country imposes no specific restrictions or limitations on property ownership for expats.

European Union

Nevertheless, engaging professional legal advice and guidance throughout the purchasing process is recommended to ensure strict adherence to Spanish laws and regulations.

For those contemplating property acquisition and aiming to preempt future complications, seeking counsel from a qualified property lawyer in Spain is highly advisable.

Real estate agencies also play a vital role in the process of buying your property in Spain, and they will help you choose the property of your dreams.

While the majority are highly professional, it’s important to note that regulations are relatively low, and there are instances of unscrupulous estate agents. Exercise caution with those requesting upfront payments or proposing shortcuts.

Estate agents offer a wealth of information about the region, are often bilingual, and frequently engage with overseas buyers. They serve as a valuable asset in your search for Spanish property.

Non-European Union

Investing in Spanish property presents an attractive opportunity, particularly for those seeking a Golden Visa. The Golden Visa procedure is regulated by Article 63 of Law 14/2013.

Spain’s Golden Visa program caters to foreign property owners, specifically investors outside the European Union. By investing over £500,000 in Spanish properties, you can secure a residency visa. This program is particularly popular among retirees and holiday home buyers.

Exercise caution regarding your marital economic regimen when applying for the Golden Visa. For those with a separation of assets regimen, prevalent in many countries, the investment must be a minimum of €1,000,000. However, if one spouse purchases the property entirely (100%), the investment requirement is reduced to €500,000. Conversely, for those with a community of goods economic regimen, both spouses can acquire the property with a €500,000 investment.

Tejada Solicitors specializes in these procedures and boasts numerous successful cases with clients from around the world, especially from Canada, the USA, and the United Kingdom.

Interesting read: Golden visa in Spain

Is it better to buy or rent?

To decide whether it is better to buy or rent a property, various factors need consideration, such as the available budget, income level, interest rates, rental prices, and the current economic situation with future forecasts.

Available Budget: It is crucial to have your lawyer thoroughly assess the expenses associated with the buying process to avoid unpleasant surprises.
Income Level: This is a significant factor as it, along with the available budget, helps decide whether to buy or rent.
Interest Rates: Interest rates directly influence such decisions. Suppose interest rates are low in the Eurozone. In that case, buying a property in Spain might be advantageous as you can secure a favourable mortgage rate, resulting in lower monthly mortgage payments compared to rental prices. Conversely, renting may be the better option if interest rates are very high compared to rental income.
Rental Price: It is advisable to compare rental prices in the areas where you would like to reside and juxtapose them with the purchase price plus housing expenses of a similar property. One ratio that can assist in decision-making is the Price Earnings Ratio (PER).

The PER (Price Earnings Ratio) formula helps identify if the property is priced appropriately when buying. It involves dividing the selling price by the rental price. This figure represents the number of times the annual rental income is contained in the selling price, or in other words, the number of years it would take to pay off a property through renting under current conditions. It is a universally accepted ratio for assessing assets such as companies, homes, etc.

PER = (purchase price + taxes + notary & property registration fees) / (annual rental income)

Imagine that the purchase of a property similar to the one you want to rent, including acquisition cost, taxes, and notary and property registration fees, amounts to 320,000 euros, and the annual rent you expect to pay is 12,800 euros.

PER (320.000 / 12.800) = 25 times

Personal economic situation: You will need to assess whether your job is stable, if you anticipate any income from a sale or inheritance, your future plans or pension plan withdrawals, lifestyle considerations, whether you have a mindset inclined towards buying rather than renting, and, of course, you should study the financial situation of the country.

Do you need more info about how to buy a property in Spain

Buying a property in Spain: Steps

Before delving into the property acquisition process, it is essential to undertake fundamental research and analysis tasks overseen by your solicitor. Broadly speaking, the stages involved in any property purchase process in Spain include the following:

NIE

The NIE (Número de Identidad de Extranjero) in Spain is the tax identification number allocated to foreign citizens for conducting transactions with the Spanish government. Hence, if you are considering investments in Spain, such as property or vehicle purchases, the initial requirement is to obtain the NIE number. This identification is provided by the Foreign Office.

Find a lawyer

Securing your home is typically the most significant investment for many individuals. The effort invested in finding a reputable solicitor can alleviate potential issues and offer peace of mind throughout the entire purchasing process.

ALL STEPS
1.- Congratulations on finding your second home!10%
10%
Obtain your NIE (Número de Identificación de Extranjeros).20%
20%
3.- Engage a lawyer proficient in both your language and Spanish.30%
30%
4.- Establish a bank account.40%
40%
5.- Determine the need for a mortgage.50%
50%
6.- Execute the “contrato de reserva”.60%
60%
7.- Conduct crucial property checks with experts.70%
70%
8.- Confirm your mortgage arrangement.80%
80%
9.- Execute the “contrato de Arras”.90%
90%
10.- Attend the notary to formalize the property purchase contract.100%
100%

The conveyancing process can be notably stressful, and buying a home represents a crucial milestone in one’s life. To prevent this exciting project from turning into a nightmare, Tejada Solicitors strongly advises you to assemble a proficient team of professionals who can provide guidance and support, making it straightforward and uncomplicated. Our bilingual solicitor, Jose Maria Oliva, will stand by you throughout this significant and wonderful endeavour.

Tejada recommends selecting an independent solicitor with expertise in conveyancing. It is paramount that the solicitor has no affiliations with any real estate agents. Occasionally, real estate agents may suggest their own solicitors, potentially leading to conflicts of interest for the client.

Open a bank account

Opening a bank account in Spain is essential when acquiring a property in the country. Following the property acquisition, you will need to set up direct debits for utility payments such as water, electricity, Wi-Fi, community fees, home insurance, as well as any taxes associated with the property, all managed through your Spanish bank account. With all payments domiciled, you won’t have to worry about missing any invoices.

Tejada Solicitors will guide you through the account opening process, whether you are in Spain or abroad. In the latter case, we can handle the account opening in Spain with a power of attorney, which is highly advisable and significantly streamlines all the procedures related to the property transaction.

Do you need a mortgage?

Foreigners residing in Spain, as well as non-residents or expatriates over 18, are eligible to obtain a mortgage in the country. While Spanish banks generally have requirements comparable to banks worldwide, non-residents face a more stringent set of eligibility criteria.

In essence, non-resident property buyers in Spain can avail themselves of mortgage conditions similar to those of Spanish citizens. For example, if you are a non-resident buyer, the bank may extend a loan covering 70% of the property’s purchase price, requiring you to provide the remaining 30%, along with taxes and associated transaction costs.

It’s worth noting that obtaining a mortgage in your home country and channelling those funds into your property investment in Spain is also a viable option.

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Sign the “contrato de reserva”

When you identify a property that suits your needs, consider the following steps:

  1. Offer and Acceptance of Purchase: Unless the price is exceptionally enticing or you’re competing with other buyers, it’s advisable to initiate negotiations below the asking price. However, it’s essential to strike a balance and not propose an amount that may offend the seller.
  1. Reservation Agreement: Initial negotiations on the price are often conducted verbally. Once a preliminary agreement is reached, it’s crucial to have your offer documented by your solicitor. During the reservation agreement period, the seller commits to removing the property from the market. It is imperative not to sign any reservation agreement or make any deposits without the guidance of your solicitor. At Tejada Solicitors, we always emphasize to our clients in our initial meeting the importance of refraining from signing any reservation contracts or making deposits without our lawyer’s supervision. We have encountered cases where clients signed and paid deposits without prior legal consultation, leading to the loss of their deposit, as they signed a document against their interests.

Important checks of the property with experts

After signing the reservation agreement, the solicitor initiates the Due Diligence phase. Our experts meticulously examine all legal aspects of the property, generating a comprehensive legal report that encompasses:

a) Verification of the property’s accurate registration in the Property Registry under the seller’s name, including a detailed assessment of the property’s description and boundaries with the aid of a Spanish Nota Simple.
b) Confirmation that the property lacks encumbrances and mortgages and is current on all tax obligations.
c) Assurance that the house is vacant and free of tenants.
d) Evaluation by an architect to determine the existence of any urban planning files and planning licenses.
e) For properties located in Andalusia, especially on rustic land, confirmation of the granting of the SWOT or AFO certificate involves regularizing houses situated on rustic territory.
f) Verification that the IBI or property tax is paid and no outstanding receipts exist.
g) Confirmation that all utility supplies are correctly registered and payments are up-to-date for the previous year.
h) Assurance that there are no unresolved debts with the community of owners.

In general terms, Tejada Solicitors ensures that the property is unencumbered, legally sound, and ready for a trouble-free sale to you.

Get your mortgage confirmed

Once you’ve found the perfect property, you can enlist Tejada Solicitors’ support for the mortgage application or opt for a financial broker. After successfully navigating through the conveyancing process with our solicitor, Jose María Oliva, it’s time to confirm the mortgage and sign the private purchase contract or “contrato de arras”.

how easy is it to buy property in Spain

It’s important to highlight that signing the private purchase contract should wait until the mortgage is confirmed. If the bank denies the mortgage after the contract is signed, there’s a significant risk of losing all the funds paid, making completion crucial to avoid financial setbacks.

Sign the “contrato de arras”

Following the completion of due diligence, the next step is to sign the private purchase contract or “contrato de arras.” This contract encompasses all the negotiated agreements, including a comprehensive property description, personal details of both parties, purchase price, payment terms, and, if applicable, details about any included furniture. For instance, if the property is sold with furniture, we will provide an example inventory list, excluding extraordinary items such as the Picasso painting. The contract is crafted by the lawyer in a double-column format (Spanish and English), and approximately 10% of the price is paid at this stage.

Go to the notary for completion

The completion date is the final and most emotionally charged step in the conveyancing process. On this day, all involved parties gather at the notary. If, for any reason, you cannot be present or choose not to attend, we can represent you on completion day with a Power of Attorney. This momentous occasion involves the payment of the balance and the ceremonial handover of keys. Congratulations! You’re now the proud owner of a property in Spain.

Interesting read: Property conveyancing in Spain

Do you need more info about how to buy a property in Spain

Selling Property in Spain

If you’re considering selling your property in Spain, let’s guide you through the essential steps to list your Spanish property on the market:

buying property in Spain as a foreigner
  1. Contact an Estate Agent and Advertise the Property:
    Contact a reliable estate agent to showcase and market your property effectively.
  1. Find a Solicitor:
    Our experienced solicitor, Jose Maria Oliva, will provide expert advice, overseeing the legal and administrative aspects of the sale.
  1. Documentation Required for Property Sale:
    Ensure you have all necessary paperwork, including:
    • Property’s title deeds
    • Copies of utility bills
    • Receipts for local municipal tax (IBI)
    • Your residency card (if applicable)
    • First occupancy license (if applicable)
    • Inventory of furniture and fixtures included in the sale
    • Details of relevant community statutes
    • Tourist License (if applicable) Urban Property Registration 
    • Energy Performance Certificate (CEE)

4. Reservation Agreement:
Upon accepting the offer, the buyer pays the deposit.

5. Signature of the Purchase Private Contract and Payment of 10%:
Formalize the deal by signing the purchase private contract, with the buyer paying 10% of the agreed-upon price.

6. Completion to Close the Deal:
A meeting takes place at the Notary Office involving the buyer, seller, and their legal representatives. The final balance is transferred to you, and the buyer receives the keys to the property.

7. Fees and Taxes for Selling a Property in Spain:

    • Estate Agent Fee: If you use an agent, expect to pay around 3-5% of the sale price in commission.
    • Energy Performance Certificate.
    • Capital Gains Tax in Spain : Due on profits from the sale, with rates depending on residency status. Non-residents face a flat rate of 19%.
    • Plusvalia Tax.
    • Legal Fees.

Interesting read: Cost of selling a house in Spain

How much does it cost to buy a property in Spain?

This point is one of the most crucial for our firm. From the very beginning, we are very clear with our clients about the total costs involved in the buying and selling process. Our lawyer, Jose María Oliva, will provide an estimated cost, including all expenses in the buying and selling process. We are entirely transparent about the issue of costs, understanding that it is a delicate and significant matter for our clients. Please don’t just compare the total costs offered by other law firms; compare each item and the services they provide.

Tejada Solicitors includes all the expenses associated with the buying and selling process, so you don’t encounter unpleasant surprises and extra costs later on.

The general costs associated with a property purchase and sale are as follows:

  • Value Added Tax (VAT) or Stamp Duty in Spain:
    • Stamp Duty: 7% (applicable to existing properties)
    • For new houses, a payment of 10% VAT (or IVA) is required, along with 1.2% for documented legal acts.
  • Notary Fees
  • Land Registry Fees
  • Legal Fees for buying a house. Feel free to inquire about our rates without obligation.

Indirect costs

Please note that after the completion, we will continue working for you and proceed to transfer the ownership of various supply contracts (water, electricity, Wi-Fi, gas, etc.), as well as the property taxes, to your name, setting up direct debits to your Spanish bank account.

Fixed expenses will be generated, which you will need to pay periodically:

• IBI (Property Tax).
• Utilities (water, electricity, gas, community fees, Wi-Fi, etc.).
• Rubbish Tax.

Taxes

  • Annually accruing non-resident tax.
  • For tax residents in Spain, the Personal Income Tax applies, where your global income (including pensions, dividends, income from work, and capital gains) will be taxed. In the context of international taxation, we adhere to the double taxation agreements between Spain and the country of origin.
  • If you opt for tourist rental, Rental Income Tax will be applicable.

What are the best places to buy property in Spain?

Colliers  and Idealista forecast major urban centers, such as Madrid, Barcelona, and Malaga, emerging as winning choices for investment in 2024. These cities boast abundant job opportunities and a diverse range of leisure activities. Among the choices, Savills has seen Malaga as a top-tier investment destination for some time now. The city’s growth, fueled by tourism and complemented by its laid-back lifestyle and appeal for sports enthusiasts, positions it as an ideal residence for both Spaniards and foreigners. Malaga has already gained popularity among British and Swedish buyers, especially for high-end properties.

Málaga city Council says The city’s economic and social progress is evident, further highlighted by its selection as the location for Google’s cybersecurity center. This development is anticipated to attract a surge of professionals and businesses in the coming years.

Similar to Madrid and Barcelona, Malaga boasts the highest rental profitability in Andalusia. This, together with its exceptional gastronomic scene, the cost of living significantly lower than that of Madrid or Barcelona, solidifies Malaga’s status as one of the best places to buy property in Spain.

Additionally In 2023, InterNations  ranked Malaga  as the top city for expats, praised for its local friendliness (89%) and securing the second spot in the global quality of life index. Alicante and Valencia followed in the top three, with Alicante noted for affordable housing and Valencia for healthcare. Madrid secured the sixth position in the overall top ten.

Legal help to find a property in Spain

Navigating tax, immigration, and real estate affairs in Spain can pose challenges for foreign individuals lacking proper guidance. At Tejada Solicitors, we adopt a comprehensive 360-degree approach to your case. Our dedicated team, comprising an immigration specialist, tax lawyer, and property conveyancing expert, collaboratively assess and analyze your situation. We aim to simplify the process, alleviate stress, and guarantee a successful transition to Spain. Place your trust in our team of specialized lawyers with extensive experience handling these intricate procedures.

Do you need more info about how to buy a property in Spain

Legal help to find a property in Spain

Navigating tax, immigration, and real estate affairs in Spain can pose challenges for foreign individuals lacking proper guidance. At Tejada Solicitors, we adopt a comprehensive 360-degree approach to your case. Our dedicated team, comprising an immigration specialist, tax lawyer, and property conveyancing expert, collaboratively assess and analyze your situation. We aim to simplify the process, alleviate stress, and guarantee a successful transition to Spain. Place your trust in our team of specialized lawyers with extensive experience handling these intricate procedures.

What are the pitfalls of buying property in Spain?

To assist you on your journey, here are the seven most common pitfalls to avoid when buying property in Spain:

Not Having Documents Prepared: Failure to arrange essential documents in advance, such as the NIE and Spanish bank account numbers.
Signing Reservation Agreement Without a Solicitor: Signing the reservation agreement and paying the deposit without legal representation.
Neglecting to Read the Contract: Overlooking the importance of thoroughly reading and understanding the contract terms.
Insufficient Research on Property Locations: Failing to conduct thorough research on the locations of potential properties.
Not Budgeting for Future Fees: Forgetting to account for future fees in the budgeting process.
Avoiding Professional Assistance: Neglecting the support of professionals, such as real estate agencies or solicitors.
Choosing the Seller’s Lawyer: Opting for the same lawyer as the seller, which can lead to conflicts of interest.

To avoid misunderstandings and maintain effective communication, it is recommended to consult with a lawyer independent of the seller’s legal representation. Additionally, ensure your solicitors are proficient in English.

Before committing to a reservation or deposit, seek advice from your lawyer, as the initial stages may reveal irregularities requiring legal guidance. In Spanish property conveyancing, selecting a law firm with integrated communication among lawyers, tax advisors, and architects is crucial for a comprehensive assessment. At Tejada Solicitors, you can find all these professionals under one roof.

Remember to choose a lawyer who prioritizes your interests and can negotiate the best deal on your behalf.

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