Spain has a highly revered international reputation. Many expats choose it for retirement, to study, or to work. There are about 6 million expats currently living in Spain. It is very popular amongst expats because it has a high quality of life, low cost of living, and excellent healthcare and education systems.
In this guide, we will present to you all the information you need to know about buying property in Spain as an expat. This includes spanish property prices, legal steps, how to find and fiance a property there, and much more.
Homeownership and Overview of The Real Estate Market
Homeownership in Spain is unusually high. About 80% of Spanish residents own their own homes.
Spain was one of the countries that suffered strongly due to the global financial crisis. Homes lost about 30% of their value. However, since then properties in Spain have been increasing in value steadily since 2016. The COVID-19 pandemic affected the market negatively in 2020. But, official figures show that the average prices grew in the second half of the year.
Real estate prices increased by 2.1% year on year. Second-hand homes increased by about 1.8% since 2016 and new-built houses increased in value by about 4.2%.
Of course, the number of house sales dropped in 2020. Before the pandemic, international home buyers purchased somewhere between 18,000-25,000 in the country each quarter of the year. Understandably this number fell below 10,000 in the second quarter of 2020.
How the Covid-19 pandemic will affect the Spanish economy is yet to be seen. Especially with international implications, it’s difficult to predict what will happen exactly. Some property experts predict that prices for properties in spain may drop by 5-10%.
Is It a Good Time to Buy Property in Spain?
If history has taught us anything, it is that the Spanish government is capable of bouncing back from a crisis. This means that even if the prices of property drop in the short term, they might bounce back after the pandemic. It is impossible to predict the future of course. However, more often than not, a real estate investment in a stable country like Spain is a good idea.
Should I Buy or Rent Property ?
Spain is a bureaucratically complicated country. The real estate market there has fluctuated in the past, so some research before buying property is always a good idea. Another important factor to keep in mind is that Spain has a fairly high capital gains tax.
Before the pandemic, there was a problem with an influx of “holiday lets.” Many investors would buy property to rent it in touristic areas. This led to an unfair increase in rental prices in areas popular with investors. Regional governments were planning on introducing stricter rules to avoid this. However, these plans are currently on hold due to the pandemic.
Spain has 17 autonomous regions. Each region can set its own rules for foreigners buying property there. In the Balearic Islands, for example, only Spanish residents are allowed to apply for “buy-to-let” licenses. The government in Madrid has also introduced some recent measures regarding this. Such measures include only allowing stays for up to five days.
If you’re staying in Spain for a short while, then you might want to look at renting a property. The rental prices there are quite cheap considering the high quality of life.
Can Foreigners Buy Property in Spain?
In short, yes! The Spanish government welcomes and even encourages foreign buyers in general. Though if you are specifically looking to buy a holiday let, you might need some legal help with the bureaucratic part of it.
The buying process for property in Spain for foreigners is relatively simple. First and foremost you’ll need to get an NIE (Número de Identificación de Extranjero) also known as the Foreigner’s Identification Number. This is the Spanish financial number, and you need it, as an expat, to do any fiscal activities in Spain. You can apply for this number yourself, or you can hire someone holding a Spanish power of attorney to get it for you.
Spain has one of the most successful Golden Visa Programs in Europe. This is a residency by investment scheme, which grants the holder residence in Spain in exchange for an investment in real estate. To qualify for the Golden Visa you need to buy a property in Spain that is worth at least 500,000 Euros. After that, you can get a residency visa, which can eventually lead to citizenship if you reside in the country legally for at least ten years.
For a comprehensive understanding of Spain’s Golden Visa please read our guide.
Property Prices in Spain
It is quite difficult to give a fully accurate depiction of the Spanish property market . This is because the full impact of the COVID-19 pandemic is yet to be seen.
The price of the property will depend heavily on where you buy. Some of the most expensive places to buy in Spain are San Sebastian, Barcelona, and Madrid. You can find much more affordable properties somewhere like Alicante or Valencia. Below you’ll find a table of the average prices for real estate in various regions of Spain:
|City||Location||Average price per m²|
|Alicante||In the city center||€2,560 / $3017|
|Outside of the city center||€1,876 / $2211|
|Bilbao||In the city center||€4,678 / $5513|
|Outside of the city center||€3,028 / $3568|
|Barcelona||In the city center||€4,519 / $5326|
|Outside of the city center||€2,980 / $3512|
|Madrid||In the city center||€4,929 / $5809|
|Outside of the city center||€2,993 / $3527|
|Malaga||In the city center||€3,271 / $3855|
|Outside of the city center||€2,066 / $2435|
|San Sebastian||In the city center||€5,800 / $6836|
|Outside of the city center||€3,675 / $4331|
|Valencia||In the city center||€2,784 / $3281|
|Outside of the city center||€1,483 / $1747|
Buying Land in Spain
As a foreign buyer, you might choose to buy land and build a property on it. This is quite popular in Spain, especially in places like costa del sol and the canary islands. As a matter of fact, due to the large number of inexperienced foreign buyers, there have been many scams regarding land purchases. Many scammers and faux estate agents have sold illegitimate properties to buyers who have not done their due diligence.
For example, sometimes the planning permission has not been acquired before building. This led to the government eventually tearing down the property. Another example is poorly built properties which lead to very expensive repairs.
How to Avoid The Pitfalls
There are a few steps you can take as a foreign buyer to be sure that you don’t get scammed. To make your life easier, we’ve prepared a checklist that can help you ensure you’re getting the right deal:
- Check the land registry or (Registro de la Propriedad)
- Check that the proper planning permission has been acquired before building
- Check the debts of the property
- Check the credentials of any lawyer or real estate agent you’re planning to work with
- Have a surveyor or architect check that the property is up to code and not cheaply built
You can usually obtain this information in the land registry office. You need to put in a request by email, phone, fax, or in-person to access this information. You can also have a trusted attorney check them for you.
The land prices in Spain also vary depending on the location and the seller. There’s usually some room for negotiation as it is a tradition in Spain to bargain a bit. Check below figures per m² in different regions.
€171 / $201
€184 / $216
Castilla y Leon
€66 / $77
The Canary Islands
€338 / $397
€158 / $185
Taxes and other Costs when Buying Property in Spain
There are no set fees for estate agents or lawyers in Spain, it’s all negotiable. Extra costs such as registration fee and legal fees differ from region to region as well. As the buyer, the majority of the cots fall on you. These include:
- The Property transfer tax: this stands at 6-10% for existing properties.
- VAT or IVA: This stands at 10% for new properties.
- Notary costs, land registration fee, and title deed tax: these stand at 1-2.5% of the purchase price.
- Legal fees: These are 1-2% of the purchase price including VAT.
Financing Your Property Purchase
Some Spanish banks and international banks offer mortgages to foreign buyers. As an expat buyer, you’ll often realize that you need to borrow at a lower loan-to-value rate than Spanish residents. This means that you’ll need a bigger deposit for your purchase. Depending on the mortgage type, foreign residents can borrow 60-70% loan-to-value. This number goes up to 80% for Spanish residents.
An interesting thing about mortgages in Spain is that mortgage lenders usually won’t complete the agreement until you own a property. This is why it is crucial to include in the purchase contract that you may cancel the purchase in case you don’t get a mortgage.
Many expat buyers have fallen prey to the “property debt” scam. You buy a property and then later realize that there is massive debt tied to this property. In Spain, when the property is sold the debt is transferred to the new owner. It is critical that you ensure that the property is debt-free. If there are any debts, then be sure that they are covered in the terms of the purchase contract.
How to find a Property in Spain
The Spanish property market is fully prepared for foreigners buying property there. This means that there are many websites and estate agents working in almost every language available.
You may even see Spanish properties on some British real estate websites. Though these usually focus on holiday homes. This is why you might want to look at some Spanish websites.
The key to a successful real estate purchase is taking your time. You can buy a property remotely and move there directly. However, it’s better to take your time, check the property, and assess whether everything is up to code. Even if it means you’ll have to stay in a hotel or a short-term rental for a while until your property is ready.
Below are some Spanish real estate websites that you can check:
Real Estate Agents
There are plenty of real estate agents in Spain who are used to doing business with expat buyers. They can often offer you valuable information about the region and help you in your property search. Be aware of scammers though. Never trust any agent who asks for upfront payments or suggests that they can “get you your property faster than others.”
Keep in mind that as the buyer you have the right to choose your mortgage provider, notary, and so on. You don’t have to go with what the real estate agent suggests. Additionally, you should always negotiate their fees, as they might try to get you to pay more.
Step By Step Process Of Buying Property In Spain
The process of buying a property in Spain is fairly straightforward. In this section, we’ll present you with a step by step instruction so you don’t miss anything:
Step 1: Finding A Property And Making An Offer
After you’ve looked at homes and found the one you like you should make your offer. You usually make this offer through the seller’s real estate agent. Prices are often open to negotiation.
Unless the price is extremely attractive, try to make an offer that is a bit less than what the seller asked for. Though don’t go too low because you might offend the seller. After you verbally negotiate the price and reach an agreement, it’s better that you have the agreement in writing. For this, it’s always a smart idea to hire a notary.
Step 2: Signing The Preliminary Contract And Paying The Deposit
After you’ve agreed on the price with the seller, you’ll sign the preliminary contract known as (contrato privado de compravento). After that, you’ll pay the deposit which is usually 10% of the property value.
Step 3: Arranging A Mortgage
As we mentioned earlier, you can only have a mortgage agreement in Spain if you own property. You should discuss your mortgage needs with your provider before buying the property of course. However, you won’t be able to complete the process until you’ve already paid the deposit and signed the preliminary contract.
Step 4: Signing The Contract
Once you figure out your mortgage you sign the contract of sale ( escritura de compravento). Keep in mind that you should do this in the presence of a notary.
Things to Know When Buying a Property
Notaries, Lawyers, and Solicitors
It’s technically not mandatory to have a notary to complete the sale. However, it is always a good idea to have a trusted lawyer to complete due diligence. As the buyer, it is your duty to register the property. A notary or legal counsel can help you with the process.
All lawyers practicing in Spain must be registered with the local bar association (colegio de abogados). You can ask for their registration number to verify that they are registered. Keep in mind that their registration doesn’t necessarily reflect honesty or trustworthiness, but it’s a start.
A house survey is an essential part of buying property. technically you can buy property in Spain without making a house survey. However, this is highly inadvisable. Completing a thorough survey will ensure that there are no major defects that will be costly later down the line.
There are two types of surveys available for existing properties: A valuation report and a building survey.
The valuation report is a preliminary survey that can give you an independent view of the property market value.
The building survey is more extensive and goes deeper. It examines the structural integrity of the property and explores any serious issues. A building survey is a bit more expensive than the valuation report, but it is highly recommended. This is because having a comprehensive understanding of the property is important when making such an investment.
Having insurance is always a smart idea to put your mind at ease in case the worst happens. Mortgage providers necessitate that you take out a building insurance policy before approving your mortgage. A building insurance policy covers the structure of the property against fire, natural disasters, and other damage.
There’s also a type of insurance known as contents insurance. This type of insurance covers your belongings in the home. You should have this type of insurance if you plan to regularly rent out your property.
Setting Up Utilities
This might be the most tedious part of buying a property in Spain. There are various deals for gas, electricity, and water that you can compare before agreeing to one. Sometimes you’ll find that the previous owner had some policies that you can just take over.
Waste disposal is managed at the municipal level. There are also annual fees that you need to pay to the municipality for garbage collection.
Buying New-Build Homes in Spain
Property scams are unfortunately common in Spain against inexperienced buyers. They usually involve unbuilt or unfinished properties that don’t have sufficient permits. Below are a few tips for you to avoid scams:
- Never sign a contract you don’t fully understand. Hiring a third-party legal counsel is always a smart idea when signing any contract
- Ask the local city hall that the planning permission has been granted to the property
- Check the legitimacy of the company and make sure that the project is registered with the land registry
- Hire a trustworthy third-party for translation
- Have written proof that you’ll get a refund if the property is not built for any reason
Selling a Property in Spain
The main issue with selling a property in Spain is the relatively large Capital Gains Tax(CGT). CGT in Spain applies to the profit of selling your home. The CGT levels are as follows:
- First €6,000: The CGT is at 19%
- €6,000–€50,000: The CGT is at 21%
- €50,000 or more: The CGT is at 23%
For example, if you purchase a property for €400,000 and sell it for €550,000 then you pay CGT on €150,000. Because of the tiered system, the tax will be €33,260.
Reductions on capital gains tax
There are a few cases where you may able to claim a reduction on CGT to account for inflation:
- If you are buying another property in Spain
- If you are over 65 years of age and have lived in the property as your main residence for more than three years
Otherwise, you’ll have to pay CGT no matter how long you’ve lived in the property. Additionally, you have to pay regardless of your residence status. This means that you need to pay CGT even if you are no longer a resident in Spain.
What is the property transfer tax when buying property in Spain?
The property transfer tax is 6-10%.
Is buying a home in Spain a good idea?
Spain has attracted many foreign home buyers over the years. Buying a home in Spain could be a very good investment whether you plan to rent it or live there yourself.