Come Buy with Me! The Ultimate Guide to Buying Property in Spain
Looking to purchase a property in Spain? Unsure where to begin? Well, you have come to the right place! This is our ‘Ultimate Guide to Buying Property in Spain’. The aim of this guide is to give you a step-by-step list of the process from start to finish – from deciding on a budget right through to completing on a property purchase. Over the years, I have guided many clients through the process.
But before continuing with this guide, I have some great news for those of you looking to purchase this year. The government have just announced that they will be reducing property purchase tax on resale properties to 7% across the board just until the end of the year. Scroll down to Step 3 and Property Purchase Costs to find out more.
Understanding how the buying process works in Spain can make purchasing property much easier and stress-free. Buying a home is one of the biggest decisions you will make in your life, both, emotionally and financially.
My favourite saying is ‘Fail to prepare, prepare to fail’. Don’t worry, you do not need to have all the answers at your fingertips before searching for the right property. The main thing is know what questions to ask. With these to hand, you can ask your team – estate agent, lawyer etc., all the right questions. I guess my number one tip is not to be afraid to ask. Personally, I like to sit down over a coffee (check out our blog to find out about some of my meeting points!) – or even on a Zoom call ( as seems to be the case these days), even before I organise any viewings.
The Ultimate Guide to Buying Property in Spain – Part 1
Part one of this ultimate buyer’s guide is all about the start of your journey to finding the perfect property. I share tips about how you can prepare before you even take a step outside and start viewing properties.
Step 1: Buying with your head or with your heart?
Buying a property is a very big decision. The way we carry out a property search and make the decision will depend very much on why we have decided to buy a property:
- Is it to be your home?
- Is it purely an investment decision?
If the property is to be a home (whether the main home or second residence), the decision will invariably be one made by the heart. A property may look perfect on paper and tick all the boxes, but if there is no emotional pull, then it is unlikely to even make the shortlist.
What makes a house a home, is a very personal decision. What does home mean to you? There are many aspects to a home. Many different things contribute to this – a blend of place, feelings, environment, lifestyle, and family. Whilst this purchase is likely to be the biggest expenditure in your monthly budget, as long as the finances fit into place, the heart will have the final say.
What’s the first step?
Before beginning your search, it is therefore good to think about what features you would like to see in your home. Over time, in this business, I have realised that speaking to my clients in a relaxed atmosphere and finding out what their hopes, aspirations, and future visions are, really help me to understand what their ‘vision’ of home may be.
This vision will include some very practical, tangible features but equally will include some intangible qualities like light, smell, energy, feeling of space. There are so many times that clients come to me saying that they love the spaciousness of one apartment as opposed to another, whereas this feeling of space has nothing to do with the actual square meterage of the property.
If the property is to be purely for investment purposes, the decision is a much more scientific one. Here decisions will be based more on the outcome you are looking for. If looking for a capital return, you may be more inclined to look for bank repossessions or properties that need some work, do them up and then flip them. However, if you require an income return, you may look for properties that are ready to move in to, are in well -maintained communities, and can immediately start generating a monthly income. Either way, the decision will be much more of a head decision, than one of the heart.
Step 2: Creating the vision
I love this step, it is like starting with a blank canvas. This is where you start building an image of what you want in your mind. Where do you see yourself living? Start with the location.
Location, Location, Location
Location, location location is the real estate mantra. This is one of the first decisions to be made. Take a look at our area guides to find out more about the areas we work in, and get a feel for this beautiful part of the Costa del Sol.
Depending on where you chose to buy, the price can vary substantially. Frontline beach properties sell at a premium. You will get more for your money the further away from the sea you go. Many of us conjure up an ‘ideal’ in our minds. Do you see yourself waking up to the view of the sea every morning or would you prefer to be surrounded by the rolling mountains?
It is good to do a reality check here. Whilst you may have a ‘romantic’ vision of what perfect looks like, make sure that the location fits with the lifestyle you want. Will you be doing school runs? Is proximity to a school important? Do you want to be close to a Medical Centre or shops? Many supermarkets do deliver, but if you chose to live out in the countryside, it may be an idea to check whether they will deliver to your chosen address.
Once you have a location in mind, it is time to start mapping out what you are looking for.
Prior to starting your search make a note of features important to you and prioritise into:
- Must have (non-negotiable)
- Would be nice to have (negotiable)
- The icing on the cake (your ideal vision)
- Definite No’s (non-negotiable)
It is great to have a visual of what you like. I love it when my clients send me links or photographs of the style of properties that they like. Try and keep your agent in the loop. The better an agent knows you, the better they will be at finding a place that is tailored to your needs – not theirs. The relationship should not be a guessing game – this just ends up in frustration.
What I love most about this job is getting to know people and finding out what they love. There is something out there for everyone. Each client is different, each search is different, and everyone has their own unique vision of home. You can check out our buyer’s checklist here. Here are some points to consider when looking at features:
1. Basic Features of Property
Start by making a basic list of key features that you require such as the number of bedrooms, bathrooms etc. that you require. The type of property is also a consideration. Are you after a detached house with a pool? Do you need a lock up and go apartment? If you are looking for a holiday getaway or plan to rent the property out, it might be better to buy on a nice community with communal gardens and security. This incurs zero individual maintenance as the community takes care of everything. If on the other hand, you plan to spend a good amount of time in Spain, then perhaps a private villa with a private pool could be more important to you.
Add what is non-negotiable here – for instance, do you need to have a lift or disabled access, do you need outdoor space. Is it essential to have a private parking space? Will you be working from home? Do you need to have a separate home office space?
Choose your style!
Once you have an idea of the basics, add to this by thinking of the style of property you prefer. Do you like a rustic, Andalucian style property or are you more into a modern minimalist look? Then go on to think about the specifications you require – do you require air-conditioning or a fully fitted kitchen, or are you quite happy to install these things after you purchase the property. Do you want a property that is ready to move into or are you looking for something that needs work – would you like a project of some kind?
Don’t worry, this list is fluid – it will help clear your mind. It works as a good starting point. As your search progresses you may add things to the list or take them off.
2. Community features
Don’t forget to add community features to your list. Most properties on the Costa del Sol are part of an urbanisation or ‘community’. This means that you will have access to communal facilities. Usually, property owners pay a community fee to use these shared facilities. It is good to have an idea of what facilities you would like – eg is a communal pool or padel tennis court a deal-breaker? Is security top on your list – would you pay extra for this? Check out our our urbanisation reviews. They will give you all the information you require about certain urbanisations, ranging from an estimate of community charges to property layouts, urbanisation sizes etc.
3. Don’t forget these things! A few tips!
The current Coronavirus pandemic has changed the way in which many of us work. There are a lot more people who are, either, working from home on a full-time basis, or splitting their week, commuting to work on some days, and working from home on others. As a result, our homes are having to fulfill so many functions.
Many more of my clients are looking for homes with office space. If you work alone, you may be fine to convert a spare bedroom. However, if you plan to have some meetings at home, you may look for a property that has access to a separate entrance or a granny flat that can be converted into a separate, dedicated, office space. Check out the properties below which all have some office space:
Click below for more information:
Click the link below for more information:
Something that is often overlooked is the wifi connection and internet speed. If you are planning to work from home, this will be of paramount importance. Often clients automatically assume that all homes in Spain have access to a phone line and high-speed internet. However, it is not always the case, so it is definitely a good thing to add this to your non-negotiable features if you plan to work from home.
Another point to consider is if you have a pet. Whilst most communities do allow pets, there are those that do not, so make sure to add this to your non-negotiable list, under communal features, if you plan to bring your pets or get one in the near future.
Step 3: Budget Before you Start your Property Search
Without some kind of budget, it is very difficult to even begin a property search.
Buying a house is a very emotional decision and you can get carried away by your heartstrings. That is why it’s important to consider your budget before you start your search. You need to plan how you are going to fund the purchase. How much of your own savings will you put into the purchase? If you need a mortgage, how much will your bank lend to you? Have you calculated your affordability, debt to income ratio? The good news is you do not have to go through this process on your own. We can help with this.
1. There are four factors to consider when estimating how much a bank will lend you:
- Age – your age will determine the maximum term you can hold a mortgage for. The maximum age depends on the lending bank but generally is around 65-70yrs of age.
- Deposit – How much of your own Funds/ Savings do you wish to put into the purchase?
- Income – How much can you afford to pay per month? The Income/debt ratio should roughly equate to 1/3. This is where you need to look carefully at all your monthly debts (includes personal loans /car loans/home improvement loans/student/loans/ any other mortgages ) All existing plus the new mortgage repayments should not equate to more than a third of your net income.
- Resident/Non-Resident Status – generally the amount that banks lend to residents is higher than non-residents. Find out what the maximum percentage of the purchase price a bank will lend you?
2. How much will it cost me to purchase a property in Spain?
The prices that you see advertised on websites and property portals are net of costs. When you are giving agents a budget, it is important to clarify whether this budget is inclusive of costs or whether you have already made an allowance for costs.
Property Purchase Costs on the Costa del Sol
As a rule of thumb, you should allow between 11-14% of the purchase price for costs.
Click here to download a free pdf to estimate the Purchase Costs of Buying a Property in Spain. Please know that this is for guidance purposes only and to be used as an estimate. Please note that the pdf shows the normal transfer tax bands – however from now until the end of the year the transfer tax will be at 7% across the board!
Depending on what you buy, the purchase costs may differ. Is it a resale property, bank repossession, or is it brand new? Check the document above for the different costs incurred in each case. You will need to factor in the purchase taxes, the notary, and land registration costs. In addition to the latter, you will have legal costs, and if taking out a mortgage, brokerage costs. Also bear in mind that the taxes vary depending on the purchase price.
Resale properties carry a lower tax than new build properties if the purchase price is under 700,000€.
The transfer tax is:
- 8% if the purchase price is under 400,000€
- 9%between 400,000€ and 700,000€
- 10% over 700,000€
To this, you then need to add the notary fees, legal fees, land registration fees, and any mortgage costs.
NEW GOVERNMENT INCENTIVE from 28th April till 31st December 2021
The government have just launched a fantastic incentive which is effective until the end of the year. The property transfer tax (ITP) will be set at 7% across the board!!! This is excellent news. Don’t miss this fabulous opportunity. Find out more below
There are many advantages to buying a resale property:
- The property has often been used and any teething problems would have been either identified or solved
- Resale properties often come with some fittings and fixtures and often some furniture may be included or available at a discounted price. This could present a good cost-saving.
- Also, resale properties are often on established urbanisations so there are no risks in terms of the end product – you can see what you are getting. The community fees will already be established so you will be able to better plan running costs.
- Easier to plan the time to completion – unlike a new build, if the property is properly registered and ready to move into, the process and timing is easier to predict. If all goes according to plan, a deal can be closed in approximately 6 weeks.
New Build from Developer
The tax on any new build is 10% across the board – whether 200,000€ or 1,000,000€.
To this, you then need to add stamp duty of 1.5% and then the additional notary fees, land registry, and mortgage fees. Please note that the stamp duty has been reduced to 1.2% from now (28APR21) to the end of December 2021. Therefore the costs of a new build are always higher for the equivalent priced resale property.
There are many advantages of buying off-plan in Spain:
- If you are hoping to retire in the future or are expecting some funds to come in at a later date, a new build may be right for you. You can secure your dream property with an initial deposit and then pay subsequent staged payments through the building process. This may fit in better if you need time to save and budget. This is a fabulous option if you do not have a strict timeframe.
- The property will be brand new and all appliances etc will be new and under guarantee.
- Some developers will give you the chance to choose the kitchen you want or to customise some of the interior.
- New builds will adhere to new efficiency requisites so are likely to have a higher energy efficiency rating
- You will be given the opportunity to snag the property prior to completion
If you decide to buy off-plan, it is good to check out the reputation of the developer. Check out what guarantees are in place. Look at the small print and check the detail. Eg. the square metres, the orientation, the view, and the qualities. Sometimes an artist’s impression is just that. It is a good idea to look at other projects the developer has done in the past. Consider the timeframe and estimated completion date. If they go behind schedule, will you get any compensation? Bank Repossession
A bank repossession could fit into any of the two types of properties. They can be ‘taxed’ as a new development whereby the bank actually becomes the developer. In other situations, a bank may repossess a house when a client cannot repay a mortgage and in this case, it will be classed as resale property.
What are the advantages of buying a bank repossession?
- Bank repossessions are often released below the market price
- They are sold ‘as seen’ and often need a lot of TLC. Investors may see potential in taking on a run-down property and in doing it up and flipping or renting it out.
- Banks often offer finance to their clients buying bank properties, as long as they meet their pre-requisites
If you are buying a bank repossession, make sure that you are ready to work on the bank’s terms. Generally, banks require a lot of paperwork and the process can be time-consuming and very bureaucratic. Banks will rarely negotiate on the price. They will rarely fix anything for you – what you see is what you get. The price for getting a good deal may mean that you need to fork out extra on white goods, fixtures and fittings, or on re-wiring. However, there are some good deals to be made.
I always recommend that if you get a chance to see a resale property where a bank repossession is available, that you look at it and compare it. Sometimes the costs of refurbishment may be more expensive than directly purchasing a property that needs little or no work doing to it.
We have been in this area for almost 20 years and are able to help you with that comparison should you want to compare different properties.
When purchasing a plot, the amount of tax you pay will depend on the seller’s tax status. If the plot is sold by a company or developer, VAT of 21 % will be applicable. However, if sold as a resale by a private individual, transfer tax is applicable.
- 8% if the purchase price is under 400,000€
- 9%between 400,000€ and 700,000€
- 10% over 700,000€
Advantages of buying a plot or investing in a structure:
Plots are fantastic if you want…
- Something bespoke
- A project
- A particular, area and view
Going into a building project is a big commitment. However, it can be extremely rewarding to see your dream house take shape. The paperwork, bureaucracy, and planning can take a lot of time, effort and patience. Budgeting is a must and sticking to a budget is probably one of the toughest things to do. If you are interested in exploring this avenue, then I would be more than happy to discuss this with you in detail. I have personally lived through the experience of project planning with my own home, where we converted a structure into our present home.
There are some fabulous plots or structures out there waiting for a personal touch.
Make sure you put aside a little extra for additional services you may require such as bank valuations, building surveys or topography assessment.
You should also consider the running costs, for example, the community fees, IBI (or council tax), and annual non-resident tax, payable. If you are buying a villa, you should factor in the garden upkeep and the pool maintenance.
If you are unsure of the type of property until you begin your search, then just work out what you can afford per month. This will help you when looking at different properties. When you search for properties, you can ensure that the community costs are affordable to you.
When I show clients around, it helps to know this. I may find the ideal property within budget but perhaps the running costs are too high for the purchaser. This sometimes happens with bank repossessions – you find a fantastic deal on a sought after urbanisation, but whilst the property may be a steal, the community fees may be high.
Are you under 35 years old, a fiscal resident in Spain and looking for your first home? Well you may be eligible for a tax reduction as long as the property is priced under130,000€. Also if you have a disability, you will also be eligible for a tax reduction if you purchase a property under 180,000€. If you do think that you are eligible for any of these tax breaks, make sure that you discuss it with your lawyer.
Step 4 – Finding the right agent for you
So you have done most of the groundwork and built up a good foundation. Now it is time to find the right Estate Agent.
Finding the right agent can be difficult. There are dozens of websites with glossy photos, promising to sell the Spanish dream, that it is hard to choose which agent is the right one for you. Here are some tips on what to look out for:
What Geographic area does an agency cover? If you know where you want to buy, choose an agent that focuses on that area. They will also have local market expertise. They will know the local registries, town planners, notaries, banks, and lawyers. This will prove to be useful throughout the buying process.
- Experience Counts
Find out how long an agent has been established for, whether they live in the area.
- Ensure that the agent is part of a property sharing network (MLS)
If so they will have access to most properties in the area and surrounding areas. The Spanish Real Estate Market works on a network basis and most agents share properties and commissions.
- Trust and Rapport
This is key. You are inviting the agent you choose to guide you through a process that represents a big decision both from an economic and emotional point of view. You need an agent who will guide you through the process and be there throughout it.
- Work with one Agent
If you build trust and rapport with one agent, I would definitely recommend that you select that agent to be your buying agent. It can take a lot of the stress out of the buying process. You can send them links from other websites and they can source them for you, at no additional cost to the buyer.
So this brings us to the end of part 1 of this Ultimate Guide to Buying Property in Spain. The fun is about to begin!
You are now ready to start your property search!
Come View with Me
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