Spain´s strong property market makes it a good destination for property investors and expatriates. There are a series of steps to be taken when buying property in Spain as a foreigner as well as several costs associated with property purchases which merit consideration.
The Spanish property market is strong with housing prices up 4.2% in May 2018 making Spain a good destination to purchase investment properties and a popular location for expatriates. Spain´s property market has a wide variety of houses, apartments and land to choose from making Spain perfect for investment properties, holiday homes and retirement.
There are no limits on foreigners buying and reselling property in Spain. However, buying property in Spain does not automatically give a foreigner permanent residency or the right to work in Spain.
Steps – Buying Property in Spain
- Foreigners´ identification number (NIE): This can be obtained in person in Spain, or overseas at a Spanish consulate or through an agent.
- Search for property: You can do this online. It is also recommended that you engage a reputable property agency. To avoid possible scams, it is advised that you engage an agent with membership to the Association for Spanish Realtors (API).
- Survey the Property for Hidden Defects
- Mortgage: There are no restrictions on using a foreign bank to mortgage Spanish property, however, foreign banks often deny finance applications because the distance creates difficulty in performing property checks. There are no restrictions on foreigners using a local Spanish bank branch to finance their property purchase and there is a good range of global banking brands to choose from.
- Negotiate and draw up contract of sale: Independent expert advice is recommended.
- Check Property registry for encumbrances: This is a vital step as, in Spain, debts are charged to the property, so, if a new owner does not properly check for encumbrances, they may be liable for them. This step should be done by a conveyancer or property lawyer.
- Pay 10% deposit: It is recommended that this be paid into an account that neither party has access to until the sale has closed.
- Sign final contract of sale (“Escitura de compraventa”) and deed of sale
- Registration of the sale
Fees – Buying Property in Spain
It is important to note that purchasers may face the following expenses:
- Rental income tax of 19% on gross rental income
- Non-residents are taxed 3% on the cadastral value of the property
- Non-residents are taxed 19% on annual capital gains
- Property transfer tax (TPO)
- For new property, Value-Added Tax (VAT) and stamp duty are paid instead of TPO
- Notary and registration fees
Buying a property in Spain is an exciting venture, but navigating the foreign procedures may be difficult. Hopefully this guide, paired with appropriate advice, can prepare you to purchase property in Spain.