The purpose of this guide is to provide an introduction to the basic and most common concepts and Spanish taxes that a non-resident (read this article to find out when it is considered a non-resident person in Spain) or a foreigner may face.
This guide is in no way a substitute for professional advice, as a thorough investigation of the various personal circumstances is required to give the best and most profitable tax advice.
Please do not hesitate to get in contact with us and we will be glad to provide you with the best solution for your situation.
If you want to buy a house in Spain as a foreigner, you will have to sort out some bureaucracy before you can buy a property.
The Spanish property market has many peculiarities, and it is worth doing some research before buying a house in Spain.
Factors to consider when buying a property in Spain include property scams, high capital gains tax and the fluctuations of the Spanish property market.
The steps involved in buying a property are not always intuitive. In addition, it is necessary to have clear which taxes and expenses you will have to pay in order to purchase the property.
This series of articles is a guide to help those looking for a property in the coast of Spain or in a big city such as Madrid or Barcelona.
Spain suffered greatly during the global financial crisis and the subsequent collapse of the property market. House prices fell by up to 30%, but in recent years the market has stabilised.
Prices in Spain have risen steadily since 2016, and although the COVID-19 outbreak affected the market in 2020, official figures show that average prices grew during the second quarter of the year. Sales prices rose by 2.1% year-on-year, with new-build house prices increasing by 4.2% and second-hand by 1.8%.
The full economic effects of COVID-19 on the Spanish property market remain to be seen. Real estate experts predict that the value of house prices could fall by 5-10% in the short term.
The latest statistics showed that the average house price in the main cities reached 1,649 euros per square metre, while properties in the Balearic and Canary Islands experienced an increase to 1,604 euros per square metre.
The most expensive places to buy in Spain are San Sebastian, Barcelona and Madrid. Prices in all three areas range between 3,000 and 3,600 euros per square metre.
The Community of Madrid is the most expensive place to buy land in Spain, with prices of 338 euros per square metre. The Canary Islands (245 euros), Catalonia (184 euros), Andalusia (171 euros) and the Community of Valencia (158 euros) occupy the top five places. Castilla y León is the cheapest place to buy, with an average land price of 66 euros per square metre.
Levels of home ownership in Spain are high, with around 80% of residents owning their home, and many do so without a mortgage.
Buying a holiday home can be complex, but Spain is a very welcoming country for foreign buyers.
The rules for buying a property in Spain as a foreigner are relatively straightforward. Before buying, you will need a financial identification number, which can be obtained by going to a police station with your passport. This is usually processed on the same day for Spanish or EU citizens, but can take a few weeks for others.
Also, although it is not compulsory, having a bank account in Spain will make all the paperwork easier for you, as it will speed up payments and probably save you some fees.
Spain also offers a visa programme for foreign owners from outside the European Union. Under this programme, if you invest more than €500,000 in real estate in Spain, you will get a residence visa. These visas are mainly aimed at retirees and holiday home buyers, but are particularly popular with non-EU investors.
Firstly, you need to decide what type of house you want – are you looking for a flat with sea views, a historic property in a local town or a rural finca set in its own grounds? Making a list of all your requirements and dividing them into “must haves” and “would be nice to have” can save you a lot of time and make your search process much more efficient. For example, “must have a minimum of 3 bedrooms” and “would be nice to have a balcony”.
Next, you need to find properties that meet your list of requirements. There are several popular online portals you can use, many of which are available in English to make the search process easier.
Below you can find some of the most popular Spanish property portals:
Many of the properties you see on the Internet will be managed by estate agents. Some will speak English (especially in the more touristy areas) and most are used to dealing with foreign buyers. Although estate agents can help you obtain detailed information about the area or town you are looking for, it is advisable to approach them with some caution.
Regulation is relatively low in Spain and there are unscrupulous estate agents. Always remember that the agent is paid by the seller. Ultimately, they are trying to sell a property and will normally only show the positive aspects of a property, not its flaws. Never provide upfront payments and try to steer clear of agents who suggest you cut corners. Some will suggest you make use of their contacts, but we strongly recommend that you seek out your own notary, mortgage provider and lawyer so that you can be fully confident that they are on your side.
Once you have found a property you like, it is best to visit it in person to make sure it meets your needs and expectations.
During an initial viewing, you may notice some obvious problems that can affect your decision to buy or negotiate the price. Some other problems may not be so easy to spot, which is why we recommend looking more closely at the condition of the property.
Before doing this, it’s good to do some basic checks. Here are some things to look out for, depending on the case.
Spain has long been popular with foreign buyers looking for holiday properties. The large number of inexperienced foreign buyers has occasionally given unscrupulous developers and estate agents the opportunity to sell properties that are not legal.
In some cases, building permits were not obtained before construction and the properties were eventually demolished by the local government. In other cases, the quality of the property did not meet specifications, resulting in costly repairs.
Many foreigners have had such experiences, which warn buyers abroad to be careful and not take unnecessary risks. We recommend checking at least the following:
Most of this information can be provided by the Land Registry and requested by email, phone, fax or in person. You can find the relevant land registry office on the national website: www.registradores.org (in Spanish only).
As a non-resident, you can also buy a plot of land and have a property built yourself. In this case, good legal advice is even more important, as you need to make sure that the contracts with the builders are appropriate and watertight.
The worst property scams in Spain, as elsewhere, involve unfinished or unbuilt properties. Although malicious intent is rare, caution is advised when buying a property that does not yet exist. At the very least, you should:
Before you start buying, make sure you have seen:
Although this is not obligatory, in this case it is advisable to commission an expert to check a second-hand property.
It is possible to buy a property in Spain without doing a home inspection, but this is not advisable. With a home inspection, you can make sure that the property does not have any major defects that could be your downfall later.
There are generally two types of appraisals for existing properties. An appraisal is a superficial report that gives you an independent guide to the market value of the property.
A building survey goes deeper, examining the structural condition of the property and highlighting any serious problems. Building appraisals are more expensive than value appraisals, but also provide a more comprehensive overview of the condition of the property.
Initially, you must make an offer on the property, usually through the seller’s real estate agent.
As in other countries, prices are open to negotiation; the asking price of the property is an indication and not a requirement. Unless the price is particularly attractive or in competition with other buyers, it makes sense to start negotiations below the asking price, but not so low as to offend the seller.
Basic price negotiations are usually done verbally. Once you have reached a general agreement, you should have to summarise your offer in writing.
If the offer is accepted by the seller, then the buyer and seller sign a reservation contract or earnest money contract and the buyer pays a deposit, usually 10% of the purchase price.
You can find more information on the reservation contract in our article Deposit contract or reservation contract: how to write a property or house sale contract in Spain without mistakes.
The next stage is the signing of the deed of sale before a notary, at which time the full purchase price, taxes and other expenses must be paid.
If you do not live in Spain at this time, it is advisable that you give a lawyer access to your bank account by means of a Power of Attorney so that you can go to the bank, collect the bank cheque and then go to the notary to sign on your behalf, pay the seller and pay the relevant taxes.
It is your responsibility as a buyer to pay all costs and taxes associated with the purchase of a property. If you have chosen to use the services of a lawyer, he or she will be able to advise you on everything you need to consider.
The buyer is also responsible for registering the property. The notary can provide this service for a fee, and can notify the registry that the sale has taken place.
The seller is officially responsible for hidden defects in the property, even if he is unaware of them. However, in practice, obtaining compensation for such defects can be difficult and costly.
If you are unsure of the condition of a property, it is best to have a survey carried out by an independent third party before paying the deposit or as a condition of paying the full amount at the same time as the deposit is paid.
Although not a legal requirement to complete the sale, it is highly advisable to use the services of a notary to ensure a smooth transition of the property.
It is highly advisable to have a notary to complete due diligence and is required by most mortgage lenders.
Once the reservation contract has been signed, it is then up to the buyer to arrange a mortgage, if necessary, although they should have already discussed their needs with the mortgage provider beforehand.
After the financial crisis of 2008, Spanish banks have been heavily restructured, with significant international involvement of the EU and the IMF.
As a result, banks are approving fewer mortgages and mortgage rates and conditions have become less favourable.
In general, non-resident buyers in Spain can enjoy the same mortgage conditions as Spaniards:
– Up to 80% coverage in the case of the first home.
– Between 60 and 70% in the case of a second home.
– In the case of a rural property, you can only obtain a mortgage for 50%.
It should be borne in mind that the value that banks give to a property can be very different from the real market price.
Therefore, it is absolutely crucial that you speak to a bank first before putting down a deposit.
Another thing to bear in mind is that mortgages in Spain are usually contracted for a minimum of 5 years and a maximum of 30, with the maximum age to have paid off the mortgage being 75 years.
In addition, your debt should not exceed 30-35% of your income.
In Spain, mortgage lenders will not complete a mortgage agreement until you own a property.
For this reason, it is important to include a clause in the contract that allows you to get out of the agreement if you are unable to acquire the mortgage.
It should also be noted that each institution has its own risk criteria, which may include the country of residence, although properties abroad are not usually accepted as collateral, as they are difficult to reach.
As we saw in our previous point, mortgages never cover more than 80% of the purchase price. This means that you need to have at least 20% of the property price available, plus about 15% on top of the cost of the property to pay for taxes, lawyers’ fees, notary fees, etc…
Most costs are the responsibility of the buyer in Spain, and costs can vary considerably from one region to another.
In general, the additional fees and expenses to be paid by the buyer amount to 8 to 12% of the purchase price and include:
Estate agent fees are usually paid by the seller, but it is advisable to check with your estate agent in advance, as sometimes fees are split. For your information, estate agents usually charge the seller around 5% of the final sale price plus 21% VAT.
In the case of a sale, two taxes apply: If you make a pre-tax profit, then you will have to pay between 19% (non-resident) and a maximum of 23% on en profit. The second tax is:
In Spain, the local “plusvalía” depends on the municipality and can vary greatly, from zero to several thousand euros.
Sellers who want to minimise their taxes sometimes suggest notarising a lower sale price and receiving the balance in an envelope under the table.
Of course, this is not a good idea, as this approach can have very negative consequences. Firstly, it can lead to legal problems. Secondly, if you agree on a lower sale price now, you will have a higher tax bill yourself when you want to sell the property again.
If you are a non-resident or foreigner, you can find more information about taxes in our article Taxes in Spain for non-residents and foreigners: Taxes payable on the purchase or sale of a property.
If you are going to buy a property and want to save yourself future problems, it is advisable to seek advice from a real estate lawyer in Spain. The savings far outweigh the cost of legal fees.
Buying a property is usually the biggest investment for most people. Even those who own several properties tend to invest cautiously in the property market. Real estate companies always use the services of lawyers before making an investment.
Ultimately, the services of a lawyer are often more useful for preventive rather than corrective purposes. But most people continue to hire them when it is too late.
Making the effort to find a good advisor can save you a lot of trouble.
Before entering into the purchase of a property, basic research and analysis should be carried out. It is important to check that the property is in order and that the contracts of sale and, if applicable, the mortgage loan, will not end up causing problems.
In addition, tax charges represent an important percentage of the operation. Together with the associated costs, they can increase the sale price by up an important percentage. Therefore, it is advisable to know this extra before getting a scare.
Any lawyer practising in Spain must be registered with the local Bar Association. They will have a registration number which you can apply for and check with the bar association.
Of course, registration does not guarantee honesty or competence, but it is a good minimum standard to insist on.
At Firmalex we are registered lawyers with the experience of having helped hundreds of happy clients find their dream home in Spain.
