Guide to Buying Property in Spain
This property guide is intended to give you an insight into purchasing a property here in Spain. It will help you to understand the documentation and legalities involved in making a purchase and advise on how you can make the transition to life in Spain as smooth as possible.
Moving to a new country can be a confusing experience for most of us, culture, laws, language all are different and can at times be far too much to digest. That is why we at Sapphire, will do our utmost to make the transition as stress free and smooth as possible. From the moment you step off the plane at Malaga airport we do all we can to make your initial visit and hopefully your permanent stay as pleasant and enjoyable as possible. We will also make ourselves available to show you as much or as little as you wish with regards to viewing. If this is your first visit to Malaga and you are not booked with a tour operator, cannot cope with driving abroad, we will be more than happy to collect you from the airport.
We will explain everything to you in a simple and straightforward way. We will give you all the relevant and necessary information you require to help you make your decision. Our advise is honest, as many of our clients can testify to, and given in a totally pressure free way. We pride ourselves on the fact that we never, ever, put our clients under any duress before, during or after they have been viewing properties. The decision is yours and yours alone.
Making the decision to buy a property can be a difficult one, we will endeavor to give you as much information and help as we possibly can. We will never, ever exert any kind of pressure on you to buy any type of property, we would far rather you make up your own mind. After all it is you who is putting forward your hard earned money to invest and not us. Once you have made the decision to purchase we assist you in every way possible to ensure that the purchase is conducted and concluded as smoothly and efficiently as possible. Remember it does not stop there.
When dealing with the legal side of your purchase we use our lawyers/Solicitors, who have well over twenty years experience of property law here on the Costa del Sol. They will guarantee that your purchase will be completed with the minimum of fuss and all habitation licenses have been granted, escrituras double checked, land registry check, debts and so on, giving you total peace of mind.
Having made the decision to purchase your dream home you will need to follow these procedures. A deposit will need to be placed to reserve the property you choose. This is normally 10% of the agreed price. The deposit is held until all the relevant and necessary searches on the property have been carried out. At the same stage you will be required to sign a reservation agreement, which outlines the property being purchased, the price, deposit paid and balance to be paid prior to completion. A completion date is agreed between you and the vendor. At this stage the property is taken off the market and both buyer and seller are committed to proceed with the sale. Further checks will be carried out to ensure that the property and Land is free from debt.
Initial Costs
As well as the cost of the Property, the buyer will be liable for transfer tax (IVA), which at present is 6% on a second-hand property and 7% on a new one, plus 1/2% stamp duty. The property registration office will charge you a fee to change the new deeds into your name. This is usually around 300€. There will also be notary charges for copies of the 'escritura publica'. The charge is on a scale depending on the contract price. In total you should allow 10% of the purchase price for costs. It is often the case that the buyer also pays the sellers fees. Check this at the point of enquiry and it is often possible to negotiate. Banks may also charge an opening commission for mortgage loans.
Annual Costs
The local town hall charge IBI which is an annual real estate tax. The previous owner is obliged to give you copies of previous bills. Community charges apply when you buy a property on a community development. These cover things like maintenance, swimming pools, gardens etc. You will also be liable for a wealth tax, payable annually and based on the value of the property and a property owners income tax based on your income from the property. You should clarify these in detail with your estate agent at point of enquiry.
Finance
Many developers of new properties are now offering up to 80% over 20 years for non-residents. Local banks will offer anything up to 60% for European residents. Most loans are long-term and secured on the property. When seeking a loan, make sure you are aware of the interest rates and if they are fixed or floating. Banks will ask for passports, residence permits, payslips, sale contracts and copies of the title deeds. There are many advantages to taking out a loan to purchase your property, in the form of tax allowances. We have not listed them here as they are subject to fluctuation. You may need to transfer money into Spain and you need to protect yourself:
When you buy a property in Spain, you will know the price of the property in Euros but you will not know the actual cost until you buy all of the currency to pay for it. This means that the property could either cost you more than you had planned (if the Euro strengthens) or the property could become cheaper (if Sterling strengthens). Recently Sterling has fluctuated more than 10% against the Euro within a matter of months, so this does deserve careful consideration. On the basis that you are buying a property and not speculating on the currency markets, it is worth fixing the exchange rate for all of your future stage payments to the agent or developer.
How to fix the exchange rate:
1. Buy all of the currency now on a "spot contract". Hold the currency on deposit and send payments when they are due from your Euro account. To do this you need to have full funds available.
2. Buy as much currency as you can afford now (e.g. for the first 2 payments) and reserve an exchange rate for the remaining payments. To reserve an exchange rate you need to buy a 'forward currency contract'. In effect you are buying currency now but paying at a later date when you have the funds available. The exchange rate that you achieve on a "forward contract" is not quite as good as that for a "spot contract" but it does guarantee that you know the cost of the property. You will be required to pay 10% of the value immediately and the balance by the date that you have reserved the currency for.
| Approx cost to buy a home at 128,000 euros or (80,000 pounds) | ||
| IVA 7% | Spanish VAT payable on declared property value | 8,960.00 |
| Legal fees | Searches, preparing deeds and translation etc | 900.00 |
| Notary's fees | Preparing escritura, registering and stamp duty | 600.00 |
| I.A.J.D | Spanish tax of 0.5% of the declared value | 640.00 |
| Connection charges | Water, gas, drainage, electricity etc | 300.00 |
| Plus Valia | Capital Gains Tax on increased value of plot since last sold. Levied by the Town Hall | 60.00 |
| Total | Approx 7,355 pounds | €11.460.00 |
The seller of a second-hand home should provide the following documents:
The title deed of the property
Receipt of payment of the real estate tax for the last year
Receipt of payment of the tax on the increased value of Urban Land
Certificate that any community charges (if applicable) have been paid up to date
Latest copies of domestic bills so that you can take over the services such as electricity and water
The seller or developer of a new property should provide you with:
Deed of declaration of new construction
Occupancy permit
Certificate of rateable value of the property
Normally, before the purchase of a property is made official, there is a prior agreement drawn up between the buyer and seller. This document will identify the two parties and set out the terms of purchase. You must seek legal advice before signing this and you must be sure that this is the property you want to buy. You can lose any deposit you have paid if you pull out of the purchase and there is a penalty clause in the contract. In the case of the seller defaulting then he has to pay twice the amount. When it comes to signing the contract, this has to be before a notary, in the form of a public deed. This ensures that the details are entered onto the public records.
Tax advantages for property owners
If you spend more than six months a year in Spain, you are obliged by law to apply for a residents permit.* This law is currently being abolished.
There are however, several tax advantages for residents of Spain that do not apply to non-residents.
Income Tax
Inputted income tax is an annual tax on an imaginary income resulting by virtue of ownership of a property and is charged as 0.5% of the catastral value. If you are a resident you will not be charged this on your principal home.
Wealth Tax
Wealth tax is a tax on all assets in Spain and is charged at 0.2% of the catastral value of any house owned. For residents the first 108,000€ is exempt and for a joint ownership this would apply to each partner. These two taxes are paid annually as long as you own the property. Non-residents do not receive any relief so therefore have to pay 0.7% of the catastral value every year.
Capital Gains Tax
When you come to sell the property, capital gains tax will be charged on any profit you have made. This is 35% for non-residents but only 20% for residents. A further concession for residents is that if you are over the age of 65 and have lived in your property for at least three years, you are totally exempt from capital gains tax. Finally, if you are 60 years of age or more and have lived in your property for at least three years, you can bequeath your property to your spouse or children and avoid paying inheritance tax on 95% of the valuation. The inheritor must also be a resident of Spain and agree not to sell the property for at least ten years.
All electrical goods brought from England will work in Spain. Sky television is available in Spain, the cost of installation being higher than in England, but you are advised to obtain your viewers card in England prior to moving. Electrical plugs are different in Spain and you can either change these or use an adaptor. Electricity bills are sent every two months, we would advise you to arrange payment through your bank as paying at their offices can be very time consuming and reminders are not sent out. As most cooking and water heating is done by gas, bills tend to be considerably lower than England.
GAS
There is piped gas in certain areas, but these are limited at the moment as they have only just introduced it to southern Spain. Gas canisters are available at a cost of about 11.00€ or 15.00€ depending on type. Deliveries to your door are usually made but you can buy your own from the nearest supply depot, Petrol Station or local Shop.
WATER
Water is metered, which means you only pay for what you use and costs are minimal. Unlike many years ago the tap water is safe and drinkable although it may taste different because of the minerals in the water. Bottled water is readily available and very cheap from all stores and supermarkets.
SCHOOLS
The state schools are free and enjoy a good reputation for their standards. Most state schools have a good proportion of non-Spanish pupils and whilst younger children tend to pick up a new language much quicker than their elders, additional lessons are available to enable foreign pupils to learn the language quickly. If you wish, Private lessons are available and we can organize these for you. In our experience the younger the child the quicker they tend to pick up the language. The normal school day lasts from 9 am to 2pm and pupils enjoy numerous holidays throughout the year!
There are several private schools in the area, which teach the GCSE and A level curriculum. Standards in these schools are extremely high with pass rates being much higher than in the UK. Class sizes tend to be much lower and most schools have bus pick up points along the coast for their pupils. These schools are fee paying and the amount you will pay depends on the age of the child. We have information on these schools, should you require it, and we can also arrange for you to visit the schools and have a look around and speak to the staff when you are here in Spain. These schools cater for children from 4 to 18 years of age and they can go onto University, either in England or Spain from here.
There are also quite a number of privately run kindergartens throughout the area. They are of a very high standard and are very inexpensive compared to England Approx 160.00€ from 09.00 – 14.00.
PETS
Pets can be brought to Spain from England on the Pet passport scheme. Microchips have to be inserted into the animal’s neck and rabies vaccination is still obligatory. If you are thinking of bringing your pet to Spain we would advise you to see your local vet for advice, but please do so well in advance of your departure as there are time limitations that have to be adhered to.
CARS
Taking your English car is a matter of choice. You are officially allowed to drive your car in Spain for six months then re-register it with Spanish plates. There is a cost involved, which depends on the type of car and age. This law is in place, but is not enforced with a great deal of vigor.
New car prices are less than England, Insurance costs are much the same as in England but you can transfer any no claims bonus. A letter from your Insurance Company, stating your level of No Claims Bonus, will be enough.
Both petrol and diesel prices are cheaper than in England.
Your UK driving license can legally be used in Spain but you can exchange this for a Spanish license without re-taking your test. However, should you purchase a Spanish plated vehicle you can not drive it with an English license, you will be required to have a Spanish one. Please note should you apply for a Spanish Driving license, they do require your English license and this is not returned. Should you require any further information about bringing your car to Spain, buying a new or secondhand car in Spain, advice about insurance or hiring a car whilst you are here, our office would be please to assist you.
HEALTHCARE
State hospitals and health centers have an excellent reputation and you should find that waiting lists are not as long as in England, You will be registered with a doctor at your local health center and translators are always on hand to help with any language difficulties.
There are a number of private health plans available, including BUPA and we can supply you with all the relevant information you will need if you are planning private health insurance.
Although as a temporary visitor you’re European Health Insurance Card (EHI card) will enable you to receive medical assistance. For emergencies you would go to the local state hospital and you show them your card and passport. The same with your local doctors/Health Centre for an appointment, go with your card, passport and a copy of your passport and they will register you for a month and give you a doctors appointment. In both cases they will fill out relevant paperwork and deal direct with the UK NHS service. The only thing payable by you will be your prescription; however, if the hospital has dispensed them, there will not be a charge.
For those resident in Spain the social security charges for self employed business owners is approx 250.00€ per month. However, if you are a married only one person pays normally the husband and this entitles his wife and family to free medical cover. Should both parties not be married then both parties have to pay totaling 500.00€ per month.
Chemists or pharmacies are numerous in all high streets. Most of the staff speak English and medication is usually cheaper than in England. They can diagnose most common aliments and many items of medicine can be bought without prescription. A green cross prominently displayed outside the shop identifies all pharmacies and there is always an all night Pharmacia open within reasonable distance.
BANKS
Transferring money in and out of Spain is now much easier than it once was. In fact there are now very few restrictions on the movement of your money in and out of the country. However, there can be some delays with some types of transfer. For example an English cheque can take up to four weeks to clear from being presented in a Spanish bank although transfers directly from English bank to Spanish bank takes much less time. We would advise you to seek advice from us or from your local bank manager before making firm decisions on movement of your money.
Once you arrive we can help you open a bank account, all you need is a Spanish & English address and passport. There are a number of Spanish banks in the area as well as English banks such as Halifax & Barclays. The banks all have English Speaking staff to help you. The services and types of accounts available are very much the same as in England. Cash points are readily available and they accept Switch, Visa etc, as well as their own cards. Please be careful, certain Spanish banks and certain English bank cards charge over the top charges for withdrawing cash sums
