Eight years on from the 2008 recession, and an average increase in property prices of around 4.7 per cent, buying property in Spain is still affordable to many. However, the process of purchase and associated costs are all important considerations before making an informed decision.
Knowing what you want to buy and where
Spanish property purchasers fall into 3 main categories:
- People who want to live permanently in Spain which means that you will be either retired or wanting to bring your family to Spain to live and work there.
- Investors looking for long or short term investment possibly with a rental income.
- Those who are looking for a holiday home, either with or without a rental income for the time when they are not using it.
If you are buying a house in Spain for retirement
Unless you seriously like living in the middle of nowhere, retired people should consider the practicalities of travelling and proximity to airports, hospitals, shops, banks, bars and restaurants etc. You may have some idea of what you are looking for but don’t be surprised if your final choice of property is entirely different to what you had in mind.
An ideal situation for couples looking toward the long term would be to live on an urbanisation that has all facilities and is a reasonable distance from the airport, hospital and beach. This offers the best of all worlds because there is likely to be a mix of Europeans living on such an urbanisation, some of whom will speak English. If you don’t speak Spanish, this will be very important to you in the first months after you move. There are many urbanisations in Spain where new villas and apartments are being offered at bargain prices.
These urbanisations are often inclusive of security and could be considered safer to purchase because they are often owned by banks and therefore completely legally built and close to all of those services you will need in your retirement.
Buying property in Spain for investment
Spain is currently an investor’s dream. There are so many bargain properties available, investors can buy several lucrative apartments for what it would have cost for one around 10 years ago. Building a portfolio of property in Spain is a viable option for investment on two levels. The price of apartments is incredibly low at present but tourism is almost back to where it was before the recession began, so there is a lot of scope for rental income during the long holiday season. There is also potential for long term lets to nationals and foreigners. Investment is for the long term because it may be another 2 to 5 years before the housing market stabilises, but when it does significant profits could be made by those investors who have had the foresight to purchase now.
It is more practical to purchase a holiday home where there is potential to rent the property out whilst you aren’t using it. And it makes sense to purchase on an urbanisation that is within easy distance of an airport, beaches, bars, restaurants and maybe a golf course or other sporting venue. Urbanisations are more likely to have property management services to take care of those rentals and help with the maintenance and change over of guests
However, you may have entirely different ideas about what you want, so before you go on your viewing trip to Spain you should do some research on the internet and then arrange to visit.
Where to get what you want
When the property boom came to an end and the economic downturn set in, thousands of estate agents closed their doors. And when the Spanish Government introduced new regulations for such agencies, many more ceased to trade. The estate agencies that have survived are professional, ethical and legal so it is possible to put faith in your agent nowadays.
When you know the area where you want to buy a house in Spain, if you haven’t already found your chosen estate agent online, look for an estate agent in the nearest town. Most estate agents in larger towns have at least one person who speaks English and even if they don’t they will have a person they can call who does.
Set yourself a target for how many properties you want to view. 5 to 6 is usually enough. Viewing 20 or more and taking photos/ videoing them so that you can view them when you get home, isn’t a great idea for two reasons.
- Viewing that many properties tends to be confusing and after a while, the photos merge into one.
- By the time you have scrutinised 20 or more properties there is a good chance that the one you finally decide upon will already be sold.
Why use an estate agent?
If you do not speak Spanish and don’t have an in depth knowledge of the way houses are bought and sold in Spain it is advisable to use a good agent.
Agents know the local area, much as they do in the UK, and possess negotiating skills that you may not have if you want to make an offer. If the owner is Spanish, the agent will be able to communicate effectively on your behalf.
By law, the Agent has to be in possession of a copy of the Nota Simple of the property which is the equivalent of a UK search. This document outlines what you are actually purchasing and whether or not there are any debts or mortgages outstanding on it. The agent will also have a copy of the title deed of the property. A common misapprehension of British buyers for many years has been that you cannot buy a property that has a mortgage or embargo on it. The situation in Spain is no different to that of the UK. It is normal to purchase a property in the UK when the vendor has a mortgage or other charge on the property. When the sale completes, the proceeds of sale are used to pay off the mortgage or other charges and the balance given to the vendor. In Spain it works in exactly the same way, so there is no chance that you will end up purchasing a property and have to pay off the mortgage on it for the rest of your life or become responsible for the charges on it. This will be done on completion and you will have legally purchased a property “free of charges” a term that will always be included in the initial contract for sale and purchase.
The agent will also be able to show you around the area if you want to look at schools or other essential facilities.
Making an offer
It is a fact that something is only worth the money that someone is willing to pay for it, and you have nothing to lose by making an offer. Your agent can advise you whether or not it is possible that your offer would be accepted and then make the offer on your behalf. It is always worth making a reasonable offer; the worst that can happen is the vendor saying “no”!
The buying process
Having found the property you want to purchase, there are two main options available to you to check the legalities and move on to completion:
- You can employ the services of a Lawyer who will do the necessary searches to ensure that the property is legally built, properly registered and check its status in terms of mortgages and/or charges. The lawyer will also check ownership to ensure that the person or company selling it to you actually owns it or has the authority to sell it to you.
- You can take a copy of the title deed (escritura) and the nota simple to a Notary who will be able to tell you the legal status of the property. A Notary is a Government appointed independent and impartial official who is a qualified Lawyer. However, the Notary will not do any of the work that a normal lawyer would such as drawing up contracts, liaising with the vendor’s solicitor, paying your taxes, changing utilities into your name etc.
In the UK it is almost unheard of for vendors and purchasers of property not to have a lawyer but in Spain it is highly unusual for Spaniards to use them for conveyancing. They rely on Notaries to advise them as to whether or not the property they intend to buy is legal and they do all the legal work themselves.
You can save money on legal fees by doing what the Spaniards do but it would require the services of a good translator if you don’t speak Spanish, and even if you do, you would need to understand exactly what is required to complete a purchase.
Another option is to use a Gestor who is the equivalent of an accountant. These are usually slightly more cost effective than Lawyers and infinitely more efficient.
It is normal to pay a 10 percent deposit when you sign a contract committing to the purchase. This is called the compraventa and is drawn up by either your Lawyer or Gestor. The deposit is not refundable if you pull out for no good reason.
Costs over and above the purchase price
We have covered the costs you should expect to pay in addition to the price of your property in our 'Buying a Property in Spain: the Fees' article. Read a break down of legal fees and the other extras here.
The best way to send money to Spain
The currency exchange rate is subject to fluctuation and naturally you will want the best rate available. Sometimes you will have to move money quickly in order to secure your purchase. You can make considerable savings on your currency exchange by using a specialist exchange service like Foreign Currency Direct, who can arrange your transfer and send the payment directly to your seller or Solicitor on the same day.
For more in depth information on buying property in Spain download our Moving to Spain Guide.