Buying Property
The Spanish property market offers significant benefits to investors. It has seen sustained growth since 1993, with significant rises from 2001 to 2004. Prices continue to rise, but with a slower growth rate - 14% in 2005 and 9% in 2006. While there is the prospect of further slowdown in the rate of growth, the Spanish market offers real potential for ongoing returns. Investors benefit from extensive historical data on this well-established marketplace when making investment decisions. Should any price fluctuation occur, investors who retain their property through a period of slowdown can still realize on their investment, when price growth resumes.
The buy-to-let market sector is very popular, driven by the increasing demand for holiday accommodation, especially in summer. With low-cost airlines delivering holidaymakers from the UK and Europe to the main Spanish resorts, investors can hope to secure good yields from rental properties. The holiday rental market has also benefited from increasing numbers of holidaymakers booking flights and accommodation direct, over the Internet.
In conclusion, property prices in Spain seem firm, but sustainable. The British continue to contribute significantly to this market as both permanent residents and temporary visitors. A report from the Institute of Public Policy Research suggests that 3.3 million UK pensioners may be moving overseas by 2050, three times the current number. In addition, UK holidaymakers are key to the ongoing demand for holiday homes. The holiday home market in Spain offers strong rental yields of 7-8% in popular destinations, which, in turn, bolsters healthy capital values.
The standard purchase process in Spain includes the following steps:
Before you start the process of buying a house in Spain, you should first ensure that you can put down the reservation deposit on the property. In most cases the minimum deposit is 3,000-6,000 Euros, although it may be higher with more expensive properties.
Once the seller has accepted your offer, and you have agreed to go ahead with the purchase, the agreement needs to be put into writing. A private 'option to purchase' contract, or a sales contract, is prepared, along with the terms of purchase. These will be received and checked by your lawyer; then they can be signed and exchanged.
Finally, the deeds of purchase are signed before a notary in order to make the contract public and legal. The final payment is then made, and the sale is complete.
The cost of a standard property purchase in Spain includes the following:
Legal fees - a total of either 1,200-1,800 Euros or 1% of the purchase value, whichever is the greater.
IVA (Spanish equivalent to VAT) - this is applicable to both new builds (amounting to 7% of purchase price) and urban plots available for immediate building (16% of purchase price). The tax must be paid on each instalment.
Taxes on Conveyance of Assets and Document Legal Procedure (ITP-AJD in its Spanish acronym) - the title deed is also subject to taxes on 'Conveyance of Assets and Documented Legal Procedures', which is the Spanish equivalent to Stamp Duty. This is around 0.5-1% of the purchase price.
Notary Fees - changing the deeds to the purchaser's name costs around 300 Euros, which is charged by the property registration office. The notary will charge for copies of the 'escritura publica' on a sliding scale, depending on the contract price.
Capital Gains Tax - based upon the increase between the original purchase price of the property and the selling price. The tax is payable by the seller and is levied at 18% to non-residents (reduced from 35% as of January 1, 2007).
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