| Spain Property Advice |
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Property prices in southern Spain have risen steadily since 1997, making Spain one of safest property markets in which to buy. This relentless rise has closely followed our own UK housing market.
Spain Property Advice Buying or selling a property in Spain will involve some different procedures to those in the U.K. However, you can make this a smooth experience by selecting reliable professionals to walk you through each step involved. When investing in Spanish property, you should simultaneously be thinking about drawing up a Spanish version of your will and consulting an expert regarding the possible inheritance taxes and other financial implications your purchase could generate. Finally, if you are thinking of renting out your property, take care to learn about contractual requirements. Buying a pre-owned property in Spain Purchasing a pre-owned property in Spain is a relatively straightforward procedure. Many people prefer buying a cheaper but older property and then refurbishing exactly as they want. For people who have the ability to do this work themselves it is possible to save a considerable amount of money, if you do have to pay someone else to do the work, we recommend investigating the costs of both the labour and materials before buying the property. When you buy a pre-owned property you will initially have to sign a reservation contract where you pay down a deposit and/or a private sales contract (a more detailed 'reservation contract' normally used when there is a long time span between signing the reservation contract and the final title deed). Before signing the title deed you will have to pay down 10% of the property price in either one payment or through an initial deposit and thereafter the outstanding of the 10% The Spanish property registry will show immediately if the seller owns the property free of liens and encumbrances. Most frequently, unless an immediate cash payment of the full purchase price is made, a private contract of purchase is drawn wherein the details of the purchase are reflected as well as the legal description of the property, purchase price, form of payment, date of completion, date of possession, etc. When the entire purchase price is paid for the property, the seller will issue the public deed of conveyance (ESCRITURA) to the purchaser, this should show that the Spanish property free of liens and encumbrances. This deed is issued before a Spanish NOTARY, is passed from the notary to the TAX OFFICE to be assessed for stamp duty, and then presented to the PROPERTY REGISTRY for inscription. Should it be required, a provisional inscription in the REGISTRY can be made immediately upon taking title.
Buying an Off plan property in Spain Buying Off plan - or at some point during the construction process - is a popular option in Spain as the earlier you buy in, the less expensive, in terms of future prices, your total purchase price should be. Spanish builders or Developers are required to take out a special bank guarantee that will compensate investors should things go wrong. Before investing in any off plan project, check on this guarantee and consult with representatives of the bank that is standing behind it. The contracts when buying off plan property will in general are quite specific including detailed information about the property and materials used. Furthermore you will have to pay between 10% and 40% of the property price during the construction. Initially you will have to pay a deposit to reserve the property and upon signing the purchase contract you will have to pay down another amount of 5% to 20%. Apart from this payment there will be some running payments during the construction. These payments are either fixed on dates (i.e. months or semesters) or on different stages of the construction (i.e. upon finishing the structure, the roof etc.). Upon signing the title deed you will either have to pay the full outstanding amount or take over the mortgage which is usually offered on Spanish off plan properties. A Mortgage for a Spanish Off plan property is usually between 60% and 80% of the total purchase price. When considering the cost of the new home, don't forget to take into account whether or not the kitchen will be "amueblada", or furnished, and "equipada", or outfitted with basic appliances. It is not unheard of for either or both of these aspects to be left in the hands of the future owner. Finally, your lawyer will help you to ensure the contract you sign is in your best interest, containing, for example, a clause that ensures you receive compensation if work is delayed. This is an excellent way to encourage your builder to keep the project on schedule and hand over the keys on - or at least near - the date promised.
Purchasing costs and Taxes when buying a property in Spain NEW BUILD/OFF PLAN: IVA (VAT) equivalent to Transfer Tax at 7% on the purchase price. RE-SALES AND PARCELS OF LAND (Urbana & Rural) : Transfer Tax at 7% on the purchase price declared in the public title deed (escritura de compraventa). In the case of residents, or Spanish nationals, if the purchase is as a permanent home, the value of the property is under 130.000 Euros and the buyer is under the age of 35 years, the Transfer Tax is reduced to 3.5% of the declared price. NOTARIAL DOCUMENT TAX is 1% on the declared value with a reduction to 0.3% in the case of residents or Spanish nationals fitting the same criterion as above. NOTARY'S FEES depend on the value declared in and the number of pages of the public title deed. On a declared price of 60.000 Euros the fees will be about 400 Euros and on a price of 184.000 Euros they will be about 1000 Euros. PROPERTY REGISTRY FEES again depend on the value declared. On a declared price of 60.000 Euros the fees will be about 130 Euros and on a price of 200.000 Euros they will be about 300 Euros. PLUS VALIA is a sales tax payable to the Town Hall on the increased value of the land (not the building) since the property last changed hands. Each Town Hall adopts its own percentages according to the number of years between the purchase and the sale and a specific calculation is made in each case and it is not possible to give an estimate in advance. It must be paid within one month of completion of the purchase buy the seller of the property and not the buyer as can occasionally be implied. LEGAL FEES must be agreed in each case between the client and the Spanish lawyer (Abogado). Allow between 1% and 2% of the purchase price for the Abogado's fees. CAPITAL GAINS TAX From the 1st of January 2007 a non-resident owner of property in Spain is liable to Capital Gains Tax on sale. The buyer on completion must retain from the purchase price and pay to the Spanish Tax Authority (Hacienda) 3% of the declared value as a guarantee of the seller's Capital Gains Tax liability, calculated at 18% on the difference between the declared value on sale less expenses and the declared value on earlier purchase less expenses. RESPONSIBILITY FOR PAYING the purchasing costs and taxes as above can be either: (a) by agreement between the parties specified in the contract for sale; or (b) according to Spanish law, with the seller paying the Plus Valia and approximately 75% of the Notary's Fees and the buyer paying the rest. N.B. On completion of their purchase, all owners of property in Spain are liable to pay Wealth Tax (0.2% annually of all assets in Spain ) and Income Tax. AS A RULE OF THUMB, prospective purchasers of property in Spain should allow 12% above the purchase price to cover all Spanish purchasing costs and taxes and the fluctuation in value between the Pound Sterling and the Euro's For further advice on buying an overseas property, please see our General Advice page. Property Connect Ltd - Secure your dream in the sun! The advice on this page is given as a guide only. There may be various issues to consider when buying your overseas property. You should always take legal advice from a lawyer or other legal advisor who has experience in dealing with buying property in the country of your choice. Property Connect Ltd accepts no responsibility for any losses allegedly resulting from the free information provided on this website. |
