Buying real estate in Spain is an attractive option for both investors and private buyers, whether for residential purposes, as a holiday home, or as an investment property. Spain offers a wide range of properties, competitive prices compared to other European countries, and a pleasant climate. However, acquiring real estate in Spain requires a solid understanding of legal, tax, and financial aspects. Our ERENA-Whitepaper provides an overview of the key steps and considerations when purchasing property in Spain.
1. Legal Basics Properties in Spain
– Types of Ownership: Spain offers various forms of property ownership, including freehold (“Propiedad Plena”) and co-ownership (“Propiedad Horizontal”). Buyers should have the property rights thoroughly verified.
– Required Documents:
– Nota Simple: A document from the land registry that confirms the property’s ownership, encumbrances, and size.
– Cédula de Habitabilidad: A certificate of habitability.
– Energy Certificate: Mandatory for all properties.
– Tax Identification Number for Foreigners (NIE): A NIE (“Número de Identidad de Extranjero”) is required for any legal transaction, including property purchases.
2. Purchase Process
1. Property Selection: Buyers should verify the property’s condition and legal status, often with the assistance of a real estate agent or lawyer.
2. Reservation Agreement (“Contrato de Reserva”):
– A reservation fee (around 1-2% of the purchase price) ensures the property is taken off the market.
3. Preliminary Contract (“Contrato de Arras”):
– This binding contract requires a deposit (typically 10%).
– If the buyer withdraws, the deposit is forfeited; if the seller withdraws, they must repay double the deposit.
4. Final Purchase Contract (“Escritura de Compraventa”):
– The notarial purchase contract is signed, and the property is officially transferred to the buyer.
5. Land Registry Entry: The buyer must register the property in the land registry to secure ownership rights.
3. Costs and Taxes
– Additional Purchase Costs: Typically 10-15% of the purchase price, including:
– Transfer Tax (“Impuesto de Transmisiones Patrimoniales”): 6-10% for second-hand properties.
– Value-Added Tax (“IVA”): 10% for new builds.
– Notary fees, land registry fees, and legal costs.
– Ongoing Costs:
– Property tax (“IBI”).
– Community fees (“Cuotas de Comunidad”).
– Garbage fees and insurance.
4. Financing
Foreign buyers can apply for mortgages from Spanish banks. Loan-to-value ratios are generally 60-70% of the purchase price for non-residents. Interest rates vary but often range between 2-4%.
5. Risks and Precautions
– Encumbrance Checks: Ensure that any mortgages or debts on the property are cleared before the purchase.
– Reliable Partners: Work with licensed real estate agents and lawyers.
– Construction Projects: For off-plan purchases, ensure all necessary permits are in place.
6. Tax Considerations
– Capital Gains Tax: Payable upon resale of the property (19-24% for non-residents).
– Wealth Tax: Depends on the property’s value, with exemptions varying by region.
– Income Tax: Non-residents must pay tax on potential rental or usage income, even if the property is not rented.
7. Conclusion and Recommendations
Purchasing real estate in Spain can be a rewarding investment but requires thorough preparation. Buyers should:
– Conduct comprehensive legal and tax due diligence.
– Engage an independent lawyer and reputable real estate agents.
– Plan financial commitments carefully.
With careful planning and adherence to legal requirements, buyers can fully benefit from the opportunities of the Spanish property market.
