Before buying a property in Spain it is a good idea to understand the most important financial elements of the purchase, which can have an influence on your financial situation today and in the future. Apart from the total and initial costs there are other factors such as taxes, interest rates or exchange rates, which you have to take into consideration. Below you can find a short introduction to some of the most important financial elements of buying a property. If you are interested in further information you can Contact Us or fill in a short form in the section Help & Advice and we will get back to you with answers to your questions.

Facts
The price of properties in Spain has during the last 10 years increased by 11.4% p.a. (adjusted for consumer inflation) according to a study made by the Economist. This makes Spain the country in the world where the property prices has increased most during the last ten years and have therefore attracted many foreign investors to buy a property in Spain. Buying a property can be a very good investment apart from the benefits of having a property at your disposal. The increase in the value is expected to continue by most experts but can of course change due to incalculable factors such as the Spanish or the world economy or a change in property taxation or duties etc. We therefore recommend people - who are not financial experts or are willing to take the economical risk - not to buy a property only as an investment. (If you are a professional investor and are looking for further information about investing in the Spanish property sector please see Property Investment Advice).

The increase in house prices in Spain differs from region to region and in some cases even between locations situated within a very short reach. We have examples of people who have saved 50% or more by looking in the neighbouring town for almost the same type of property.

The average price per square meter (the way house prices are measured in Spain) in 2004 was 1748 Eur (according to the Ministerio de Fomento). The price per square meter is much higher in popular tourist destinations like Andalucia, Valencia or the Balearic Islands or in big cities like Madrid, Bilbao and Barcelona.

The size of foreign investments in properties in 2004 was about 3.2bn Eur. Almost half of this amount was invested in Andalucia, which is the most popular place for foreigners to buy a house in Spain.

Mortgage Loan
If you need a loan to finance the purchase of a property in Spain you have first of all to decide whether you want finance from a Spanish bank or from a bank in your own country. There are different factors that can influences this option like; where you are going to live and work, where you have your savings, interest rates, exchange rate fluctuations, fiscal advantages of obtaining a loan in different countries, cost of financing a property in different countries, etc.

When financing a property in Spain you can either take a loan in a bank or provided directly from the developer if it is a new property. These types of loans are secured in the property and are long-term loans about 20-30 years. A bank will normally lend you between 60% and 80% of the price. To obtain a loan the bank will normally ask for copies of your passports, either payslips or proof of savings, sale contracts and copies of the title deeds.

You have to be aware of the type of interest rate the bank is offering, as it can have a great influence on the monthly cost - now and in the future. If you live or have your savings in a none-Euro country you also have to be aware of exchange rate fluctuations, as the exchange rate can change very quickly (both positively and negatively). It can be recommended to fix the exchange rate (i.e. buy a spot contract or a forward currency contract). This can be done in your bank or in financial companies specialized in these types of operations.

If you are interested in further information about mortgage loans or other financial issues please fill in the form in the Help & Advice section.

Initial Costs
The initial cost of buying a property in Spain is about 10% of the total price. Below you can find a short description of the different cost involved in a property transaction.

To buy a second hand property the buyer has to pay a transfer tax, which is 6 or 7% of the price (depending on the where in Spain you are buying). On a new building (when bought directly from the constructer) the buyer have to pay VAT and a stamp duty, which is 7.5% (7% VAT and ½% stamp duty).
The buyer will also need to pay for the new official title deed 'la escritura' stating who is the owner. This is made by a public notary and the price is about 500€ depending on the price of the property. All properties in Spain also have to be registered in the 'Registro de Propiedad' and the deed need to be changed into the new buyers name, which costs about 400€.

Apart from the above obligatory costs there are other costs, which will increase the total amount.
It can always be recommended to seek legal help and advice from an independent lawyer before you sign any contract. The cost of this assistance is about 1% of the property price - see the section Accom Services for further information about how we can help you with legal and general advice.
If you need a mortgage loan to finance the purchase there is normally a 1% application fee charged by the lender (this is 1% of the mortgage, which is about 0.7% of the total price).
You also have to be prepared to pay about 10% of the property price as soon as you have decided upon a property. This is normally arranged with a pre-contract to make sure no parts can regret without incurring a financial penalization.
Finally there is a tax IVT or plusvalia which is a tax based on the increase of the value of the land since the last sale. This tax is officially supposed to be paid by the vendor but in many contracts it is specified that the buyer have to pay. The exact amount depends on the size of the land and the years since the last valuation.

Annual Costs
Before you buy a property in Spain you have to be aware of the annual costs, apart from the loan you might have in the property. There are different duties and taxes you have to pay when owning a property in Spain.
The annual real estate tax is a tax to the local government, which is based on the official value of the property ('valor castral' which is normally lower than the real value). The amount is a percentage of the value, which can vary from community to community but will be around 0.5% per year.
Property owners shall also pay a wealth tax based on the value of the property minus the mortgage and other debts registered against the property. The total amount to be paid is around 0.2%-0.5% depending on whether the buyer is a resident in Spain, the number of owners of the property and the value of the property.
None-resident property owners or residents that owns more than 1 property have to pay a special Attribute Tax. This tax is about 0.5% of the official value of the property but is taxed as an income tax and therefore differs for residents and none-residents.
Owners of community properties like apartments and houses with shared facilities will have to pay a monthly fee for maintenance, cleaning, gardens, etc. This fee depends on the number of facilities but is about 30-100€ a month.
If you rent out the property you also have to pay an income tax on the earnings. The amount depends on your other earnings in Spain and whether you are a resident or not.
It is also obligatory for all property owners to have fire insurance in Spain.
Finally there is a capital gain tax, which have to be paid when the property is sold (this is not an annual cost). This tax is calculated on the profits of selling a property (difference between purchase and selling price adjusted for inflation minus initial cost like VAT, lawyer and notary fees). For non-residents there is a flat rate of 35% on the profit and for residents this is 20% or 0% if the profit is used to buy another property or the owner is older than 65 years.

The different taxes above and the amounts mentioned can only be used as a guideline. There exist a number of exemptions that can change the total amount or the percentage which have to be paid. For further information you can contact us by filling in the form in the Help & Advice section.

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