Spain is an extremely popular destination for expats, looking for a pleasant climate and high standard of living. Whether you’re thinking of working in Spain, in one of the major cities, such as Madrid, Barcelona or Valencia, or retiring to the Spanish coast, you can find your perfect place in Spain.
If you’re thinking of making the move to Spain, you’ll need to find somewhere to live. While renting in Spain is a strong option, many foreigners choose to buy property if they’re going to stay in the long term.
At 78%, home ownership in Spain is above European averages, and the large expat communities scattered throughout Spain means that a high proportion of real estate is already foreign owned. In fact, in the first quarter of 2017 alone, nearly 15,000 homes were bought by foreigners.
Traditionally, Brits have been the largest single group of expats investing in Spanish property, but due to currency fluctuations and Brexit worries, buyer numbers from the UK have fallen. Nonetheless, more expats than ever are buying in Spain - making for a much more diversified group of foreign home owners.
If you’re thinking of doing the same, then you’ll need to know a bit about how the process of buying a home in Spain as an expat will work. Here’s a quick guide.
The Spanish property market was hit hard by the global economic crisis. In the years before the crisis, housing prices had been among the highest in Europe, with some areas seeing growth in the region of 250% in the 10 years prior to the crash. The Spanish coastal areas in particular saw surging prices, as people from Spain and beyond bought second homes, pushing prices up.
As Spain’s economy suffered in the economic crisis, so did the housing market, with a major readjustment. In fact, across the country, property prices on average lost around 40% of their value between the end of 2007 and the third quarter of 2015. This decline, naturally, hit some areas worse than others. Although year on year prices continued to fall, the decline started to slow after 2013, and demand is now beginning to grow again. Spain’s housing market returned to positive growth in the first part of 2016.
Spanish property is now starting to be seen by many as a strong investment. Because of this, foreign purchases have played a significant role in turning the Spanish property market around, with many expats buying homes in the major cities and along the coasts. This renewed interest has pushed up prices, and the outlook for 2017 is the same. It’s estimated that price growth will be in the region of 7% in Barcelona and 4% in Madrid over the course of the year. Across the country on average, the outlook is for growth of about 2%.
There are no special requirements nor paperwork for foreigners wishing to buy property in Spain, so you shouldn’t have any issues. In fact, foreign investment in Spanish property was traditionally encouraged by the government, although this became controversial during the crash, when foreign investors found themselves accused of profiting from the country’s woes. With the uplift in prices, the climate for foreign investors looks strong once more.
If you’re thinking of buying a property in Spain, the price you pay will be influenced significantly by where you want to live. Some of the most expensive properties in the country can be found in Barcelona, with Madrid city centre prices falling a shade below this. However, if you want to live in the capital on a budget, you can decrease your housing costs considerably by looking to the suburbs instead of the city centre. In other areas of the country, such as the coastal regions, the wide variety of different housing on offer means you can find something to fit pretty much any budget.
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There are several avenues you can take to find a property in Spain:
- Through an agent (*inmobiliaria*)
- An online portal which puts owners directly in touch with prospective buyers
- Word of mouth, or via adverts in the neighbourhood you’re interested in
An estate agent, if used, generally works on behalf of the seller. The estate agent fees are likely to be between 2.5 and 3% of the price of the property, and are usually paid by the seller.
If it’s the first time you’ve bought a property in Spain, then a specialist buying agent or broker might offer helpful advice and insight into the local market. However, there will be a fee to pay for this service, and you should make sure you’re clear on what you’ll get for your money, as both the packages and prices vary wildly.
Ask for local advice and recommendations for a broker, to avoid scams and pitfalls. Looking for membership of a professional body is another good choice. The API is an association of Spanish realtors, which works in regional chapters based across Spain. Choosing an agent in your local area, who holds this membership should make sure you don’t fall foul of any scammers.
The best way to get a head start on finding a place to buy in Spain is to look online. Great websites to find a house or apartment to buy include:
- Idealista has ads in English, French, German and several other major languages, as well as a handy search function while allows you to select the features of a home that are important to you.
- Compracasa has English speaking agents who can help you with your search.
- Servihabitat has an English language website, with a map function allowing you to easily choose where you want to look for your new home.
Spain has a well developed real estate sector. This means you'll have a wide choice of apartments, houses or even land if you want to build your dream home yourself. Naturally, you'll find more flats available in built up areas and cities, with houses and villas more readily available in newer developments in the suburbs, and in towns and villages.
You'll find a good mix of older properties and new build condos in the cities, while the coastal towns - popular with those looking to retire in Spain in particular - also have a good mix of new apartment complexes and villas, and more traditional style homes once you move slightly away from the sea front.
It’s a smart idea, though not required by law, to get a survey done on any property you choose before you commit to buying it. This isn’t actually the norm in Spain but some houses, in particular those over about 15 years old, can have hidden problems which are costly to fix.
Construction standards in Spain have improved greatly over recent years, and new builds are erected to the same standard as anywhere else in Europe or North America. Older homes, however, may not have been built to quite the same meticulous standard. To double check this you can find a surveyor online, or ask for recommendations from local connections.
Buying a property in Spain isn’t too dissimilar to buying a home elsewhere in Europe or North America. You’ll need to:
- Decide which mortgages might suit you, and get an offer in principle so you have a budget in mind
- Find the property you want to buy
- Make an offer the seller agrees to and have a notary draw up the sale contracts
- Check the Registro de la Propiedad (Property Registry) to make sure there are no debts outstanding against the property (your lawyer can help with this)
- Go back to the bank and finalise the mortgage
- Sign the preliminary agreement - known as the Contrato privado de compraventa, and pay your 10% deposit
- Both you and the seller sign the Escritura de compraventa, to complete the purchase. You now have to pay the balance of the price and any fees outstanding
- Have the notary register the sale
The notary has an extremely important role in house sales in Spain. He’ll prepare the contracts and make sure that they comply with local laws, and then enter the property transfer onto the land register (*Registro de las Propiedad*).
However, you’ll also need your own property lawyer to help with other aspects of the sale, such as ensuring the person proposing the sale is actually the legal owner of the property, and that there are no existing debts listed against the property. This is especially important in Spain, as debts are attached to the property and transfer with the ownership. If there’s an outstanding mortgage on the place in the previous owner’s name, you could find yourself liable for it if you don’t check this properly.
In most cases, to buy a home in Spain you’ll have to take a mortgage through a Spanish bank. There’s no legal barrier to getting a mortgage with a bank from another country (within Europe, at least), but individual banks usually decline such applications. This is because there are checks the lender must do on both the property and the borrower, which typically have to be arranged locally. Thus making cross border mortgage lending fairly unusual.
However, Spain has a developed banking sector and you have a good choice of local and global banking brands to choose from when it comes to arranging a mortgage. The four largest banks in Spain are Bankia, BBVA, La Caixa and Santander. All offer mortgage products, although it’s worth checking the small print as each product will differ slightly from the next.
You don’t need to be a resident to arrange a Spanish bank account and mortgage, and many banks, including those mentioned above, offer specific products to non-residents. However, these accounts might not offer the same number of perks as a resident account. The mortgages on offer are likely to be more limited, too, if you’re not a legal resident. If you’re planning on moving to Spain more permanently, you should consider opening a Spanish bank account and securing your mortgage, once you have confirmed your legal residency.
When you have chosen the mortgage product that works best for you, you’ll usually need to visit the bank in person to get approval.
It’s worth getting a mortgage agreement in principle before you go on too far with your property search, as this will give you a more solid idea of what you can afford.
Many Spanish banks don’t offer mortgage terms which are set in stone, but rather work on a negotiated basis with each individual client. This means that it might be a good idea to use a broker to help you find the right mortgage for you. Simply having someone on your side who speaks Spanish and really understands the system can pay dividends.
Each bank will operate slightly differently, so once you’re ready to start making mortgage arrangements, you’ll have to call your local branch to check if you need to make an appointment in advance. If you’re not using a broker then you should also check if there’s an English speaking staff member who can help you, as this isn’t always the case.
You should know that most banks will check your creditworthiness by reviewing the combined costs of your lifestyle and any existing loan repayments you have. Expect to complete a personal balance sheet to show your existing financial arrangements, and to provide documents to prove your income and outgoings.
It’s normal to pay a deposit of 10% on your property. This cash should be held in a separate account so that neither party can access it until the deal is completed. It’s important to ensure that the initial contract you sign (*Contrato privado de compraventa*) with the seller includes an arres agreement. This means that if the seller subsequently withdraws the agreement you’re entitled to double your deposit money back.
If you’re not yet in Spain, you might have to pay your deposit from abroad. This might mean making an international money transfer to cover the deposit amount. If you’re transferring a large amount of money across currencies, it’s important you get the best deal available. One smart option is to get a Borderless account from Wise. With this, you can hold 15 different currencies all in one account (including GBP, USD and EUR). It’s like having a local bank account which you can use to pay like a local, wherever you need it. And if you need to, you only pay a small flat charge to transfer cash from one currency to another.
Once you add up all of the fees you’ll have to pay as a buyer, you can expect to add around 6-10% of the property price onto your bill. Fees and taxes include:
- Property transfer tax: 6-10% of the purchase price
- Notary fees: Usually 0.03-0.45% depending on the circumstance
- Registration fees: Normally 0.02–18%
- Estate agents fees: Usually paid by the seller, and typically around 2.5-3% of the price
Buying a property is a big and exciting step, but navigating the system in a new country can be a challenge. Luckily, buying your dream home in Spain should be fairly straight forward if you follow these steps, and source the right local help if you need it.
Good luck with finding, buying and settling into your new home in Spain.
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