Buying Guide for Property in Spain
Listed below is a guide to some of the key points:
All the prices on our website are listed before taxes and legal costs. The following is a guide to expenses for any purchase of Spanish property. You should add:
- ITP 8% on bank repossessions and resales (*)(**)
- Land registry, notary costs 2% - 3%
- Clients may have other expenses on completion. e.g. first years' insurance, first quarter's community fees
- Solicitor/Legal fees. Typically €1,000 + VAT.
This is a summary of taxes and fees and we recommend a number of good independent lawyers (Spanish and English speaking) to advise fully as each purchase and client circumstances differs. (see below).
(*) ITP is charged by the regional government and applies to most of the property on our website. However If the property is direct from the developer this is taxed by the national government and not the regional government. IVA (VAT) and not ITP then applies and this is 10% (not 8%). Bank repossessions although often new and unlived in are classed as second hand for tax purposes because the "first sale" was the repossession from the developer.
(**) ITP in Murcia increased from 7% to 8% on 11 July 2013.
The process of buying will vary depending on the source of the property. There are three types or sources:
3. Direct (Developer)
Each property is marked as either bank, resale or direct on our website. As agents we can show you any of these properties and help you choose the best for your needs.
The majority of our buyers are likely to be interested in the bank owned properties. For bank properties the process can vary depending which bank and resort. Either €3000 or nil followed by 10% is due as a reservation deposit. This is often refundable based on mortgage approval.
When buying a resale property in Spain, an offer is put forward to the vendor. If this is accepted a deposit (usually €5,000 or €10,000) reserves the property until the next stage which is a private contract between vendor and buyer. The next stage is usually 10% of the purchase price prior to completion. Often the next stage can go straight to completion without the need for a second stage deposit.
For direct developer properties, deposits are either €3000 or 10% depending on product.
From offer to completion can be as little as 3-4 weeks for cash buyers and 2-3 months where a mortgage is required.
We recommend you appoint an independent lawyer (solicitor) to manage the legal details of your purchase. We have contact details for a number of English speaking Spanish lawyers in the Murcia area and we can arrange meetings during your trip.
What do I Need?
: Anyone buying a property in Spain
requires an NIE (or NIF) number. This is the Spanish equivalent of a National Insurance or ID number. You can obtain this during your trip or by granting a POA to your lawyer they can obtain it for you.
Power of Attorney: Although not necessary it is useful to provide a POA to your solicitor. This will allow them to deal with legal matters on your behalf without you having to be present in Spain. This can include the full buying of the property including completion at the notary and NIE above. We have several local Spanish solicitors (English speaking) that we recommend and arrangements can be made to meet them during your visit.
At present as a UK or overseas buyer the only way to achieve a high mortgage in Spain
on a property purchase is by purchasing a bank owned property
. Otherwise on resales and purchases from the developer, mortgages are available for non residents typically to around 50%-60% of the purchase price.
It is rare to get 100% mortgages following new laws in Spain from July 2013 which restrict banks from lending over 80% of the valuation. However it is possible on selected properties from certain banks.
We deal with at least five different banks for the properties they own. Bank property mortgage interest rates are between 2.00% and 4.00%. The best deals we have are currently are at Euribor + 1.25% (around 2.0% mortgage rate). These are the general market conditions at time of writing. (Updated March 2014).
Applications are generally quite quick. You will need typically proof of income (P60's, Tax Returns, Signed Accounts), a credit reference (eg Experian or Equifax both of which can be obtained online), 6 months' bank statements and details of assets & liabilities.
You will need a Spanish bank account. Most banks now offer statements and correspondence in English including online banking in English. It's free to open a bank account. You just need your passport and a small deposit. If you are taking a mortgage then that bank will insist you have a current account with them anyway. We can help you open an account while in Spain. Your solicitor can do this in your absence with a Power of Attorney.
We recommend a couple of days to view properties and meet with a solicitor and possibly a bank should you be applying for a mortgage. In most cases a property can only be taken off the market once a deposit is placed. This can be done in some cases by card (depending on developer/bank) or by bank transfer from your home country on return. Read More: Polaris World Inspection Visits
There are a number of providers in the area that can furnish your home throughout including lighting and outside furniture. We can help you with selecting these. Most can deliver and install your full order without the need for you to be present in Spain. Furniture packs
are available that provide everything you need so your home is ready to move in. We are often asked how much does it cost to furnish a property. You can do this from just a few thousand Euros (there is even the Ikea option in Murcia!) but it really depends what you want to spend. Generally furniture packages similar to this showhome
start from around €5000.
There are six Nicklaus designed golf courses across the six Polaris World resorts in Murcia which make up the Nicklaus Trail
. Residents can play any of the courses and are entitled to reduced fees. A round of 18 holes is priced from 44 Euros plus there are various promotions, eg twilight. Residents can join their own course for €1200 pa or €1600 pa for a family of four or pay slightly more for full access to six Nicklaus courses in the region. Read More: Polaris World Golf
Renting Your Property
The benefit to buying a property for investment and rental at Polaris World is it offers year round rental potential. The golfing season is counter to the summer season. Hence holidaymakers in summer, golfers visiting the rest of the year. A traditional beach resort does not offer this.
You can choose to rent your property through one of many independent rental agencies managing property rentals on the resorts. Fees will vary depending on the service required from basic cleaning and key holding to full marketing. You can of course market the property yourself (ie local ads, via contacts, websites). There are a number of websites that will advertise your property for around 200 Euros per year. Read more on Polaris World rental examples.
Renting and its success very much depends on how you manage, equip, market and advertise your property. It depends also on the property you select. There is no simple answer to how much rental you will obtain. Our advice in most cases for those wishing to rent is to primarily invest for the lifestyle benefits and long term capital growth. Any rental when not using the property can then contribute towards the costs.
The region of Murcia is well served by airports making it one of the most accessible coastal regions of Spain for cheap flights from the UK and Ireland. There are a total of six Polaris World resorts all in the same region of Murcia, all 10-30 minutes from Murcia (San Javier) airport. Ryanair is a major carrier into Murcia, also Jet2, Easy Jet, Virgin, BMI and a few others. Airports currently connecting with Murcia include Gatwick, Luton, Stanstead, Liverpool, Dublin, Belfast, East Midlands, Prestwick, Bristol, Blackpool, Manchester, Leeds/Bradford, Birmingham, Southampton, Exeter and Edinburgh. In addition there is a new international airport being constructed in Corvera due to open in 2013 This will be 10-20 minutes from all the Polaris World resorts. Alicante airport is also close by, 60 minutes from the resorts.
Service Charge (Community Fees)
Each property at Polaris World will have a community fee attached. The community fee is set by the resort residents association. It is set to cover communal costs such as swimming pool cleaning, 24 hour security, gardens etc. It is a non profit entity and is there to simply cover the costs of such communal maintenance. These communal costs are allocated to a large extent on the size of the property. Two bedroom apartments pay from 60 -100 Euros per month with two bedroom villas and townhouses from around 120 Euros per month.
Other running costs
In addition to the community fee there are annual taxes to pay to the local town hall. This is the equivalent of the community charge in the UK covering local services such as refuge collection. Expect to pay between 200-300 Euros per year depending on property size.
There are then utility costs for water and electricity (and gas on some resorts). Again, similar to the UK these are paid direct to the utility companies by direct debit. Your solicitor will arrange these for you. Costs are on a useage basis and the price per unit of water and electricity is typically lower than the UK. Expect to use far less for heating and lighting! Note with some repossessed bank properties the utilities may have been disconnected and there may be a reconnection fee.
Often for home insurance in Spain your bank will insist you take their policy for the first year. If this is the case it will be well worth switching for the second year. A recent example (2012) of a two bedroom apartment contents insurance on Hacienda Riquelme was €405 pa through the bank and €136 the following year through the Spanish arm of a large UK insurer who issues their policies in English. We can provide contact details of that company for our clients.
tv internet and phone lines
This is available throughout the resorts. There are several hundred TV channels free of charge including BBC, ITV, Sky etc. Internet is cabled throughout the resorts to every property and several resorts are now moving towards providing this free of charge to residents. (included in the community fee). Please contact us for more details. Phone landlines cost around 11 Euros per month standing charge from the local provider A2Z.
Technically it is not necessary but highly recommended. It will speed the whole process and it will typically cost €100-€200 with a solicitor.
Capital Gains Tax
This has recently been reduced to 18% for non residents. It is only payable on the increase in property value when you sell your property. There are a number of ways to reduce or avoid any tax being paid. For example if you are over 65, a resident and if you have owned your home for more than 3 years or if you are re-investing in another property.
If you are non resident you will not have to pay any income tax unless you generate income or are deemed to generate income within Spain.
minimum market value
The bank properties we sell are at huge reductions to their original prices. In some cases the regional government will attempt to charge the 7% ITP tax on a higher price than that at which the property is being purchased. This is because they deem the minimum market value to be higher. It is perfectly possible to challenge this but the regional government hopes you don't have the will and it is sometimes cheaper to pay than incur legal costs. The lawyers we recommend are well rehearsed in this area and will advise the best route.
Buying Spanish property through a company
Buying Spanish property through a company is perfectly possible. Legal and tax advice is necessary and there is more administration to do in this sense than there would be simply buying as an individual. We can recommend lawyers specialist in this area. Please note that it would not be possible to obtain the high mortgages advertised for bank repossessions if buying as a company. Banks will lend perhaps 50% to 60% in these cases and the application process will be more stringent. There is an annual tax of 3% of the catastral value of the property however under double taxation arrangements with Spain (most countries including UK and EU) this can be avoided for foreign companies.
For information, clarification or further questions please call our experts on 0208 429 7115.
Tax laws always subject to change. Advice above should not be relied upon for detailed tax planning. Consult specialist advice where necessary.