Popular with the Brits, Spain remains a firm favourite when it comes to moving overseas. So what are the plus points and what are the potential pitfalls of buying a property in Spain? As with any major house purchase it’s important to do your research before making a firm offer on a property. Finding out as much as you can about the local area, the neighbours and the legalities will all help to make your move abroad a success.
Why Move to Spain?
A move to Spain can seem like an attractive idea to many of us who have visited the country whilst on holiday. As we sun ourselves by the pool it’s easy to dream about what it might be like to live abroad, invest in a second property as a holiday home, or possibly even retire to Spain. If you are planning to invest in a property overseas, moving to Spain promises the allure of an improved quality of life in a warmer climate.
Upon closer inspection, the cost of living and the climate can vary across Spain, and just as in the UK and other foreign jurisdictions, a mixture of wealthy and poorer communities co-exist. Spain has experienced recession and high unemployment in recent years, and not every immigrant finds it easy to settle in with the local way of life. So, if retirement to Spain is on the cards, it’s important to get down to the nitty gritty and find out where you stand when it comes to claiming your UK pension for instance. Also it’s sensible to make yourself aware of Spanish tax implications which become applicable if you’ve lived in Spain for 183 days or more (the days don’t have to be consecutive). So, as well as the practicalities involved with buying a new property, there are several other issues to consider when moving to foreign climes, some of which may not have crossed your mind.
Useful Tips for Your Move to Spain
It’s wise to keep abreast of the Spanish property market via quality websites or forums, as well as up to date news reports, for example. Make sure you get some sound legal advice, which could save you money in the long run. If the Spanish property you’ve set your heart on looks somewhat dilapidated, opt for a full survey and get this translated into English. Assess the grounds in which the house sits, and any potential accessibility issues. Investigate the planning regulations that could affect any repair work or extensions you may like to carry out.
It’s a good idea to stay in the area where you plan to buy your new home after the holiday season, and get a true feel for what everyday life is like. Try to mix with the locals and speak to other expats whilst you’re there.
How to Buy a Spanish Property
Start by making a list of the most important things your Spanish property must have. Specify whether you are looking for a renovation project or a brand new property. This will help you stay focused and even save time, as you can brief estate agents to only send you details of properties that meet your requirements.
Hire an independent, reputable Spanish lawyer, and avoid hiring lawyers who are linked to estate agents or property developers to avoid a possible conflict of interest.
Decide on your budget and build in a contingency fund of around 10% to cover any unforeseen expenses such as legal fees, local property taxes and surveys.
Review whether you will need a mortgage to help you buy your property. It may be advisable to apply for a Spanish mortgage rather than extend your UK mortgage. Ensure you make time to research this so that you pick the right mortgage for you. Once signed up, Spanish mortgages can be for the longer term.
Don’t sign any contracts or put down a deposit before getting an all clear from your lawyer.
Be extremely cautious if considering a resale property. Check the deeds carefully and also that the property is free of any debts and encumbrances (whereby another party still has an interest in the property making it less marketable if you choose to sell it on).
If investing in off-plan property, ensure you have enough funds to cover any unforeseen events.
Be aware of your tax obligations once you have purchased your property in Spain. Whilst taxes are low, if you don’t pay them you risk having your property confiscated.
Keep copies of all documents including invoices and licences which you may be able to offset against capital gains tax if you decide to sell your property in the future.
It may be useful for you to learn some language basics, particularly when you are fact finding and trying to get a feel for different areas during the process of deciding where to buy your Spanish apartment or villa. If you are choosing to move to a rural Spanish location, you may find that away from tourist areas, English may not be spoken amongst the locals. Some basic knowledge of the Spanish language will help you better integrate with the local community, who tend to welcome foreigners that make an effort to speak the country’s native language.
Cost of Buying a Spanish Property
Whether you buy privately or a new property from a developer, be aware of the different costs which may apply to you. VAT and stamp duty are payable on a new property purchased from a developer or a bank. The VAT, or IVA in Spain, is 10% on the purchase price of new residential properties, and 4.5% on properties in the Canary Islands (2012).
Transfer tax is payable on resale property from a private individual and varies by region around the national rate of 7%. In this case no VAT or stamp duty is payable (stamp duty is included).
Income tax is payable when buying from non Spanish residents. In this scenario the buyer has to withhold 3% of the purchase price and pay this to the tax authorities.
Standard fees include agency fees (variable between 2 and 15% of the sale price). Legal fees can vary depending on the nature of the purchase and charges can be around 1% of the purchase price, which is considered quite high. If you can find a reputable lawyer who charges by the hour, a straightforward property purchase should cost circa 1,000 to 2,500 euros.
Other costs include mortgage costs, Notary expenses and registering the property with the land registry (taking out a mortgage will increase the Notary expenses).
You may need to raise a banker’s cheque to pay for your property, in which case you will need to open a Spanish bank account. Money transfers will incur a fee.
Removals to Spain
Don’t forget to factor in removals and storage costs. Book a home survey and get an estimate three months before your move from a reputable international movers firm such as Britannia Pink & Jones in Kettering, who can offer storage facilities in the UK and Spain. Britannia Pink & Jones has several years experience of moving household effects between the UK and Spain via fully tracked groupage shipment or sole container, with any excess baggage by air freight. Make sure you enquire about other useful services your moving firm offers such as moving with pets, currency transfers, packing materials and storage services. Leaving you to focus on the purchase of your Spanish home.
More on Moving to Spain
Spain Profile – http://www.bbc.co.uk/news/world-europe-17941641
Buying a Property in Spain for Dummies – http://www.dummies.com/how-to/content/buying-a-property-in-spain-for-dummies-cheat-sheet.html
Britannia International’s Ultimate Guide to Moving to Spain – http://www.britannia-movers.co.uk/ultimate-guide-moving-spain