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Useful Tips To Consider on Buying Property in Spain


SOME USEFUL POINTERS FOR THOSE THINKING OF PURCHASING SPANISH PROPERTY

Purchasing a property is a major 'investment', whether in your own country or overseas. Noted below are some of the more common issues that are encountered when purchasing property in Spain. These notes are only for general guidance and, in particular, professional advice should always be sought with regard to legal, financial and taxation matters.

1) Is a property in Spain always a good investment?

As is likely to be the case in your own country, the simple answer is NO. However, if you take the right advice and use your own common sense, many of the key principals you would consider with local property purchase will also apply to any property you look at in Spain, including:

  • Location - accessibility (airports, car, public transport, conditions of roads, sign-posting
  • Facilities - both at the property and within the immediate area (pool, beach, golf, tennis etc)
  • Attractions - range of amenities which would appeal to cross section of users and within easy travelling distance
  • Adjacent developments - nature, style, quality of adjacent developments
  • Planning restrictions - high rise, zoned land use, future developments
  • Perspective - immediate and potential outlook/inlook, surrounding garden/space, privacy

You can judge for yourself many of the above considerations and balance these against the proposed cost of the site/property, resale track record/capital growth, rental experience from discussing them with both your agent, developer and potential neighbours.

2) What part of Spain would best suit my budget/requirements?

The general view is that the Costa del Sol tends to have the most expensive properties (£150k upwards) and although cheaper properties can be purchased, the points noted above should be fully considered. The Costa Blanca is currently experiencing significant property development and would have a broad range of prices with the more scenic Marina Alta (Northern Costa Blanca) where there are strict planning controls/restrictions in certain areas to prevent over development eg Moraira, Javea, Denia, where properties can range from £80k to £500k+. In the Southern Costa Blanca, properties can tend to be much cheaper as there appears to be less restrictions on more intensive developments, or where the area is still relatively underdeveloped with limited infrastructure (eg Costa Calida).

In reality, much will depend on what you want from your property and set against what you wish/can spend.

3) How do I decide what is best for me?

Preliminary discussions with the various property agents should give you a `feel' for what is available from their property portfolios/representations. Once you have considered which property agent offers what you believe you are seeking, an inspection visit to the various areas/developments is the best way to ascertain if the initial discussions are accurate. Whilst a number of agents/developers offer `free inspection trips', take care, as these tours can limit what you might see.

Depending on the agents you use will also impact the degree of `hard sell' and their `encouragement' for you to pay a deposit on your inspection tour and thereby reserve a particular site/property. Again use your own common sense in committing yourself to a purchase if you have unanswered questions/doubts, then make your decision in the cold light of day. However, if you are definite about what you have seen, have had all the key issues clarified, then delay may result in others purchasing your preferred property/site!

4) How does the weather vary between the seasons and regions?

Mainland Spain does have seasonal variations, although not as pronounced as in the UK/RoI. Summer months will be hot and dry, with perhaps the Costa del Sol and the Northern Costa Blanca may be slightly more humid than Southern Costa Blanca (but not uncomfortably humid). During the late Autumn, Winter and early Spring, the evenings can be cooler, although the days can still be in the low 20s (celsius) and there is more rain in both the Costa del Sol and Northern Costa Blanca, as a result of the more mountainous terrain and evidenced by the greener, more cultivated landscape and thereby offering attractive scenery.

5) Is a deposit paid on a site/property in Spain refundable?

A deposit in Spain should be part of a signed legal contract which should state the price of the site/property at the time of signing and the finishing date for the project. On signature, the purchaser is guaranteed that no other buyer can take that site/property for the period specified on the contract, and also that the site/property will remain at the stated price. Consequently no `gazumping' can occur after the contract has been signed, however, neither can the deposit be returned (normally circa £2000). Where contracts are presented in Spanish, you should seek a translated version to your own language.

6) At what stage do I appoint legal advisers?

Before committing yourself you should certainly make enquiries as to potential legal advisers, your property agent should be able to offer advice or your own local lawyer may have associations with appropriate Spanish lawyers. At the initial meeting you should seek some idea of their costs associated with your property and as may be the case back home, costs will vary depending on the time and complexity associated with the purchase. In addition, to your own lawyers costs, there will also be Notary costs, which tend to be based on the value of the transaction, not time!

7) Will exchange rates have any impact?

If you live within the UK, you may be aware that as yet, the £sterling is not part of the Euro and consequently your purchase costs will be affected by exchange rate movements between the Euro and the £sterling. Currently, and for over the past year the Euro (and hence the Spanish peseta ) has been `weak' against the £sterling, with the Spanish peseta ranging from 245 to 290 pesetas/£, and resulting in many UK residents purchasing property in Spain (and elsewhere within Euro-land). Your exposure to future exchange rate movements can be minimised by taking out forward contracts to cover the future payments for your Spanish property and the foreign exchange office of your bank can advise you on such transactions.

If you live within the Republic of Ireland, as the punt is within the Euro, the exchange rate between the punt and the peseta has been fixed at 211.26 pesetas/I£1. Being part of the Euro should make it easier and cheaper to transfer funds between RoI and Spain.

8) Can I obtain a mortgage on my Spanish property?

UK/RoI financial institutions may be reluctant to offer mortgages on overseas property as there tend to be difficulties associated with repossession of property across international borders. Depending on the availability of other 'local` collateral and your own standing with these financial institutions, loans may be available to finance the purchase.

Mortgages are readily available in Spain, although they may restrict the mortgage to 60 -70% of the value for non residents. Mortgages are normally straightforward, although as in the UK/RoI, you should deal with reputable financial institutions. In the case of UK owners, you should also be aware that the mortgage/repayments will be in pesetas/euros and consequently exposed to exchange rate fluctuations with £sterling, until such time as it is part of the Euro.

9) What level of rental income can I expect?

Depending on your location, there can be excellent scope to achieve rental income throughout the year. For properties close to beaches, rentals can be higher during the peak holiday season (July/August), although perhaps of less interest in the off season, whereas properties adjacent to golf clubs/tennis/horse riding complexes can achieve higher occupancy/rentals over the year.

Rental rates will also vary depending on the facilities and the overall location and if you anticipate wishing to rent out the property, make sure that you check the local rental market with rental agents (are they seeking more properties for their books, what rates do they achieve, occupancy levels etc) before committing yourself to a site/property. The rental market can also be assessed by reviewing some of the holiday villa magazines (Private Villas, Holiday Villas, web sites on the internet) and which are published in the UK and available at large newsagents.

10) What are the tax implications and whom do I pay taxes to?

That will depend on you tax status ie whether UK or RoI resident or planning to reside in Spain. Both the UK and RoI have double taxation agreements with Spain. It is always advisable to check your specific tax planning options with professional tax advisers before committing yourself to a specific course of action eg changing your residency status, generating rental income.

11) What is the position re health cover, is there a Spanish NHS?

Again this will depend on whether you are just visiting Spain or intending to live there permanently. If you are just visiting then you should complete an E111 form (obtainable from the Post Office) and take this form with you on your trips. The E111 form entitles you to similar healthcare benefits to those currently available in the UK/RoI. In addition, if you have private healthcare and/or holiday insurance, the benefits available will be outlined in your policy documents.

If you intend living in Spain, you should be aware that private health insurance is more common and at lower cost than the UK/RoI, primarily due to the healthier climate and diet. The Spanish health care system enjoys an excellent reputation, although the is a greater tendency to expect a relative to stay with the admitted patients and provide basic assistance during the period of admission. If you are under 65 years of age, you will need to take out private health care insurance, whilst those over 65 years are entitled to free heath care.

Should you be interested in acquiring your 'heavenly home' please contact Anthea Campbell at 028 9145 5178 for further information - other than the cost of a phone call it costs nothing to enquire!

NB THE ABOVE INFORMATION IS GENERAL INFORMATION ONLY AND YOUR OWN CIRCUMSTANCES WILL INFLUENCE SPECIFIC ADVICE

Cielo Villas - 12 Coniston Road - Bangor - Northern Ireland - BT20 4QQ Tel: 028 91 455178 Fax: 028 91 455178 Mobile: 0802 928661

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