24 Jan Everything You Need to Know About the Spanish Property Market Before You Buy Your Dream Home
No one loves Spanish property quite like the Brits. Britain is consistently at the top of the list of foreign buyers in Spain and it’s not difficult to understand why.
Not only does Spain offer a warmer climate, an improved work-life balance, and a lower cost of living, but there’s also a thriving expat community.
Whether you’re looking to settle down in a spacious villa in the Costa del Sol or invest in a sleek buy-to-let apartment in Barcelona, we’ve got tons of useful information to help you decide if 2019 is the best time for you to buy property in Spain.
The Spanish Property Market
It’s now over 10 years since the credit crunch crash of 2008 and the Spanish property market is finally back on its feet again.
The country’s economy as a whole is growing steadily, (Spain actually saw growth of 3.1% in 2017) and since the market began to stabilise in 2014, property prices, as well as the number of sales, have been on the rise.
This is the highest figure on record since 2008 and equates to an increase of almost 15% when compared to 2016.
A report published by Spain’s national property register revealed that the average increase in price between 2016 and 2017 was 7.6%.
This sustained growth has continued throughout 2018. The Tinsa data (Tinsa is a Spanish property valuation company) for the first quarter of 2018 has shown a further 5.4% increase in price for both new and second-hand property sales.
The majority of experts are predicting that this slow and steady growth is likely to continue and the upturn in the Spanish property market has attracted overseas investors who are once again flocking to Spain.
Top 5 Spanish Property Websites
If you’re looking for the best places to find Spanish property online, look no further! Here’s a list of the top 10 Spanish property websites to help you bag your dream home in Spain.
Attracting over 2 million property hunters per month, Fotocasa is one of the most visited Spanish property websites. There are over 1.2 million properties to choose from, including those available to rent as well as buy.
Idealista has more than 1.5 million properties to choose from and like Fotocasa it covers both rental properties as well as those for sale. Thousands of listings are added daily so be sure to keep checking this site regularly!
This is a site that specialises in apartments to rent all over Spain. While it won’t help you find a property to buy, it can be incredibly useful if you need a short-term place to stay while you shop around for or finalise the purchase of your property.
This website is in Spanish so you’ll either need to get a Spanish speaker to help you or ask Google to translate the page to give you an idea of the services available.
They offer accommodation to buy and rent including residential, commercial spaces, and land. A nice feature of this website is that it allows you to search for new construction.
Yaencontre is a Spanish estate agent. They have almost 800,000 listings so it’s worth checking them out. The site is currently only available in Spanish so again you might need a translator.
Habitaclia advertises a range of residential and commercial properties in northern Spain. At the time of writing, they have over 70,000 homes listed in Barcelona alone.
Expats in Spain
There are currently over 240,000 British expats living in Spain. Spain offers expats great weather, good food, a laid-back lifestyle, and a low cost of living.
It’s also an ideal location to use as a base to explore nearby treasures like the Balearic Islands and Gibraltar, or to travel further afield into northern Europe or Africa.
The country has a rich cultural history, beautiful architecture, and relaxed and welcoming people.
The slow pace of living and sociable lifestyle (it’s not uncommon for large groups of people to get together to enjoy a meal and drinks in the evening) also often attracts people to Spain.
English is widely spoken, particularly in Barcelona, Madrid, the Costa del Sol, and Majorca, where a lot of Brits have settled, and so expats should have no problems meeting like-minded people and joining a community.
If you are thinking of becoming one of the tens of thousands of Brits that relocate to sunny Spain each year, the first thing you’ll need to do is some serious research.
You will no doubt have a ton of questions, so here’s a list of useful websites that are chocked full of useful information and valuable advice to help you figure out the best plan for your move.
If you’re moving to Spain, Expatica should be your first port of call. The site pretty much covers everything you need to know about moving to Spain. If you need information on visas, housing, work, education, finance, or healthcare, you’ll find it here.
This is an independent site with an active forum that covers a whole range of topics relating to business, lifestyle, finance, moving, language, the law, and technology.
Ideal Spain claims to be the world’s largest and oldest guide to Spain. They offer in-depth guides on every aspect of Spanish living, from making the decision to move and finding the right property to mortgages, investments, and more.
This site is a global hub for expats in Spain and is great for connecting with expats from your home country and beyond. There are plenty of different groups and events you can join, and they run meetups for expats monthly. They also have a ton of useful guides on there as well.
If you want to learn from those that have boldly gone before you, check out this lifestyle blog. It’s written by an expat and paints a good overall (and sometimes quite humorous) picture of life as an expat in Spain.
How Easy Is It For Foreigners to Buy Property in Spain?
Although Spain actively encourages foreign investment in its property market, the country is incredibly bureaucratic.
If you want to buy property there, you’re going to have to accept the fact that you’ll be up to your neck in paperwork. This is why most people opt to go through an agency or lender who understands all of the intricacies of Spanish bureaucracy.
Choosing an agency or independent third party with a good reputation can also help you to minimise the risks of buying property in Spain.
For example, did you know that there are properties in Spain that have been built illegally and that the government has the authority to tear down?
There are also lots of rules and regulations when it comes to renovation.
Buyers looking to renovate a run-down or ruined property should ensure that they are fully aware of any relevant national or regional regulations that may affect their plans.
Many properties that are considered to be in ruins, for example, require that the property being renovated has a partial or completely intact roof in order for planning permission to go through.
A good agent will be aware of these potential pitfalls and can, therefore, help you to avoid buying an illegally constructed, unsafe, or unviable investment property in Spain.
The following video (issued by the British Embassy in Madrid) highlights the importance of doing thorough research when considering purchasing property in Spain.
Getting a Spanish Mortgage: Rates and Other Costs
Getting a Mortgage in Spain
While you can legally apply for a mortgage from a Spanish bank, as a non-Spanish citizen, your mortgage is likely to be capped at a maximum of 60% to 70% of either the overall purchase price or the valuation as determined by the bank’s assessor.
The majority of mortgages available in Spain will be variable rate mortgages linked to the Euribor (European inter-bank offered rate). As of January 2019, the Euribor rate is -0.378%.
Euribor rates are currently more attractive than fixed-rate, but there are also many fixed-rate mortgages available. Fixed-rate mortgage prices vary depending on the terms of the loan, and are likely to fall somewhere between 2.5% (based on a 15-year loan) and 3.25% (20 years) in 2019.
It’s important to note that the credit check process with Spanish banks can become quite complicated. This is another reason why it’s a good idea to have a reputable agency or knowledgeable third party acting on your behalf.
Other Costs to Consider
If you’re using a Spanish lender, it’s a good rule of thumb to allow 10% to 15% of the total purchase price to cover all of the extra transaction fees.
This usually covers the following additional costs:
- Transfer fees – this is a Spanish tax that is payable upon purchase. It usually falls between 6% and 10% of the total purchase price and varies depending on the location of the property.
- Stamp taxes – the stamp tax also varies by location and could cost anywhere between 0.75% and 1.5% of the total purchase price.
- Bank’s mortgage arrangement fee
- Bank’s opening fee
- Bank’s assessor’s fee
- Notary fee
- Registry fee
If you’re buying a residential property in Spain, you are legally required to take out a home insurance policy. This must cover the full value of the property.
You are not legally required to have life insurance, however, many mortgage lenders make this a mandatory requirement to obtain a mortgage. Lenders generally require that your life insurance policy covers the full outstanding cost of the mortgage.
You may also want to consider taking out mortgage insurance. This protects you against defaulting on your payments in the event of an unexpected loss of income. In some cases, having a good life insurance and mortgage insurance policy in place can save you money on interest rates.
Short-Term Finance Options
The market is becoming increasingly more competitive which means that in some cases you may need to act quickly to avoid losing out to another buyer.
The good news is that there are other, shorter-term financing options available to you. This means that when you find your dream house in Spain, you don’t need to wait for your current property to sell in order to make your purchase.
Bridging loans, as the name suggests, are loans designed to bridge the gap between the sale of your existing property and the purchase of a new one. If your house is likely to take some time to sell, taking out a 12 or 24-month bridging loan could help you get to Spain more quickly.
Bridging loans can be secured against commercial as well as residential property, the idea being that you pay off the loan once your house is sold.
The Buying Process in Spain: 7 Simple Steps
The process of buying property in Spain can be divided into 7 simple steps as outlined below:
The first step is fairly straightforward. Once you’ve found a property you like, you contact the seller’s estate agent and make an offer. You should have already discussed mortgage requirements with your lender before making an offer.
Once your offer has been accepted, both you and the current owner must sign a contrato privado de compraventa (preliminary contract). Make sure that any surveys or inspections have been finalised and any planning permission issues have been dealt with before you sign this.
In Spain, any debts attached to a property automatically get passed on to the new owner, so it’s important to also make sure that there are no outstanding debts attached to the property before you sign anything.
When you sign the preliminary contract you will also need to pay a deposit. This is usually set at around 10% of the purchase price.
The next stage is to secure your mortgage. Please be aware that due to the severe financial restructuring following the 2008 property crash, mortgage conditions from Spanish banks may be less favourable than those in the UK.
For example, some rural properties in Spain will only qualify for a mortgage of 50% of the total valuation.
Also, mortgage lenders in Spain don’t finalise payments until you are already the legal owner of the property, so it’s a good idea to have a clause in the contract that allows you to pull out of the agreement in the unlikely event that your mortgage falls through.
Once you’ve secured your mortgage, the next step is to sign the escritura de compraventa (final contract of sale).
This final contract should be signed in the presence of a notary. This is not always a legal requirement, but it is advisable to ensure a smooth transaction and most mortgage lenders will require that a notary be present as part of the contract.
Once the escritura de compraventa contract is signed, you must pay the agreed sale price in full as well as any other transaction fees or taxes owed.
The whole buying process usually takes somewhere between 6 and 8 weeks to complete.
That’s it, folks! You’re are now armed with everything you need to know to successfully purchase your dream property in Spain.
I wish you sun, sea, sand, and sangria along with the best of luck in your journey.