Introduction:

This GPS-Direct Spanish property buyers guide has been prepared to provide a helpful, straight to the point source of important and relevant information and perhaps is particularly useful for busy, seriously minded purchasers. We take a step by step approach to achieving a positive conclusion.

Just started thinking about a Spanish investment?

Or maybe you’ve done the rounds but are still a little or even more confused than when you began? So let’s analyse things and start by looking at the key question:

What are you buying the property for?

a) To emigrate

b) Holiday use

c) Buy to rent

d) Buy off plan / capital appreciation

e) A mixture of holiday use and investment.

It is important to have some focus from the outset, the reasons buyers have for a Spanish investment may differ greatly from a UK purchase. The criteria for buying in Spain may be completely different to UK buying reasons.  

Emigrating to Spain:

Further on we will cover more fully the practicalities and living expenses of life in Spain. If your mind is made up and you are or will be in a position to move into your Spanish home within a year, it is best to go ahead and find the ideal property now. Prices are constantly moving upwards. Delivery time between reservation and completion on new property can easily be between one year and eighteen months.

If your emigration date is more than eighteen months away and you are not in a financial position to secure your ultimate new Spanish home now, you may well be advised to look at options which can utilise capital within the Spanish property market, such as:

a) Purchasing off plan for resale with possible considerable capital appreciation benefit (see notes further on under ‘Buying Off Plan’)

b) Buying to rent

c) Buying a lower priced home than your final goal, but benefit from the pleasure of it leading up to your emigration, as well as rental income and capital appreciation.

In short, don’t dream about your emigration/retirement home too far ahead without taking any action now. Later price increases may be unacceptable to you and an investment growth period may have been lost.

Holiday Use:

Currently property prices in Spain continue to rise, making a holiday home a very attractive proposition, even if only for your personal use whenever you wish.

Buy To Rent:

Many investors are currently switching funds to Spanish investments, appreciating that their money is within an international market place. Just imagine the vast letting potential and sales market which exists across Europe alone.

Further on we can look more closely at the subject of letting.

Buying Off Plan:

Can provide a very satisfactory option for three principal buying groups:

1) Long term investors - low capital expenditure into the Spanish property market with excellent long term gains.

2) Medium term financial planning – ideal for purchasers who have funds coming on stream over a given period to coincide with the Spanish property purchase contract. Maybe the sale of shares, bonds, other property or lump sums from retirement schemes.

3) Pure investment - buying off plan for resale before completion of the official title deed (escritura). For many investors who have no immediate need or particular wish for use of Spanish property this option can be ideal. Property is purchased off plan in the normal way, usually secured with up to 50% of the purchase price and then sold nearer to completion of the complex to another who will take the deed directly from the developer.

If you intend to buy off plan as described, your solicitor should check that it is possible within the terms of your contract. Some developers insist that the person signing the original purchase contract is the same one as taking the title deed (escritura).


A Mixture of Holiday Use and Investment:

Can be a splendid option. Yields can often easily match those of UK buy to rent situations. You can choose when you want to rent and when you require the accommodation for yourself.

Budget:

Usually when buying property in the UK we know pretty well exactly how much we want to spend, not so it seems when Brits buy abroad. Not being clear on how much purchasers wish to spend or can afford in terms of raising finance so often leads to unrealistic expectations and disappointment or conversely the lack of appreciation of what can be achieved with good finance advice at the outset.

Where Do You Want To Be?

Some may simply say Spain. Spain is a big country and has a land mass several times greater than the UK. The regions are diverse and have different climates.

Not only are there so many different climates in Spain, but dialects too and even cultural attitudes can vary from region to region.

Experience within GPS-Direct in Spanish property spans back almost 30 years. Whether your ideal location is the luscious green climate of the Costa Brava or the temperate Costa Blanca, with its World Health Organisation acclamation, right down to the far south of Spain, the Costa del Sol, GPS-Direct can help you.

New or Resale Property?

Off Plan / New Property: No one will deny properties purchased in this sector offer the best possible capital appreciation potential.

Promoters in the early stages of developments are keen to offer attractive initial pries and it’s quite common for prices to more than double from a commensurate off plan price to final prices when developments are complete over a 2 year Spain.

If you intend to sell before completion (execution of final deeds), instruct your solicitor to check your purchase contract carefully.
The downside to buying off plan may be considered by some:

a) The need to wait for your property

b) The possibility of building work carrying on in other phases once yours is complete – however, most developers do their best to minimise this problem.

Resale Property: Most new property purchases in the UK are in fact re-sales and to buy a new property in Britain on a like for like specification of building and land area to an older resale we usually find ourselves paying a premium; in the final analysis we seem to get less for our money when we buy a new property in the UK, as opposed to buying an older resale. Many would also argue that building standards of older British properties are superior to new ones.

To a considerable extent the reverse of the above scenario seems to apply in Spain. So let’s highlight some points why this may be so:

a) There is a vast amount of remaining undeveloped land in Spain – not so in the UK.

b) Building regulations in Spain, which now generally produce high quality new constructions, have reached all time high standards within the last few years.

c) Due in part to the elements, building costs in Spain are cheaper.

d) Many owners of established Spanish property wishing to sell, capitalise on the fact that current buyers in Spain wishing to purchase new property generally need to wait some time for the construction to the completed, hence premium prices are charged.

e) In Spain unpaid taxes for a specific property become the responsibility of the new owner on possession of the title deed (escritura), which can provide further concern, although a good solicitor (Abogado) should in theory deal with such matters on a purchaser’s behalf.

f) Commissions and marketing costs for resale properties can vary greatly between agents, leading to a number of different prices sometimes being asked for the same property when the vendor employs several agents, as most do.

Of course it is possible to buy a secure resale property and one should, as in the UK, employ the usual professional services but considerable care should be taken at every step, particularly with properties more than three years old.

Choosing Your Buying Route:

New Properties

Some Spanish developers market their own properties directly but almost without exception substantial bona fide Spanish property development companies also appoint representatives in various countries to market their properties.

GPS-Direct is a directly appointed representative of a number of principal Spanish companies, providing a complete service, including after sales. When using an appointed representative for a Spanish development company your contract is directly with the developer and you pay only the developer’s price.

For your security, GPS-Direct will normally insist you use a registered solicitor (abogado) for your conveyance.

Some prospective purchasers may find themselves on the doorstep of a developer under their own steam. However, many of the larger developers are not geared to received people “off the street”; they will be aware that the prospective purchaser is probably planning to honour many other developers with a similar visit.

Resale Properties:

For the reasons previously mentioned, purchasing a resale can be problematic, but the use of a well qualified solicitor (abogado) will help to deal with the matters referred to.

GPS-Direct in the main restrict resale property activity to properties not generally available on the open market and being sold exclusively in co-operation with the company.

Tax Efficient Ownership:

The most tax efficient way for a non-Spanish resident to own, rent and sell a Spanish property is via a Spanish Holding Company. However, the set up and ongoing running costs can be prohibitive. GPS-Direct, working with Spanish accountants, lawyers and developers, have found the solution which may suit many buyers.

Taxes on rentals can be reduced to nil and capital gains taxes, when the time comes to sell your property, can also be reduced to virtually nil.

GPS-Direct will be happy to discuss ways we may be able to help you.

Renting Your Spanish Property:

Now let’s run through some of the key points of Spanish property renting.

Location:

Obviously with renting property anywhere a good location is of paramount importance.

Swimming Pool Accessibility is always a number one consideration for people renting property in Spain.

Holiday Lets:

One of the big pluses for letting property in Spain is that we have a European market place and in fact even further a field. As in the UK, holiday lets can attract very high premiums, commonly letting for 3 or 4 months during the summer can equal that of one annual let.

Long Term Lets: As in the UK it may be possible to secure long term lets from corporate bodies, usually through letting agents, but remember there is a good Spanish market for medium to long term lets.

Using Spanish Agents:

Next you must consider whether or not you want to use a Spanish agent for the renting of your property. Spanish rental agents tend to charge between 15% and 25%. 15% is a negotiable fee for attracting the tenant, whether it be a holiday or long term let and a further 10% is normally charged especially in the case of holiday rental to cover linen changes, maid service, although sometimes the agent will charge maid service, etc directly to the tenant.

UK Promotion:

Many UK resident owners of Spanish property promote the rental of their property through magazines such as Holiday Villas, also local and national press. Arrangements are then made with ex-pats living locally to their properties in Spain, who are often more than happy to undertake changeover services, etc, for a very reasonable fee. 

Income From Rentals: Most owners seem to successfully cover 50% mortgages on their Spanish properties with rental income. However, there are certain considerations which must be borne in mind. It may take some months or up to a year for the surrounding properties to be completed and communal areas to mature, so one should not be too over optimistic on rental income during the first year after completion 

Spanish property rental income can equal and surpass UK yields.
Most of our clients looking at their Spanish property from an income earning point of view like to feel that their income will cover a 50% mortgage in as few as months as possible, thus allowing good time for personal usage.

Taxation:

There is a 25% taxation levy on Spanish property letting when owned by non-Spanish residents. See notes under “Tax Efficient Ownership” for more information on how to avoid or reduce such taxes.

Viewing Properties:

By reading through this buyers guide up to this point you will have appreciated that GPS-Direct consultants need to be highly professional and well focussed in order to help clients on the road to happy property purchasing. To help them help you, together a pre-inspection tour questionnaire will be completed to build a profile of your buying criteria.

Our inspection tours are carefully designed to take into account, on a tailor made basis, the whole of the client’s buying needs, not just the bricks and mortar aspect – important although that is.

All our tours are conducted on a one to one basis and are found to be very informative, interesting and enjoyable. Sales pressure with GPS-Direct is a non entity, as we are helping to buy with you and not to you.

Bank Guarantees:

Some developers provide bank guarantees to secure clients monies prior to completion. Your solicitor (abogado) will advise you in this regard, but additional charges by the developer and solicitor may be incurred if this service is used.

Finance:

A realistic understanding of how your Spanish investment is going to be funded, at the outset, is paramount to a successful purchase.
Spanish mortgages can be considerably less expensive than in the UK, however, a combination of fund raising in both the UK and Spain can lead to very satisfactory 100% finance deals.

Our in house mortgage advisor is always available to provide competitive quotations.

Spanish Wills:

Your Spanish property will of course come under Spanish jurisdiction in respect of any subsequent inheritance matters and a Spanish Will is more than highly recommended. The solicitor (abogado) who deals with your property conveyance will deal with your Will according to your instructions.
Spanish Solicitor (Abogado)

Introduced by GPS-Direct will carry out the following work:

a) Obtain NIE number - this is a fiscal identification number for foreigners in Spain.

b) Follow up contract with developer through to completion of the title deed (escritura).

c) Carry out searches on the title deed of land or property to ensure smooth conveyance on day of new owner signing title deed at the Notary.

d) Prepare all necessary documents for the Notary.

e) Translation and assistance at the Notary for the signing of the title deed.

f) Deal with all mortgage related work.

g) Paying the taxes involved in the purchase of a Spanish property.

h) Changes of title of the gas, electricity, rates and water contracts.

i) Continue with work of fiscal representation in Spain, if instructed to do so.

Securing the Property of Your Choice:

OK, you’ve found the property, what’s next?
The procedure could not be simpler and for the sake of this illustration we will follow the procedure of a typical purchase of a new off plan property purchased through GPS-Direct:

1) A contract is drawn up between yourself and the developer with a reservation fee of 3,000 euros (£2,000) payable.

2) At this stage our company recommends that the contract is approved by a local English speaking Spanish solicitor (abogado). The solicitor will have local knowledge of the company you are buying from and will easily be able to check all necessary details of the contract.

Additionally you can take preliminary advice on other matters including mortgages and Spanish Wills, etc.

3) Once the contract is signed and the deposit paid, you will have secured the property at the contract price, regardless of further price changes.

You will be required to make interim payments prior to completion, with the first amount due one month following signing of the contract.

Payment schedules vary, the most common being between 40% and 50% of the purchase price one month following signing the contract and the balance on completion, but this can vary between different developers.

Transferring money to Spain is usually best handled by specialised companies working to secure the best rate of exchange for you and liaising with your bank or building society. GPS-Direct will help you to select a currency transfer company if required.

Completion:

Following your inspection of the property, on the day of completion and day of final payment your solicitor will accompany you to the notary. You could elect to give your solicitor power of attorney to act on your behalf in your absence. In spite of appointments being made well in advance, you can expect to be at the notary’s office for well in excess of one hour.

As well as your solicitor, in attendance will be a representative from the developer and also an official from the bank if you are taking a mortgage.

There are a number of elements which contribute to the total purchase costs, notably:

1) IVA 7% (Spanish VAT) payable on the declared value of the property.

2) Allow a further 3% on the declared price for notary fees, registration charges and legal fees
.
Most of the quotations above are based on declared notary figures, giving a situation that if one allows 10% on top of the actual purchase price paid, adequate funds should be in place to complete your transaction.

In addition, if you are taking a Spanish mortgage, the bank may charge a set up fee of up to 1% of the amount borrowed and the notary will require 1% to register the mortgage deed.

GPS-Direct DO NOT currently charge an administration or after sales fee, unlike many other companies.

Living in Spain:

Certainly the amazing choice and low cost of wonderful fresh food produce in Spain, not to mention quality wine as well as generally lower priced groceries, electrical goods and clothing all help to make living in Spain enjoyable and economic.

In terms of property ownership costs, we take an example of a 2 bedroom villa to assess average costs, taking into account: