• Buying Property in Spain as a Foreigner: The Ultimate Guide

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    Suggestion: Watch the 5 minutes video tutorial before reading this article

    Spain is one of the hot spots for European travelers, retirees and overseas property investors. You’ll also find plenty of Americans and Asians who are keen buying property here.

    Buying property is fairly easy in Spain and, in fact, foreigners are welcomed with open arms as the government tries to attract more investors.

    As you might remember, Spain struggled much during the economic crisis that evolved in 2008.

    A great benefit of buying real estate in Spain is that you have no issues to own the land which your house is built on. This is not the case in Asian countries like Thailand, Vietnam, and Indonesia.

    Yet, before you buy property in Spain as a foreigner, it’s important that you learn about the buying process, property taxes, if you can a Spanish bank account, and more.

    Topics covered in this article:

    Can foreigners buy property in Spain?

    Foreigners have no particular restrictions to buy property in Spain. As mentioned, the Spanish government even encourages foreign investors to buy local property.

    This is a completely different story to places like Singapore and Hong Kong, where the governments have introduced hefty buyer’s stamp duties towards foreigners, to cool down the markets.

    buy-property-spain

    Another benefit of investing in a Spanish property is that you can buy any kind of property such as a unit in a condo, a villa, land, or an apartment.

    In many Southeast Asian countries, unfavorable property regulations leave foreigners with the only option to buy units in condos.

    Can foreigners buy land in Spain?

    Yes, as mentioned, a great benefit of buying real estate in Spain is that you can own land as a foreigner.

    Here, many foreigners buy villas in places like Marbella, Malaga, and in Seville.

    Yet, even if regulations towards foreign property ownership are transparent and favorable compared to many Asian countries, you need to be cautious and study the buying process well in advance, before engaging in the market.

    Process when buying property in Spain

    In this section, I’ll explain the complete buying process when you buy a property in Spain.

    First of all, you should get a local ID number, also referred to as NIE.

    How to get a Foreigner’s Identity Number (NIE)

    The first thing you need to do is to get a so called Foreigner’s Identity Number (NIE). The NIE number is similar to the ITIN in the US, simply, it’s your personal tax number.

    Without the NIE number, you can’t make local transactions such as paying property taxes and for utilities, among others.

    Where can I apply for the NIE number?

    You have two options when applying for an NIE number:

    • Apply in your home country, at your local Spanish embassy
    • Apply for the NIE directly in Spain, after arrival

    The application can also be submitted by another person on your behalf, if the other person is authorized to do so.

    Therefore, I highly recommend that you give your local embassy, or contact the Spanish Ministry for Foreign Affairs, to get all advices you can get.

    You can also ask whether another person can act on your behalf, if that’s how you want to proceed, and if your contact person is authorized to act on your behalf.

    What do I need to bring to apply for the NIE?

    You need to bring the following documents when you apply for the NIE:

    • The filled in application
    • Copy of your passport
    • One passport photo
    • Around 12 euro to pay for the application (bring some more, just in case)
    • A separate document explaining the background of your NIE application. The document might need to be notarized. Your notary can help you to do this, for example (notarized means that an authorized person verifies your identity)

    Where can I find the NIE application form?

    You can find the NIE application form on the Spanish Government’s website.

    Keep in mind that you need to fill in the application in Spanish, thus, it can be a great advantage to let your notary or translator fill out the document.

    2. Getting a non-residence certificate in Spain

    If you open a non-resident bank account, you also need a non-residence certificate.

    I recommend you to apply for the non-residence certificate at the same time as you apply for the NIE, as this will save you time.

    The procedure is very similar and you can apply for the non-residence certificate at your the local Spanish embassy in your home country. After, they can send your application to the Police in Spain.

    3. Opening a Spanish bank account when buying property as a foreigner

    spain-bank-account

    You need a Spanish bank account before you can buy a property.

    So which are the biggest and most popular banks? Below I’ve listed some of the most common options:

    • BBVA (Bank of Bilbao and Biscay)
    • Bankia (Bank of Madrid and Valencia), Caixabank (Bank of Barcelona and Seville)
    • Caixabank (Bank of Barcelona and Seville)
    • Banco Santander

    What documents do I need to bring to open a non-resident bank account?

    You need to bring the following documents:

    • Your passport
    • A so called non-residence certificate
    • Your NIE number (bring the original document)
    • Bank statements or pay slips that proves where your income comes from
    • A document that proves your residential address (like a utility bill)

    Contact the above mentioned banks by phone or email and ask for what’s needed to open a bank account. It’s always important to get up to date information and an individual assessment.

    Bear in mind that the required documents might differ from bank to bank, it’s important that you confirm all these details beforehand.

    And don’t forget:

    It can be favorable to open a bank account at the same bank that provides you a mortgage.

    As such, I suggest you to confirm what mortgage options you have with each bank, before you choose a bank to open your bank account.

    4. Getting an insurance in Spain

    In addition to the NIE and non-residence certificate, you’ll need a local insurance prior to your property procurement.

    Your bank can help you to find an insurance, that’s why I recommend you to handle everything through the same bank. To summarize, for the following items:

    • Opening a bank account
    • Getting an insurance
    • Mortgage applications

    5. Getting a preliminary mortgage agreement (Approval in Principle) in Spain

    As mentioned above, you should confirm the mortgage options you have, earliest possible. After, you should get a preliminary mortgage agreement.

    The preliminary mortgage agreement will assure that you don’t face any hurdles or unknown surprises later, as you might end up with a situation where you can’t finance your property.

    This is not optimal if you’re far into the buying process and already spent a lot of time and paid a deposit.

    6. Finding a notary when buying property in Spain

    I’ve not explained about the duties of notaries in my previous articles.

    The reason is that you’re usually not obliged to hire notaries, for example, in countries like the US, Canada, Australia and other Asian countries, .

    What are the duties of a notary?

    Simply out, a notary represents the state and has different duties compared to a solicitor (property lawyer).

    The notary can help you to review titles, contracts, terminate lease contracts on a landlord’s behalf, and give you advice during at the time of a property purchase.

    In Spain, you’re required to hire a notary as they will make the registrations related to your money transfers, and handle tax related issues.

    The notary will be present at the time you sign the sales contract and, in a traditional manner, read the contract in front of you.

    In some states in the US you are also able to hire notaries, but societies become more digitized and notaries can now act as witnesses digitally, through webcams for example.

    How can I find a notary in Spain?

    I highly recommend you to contact your local embassy to see if they can offer help to find a notary.

    Sometimes, you can work from abroad and still let the notary help you to deal with local matters in Spain.

    You should also check online and check the official website for Notaries in Spain.

    7. Hiring a solicitor (property lawyer) in Spain

    Being a foreign investor physically located on the other side of the globe and with none or little Spanish skills, I highly recommend you to hire a Solicitor.

    You should start looking for a Solicitor earliest possible, as they can give you advice from the start, acting independently from the real estate agent.

    Why should I hire a solicitor before looking for a real estate agent?

    In Spain, it’s not uncommon that the solicitor will be appointed by the real estate agent and they might not always serve you the best.

    Therefore, hiring an independent solicitor can be beneficial, as they’ll work independently.

    It’s best if you can find solicitors that have offices in both your home country and in Spain, as you’ll be able to communicate in your native language. At least, the solicitor should be fluent in English.

    Just make sure that the solicitor is credible, licensed, and have decent experience of working with real estate in Spain.

    The property regulations in Spain differ a bit from other European countries, you need to make sure that he or she has a deep knowledge of Spanish laws and local regulations.

    What can a property solicitor help me with?

    solicitor-spain

    The solicitor will be valuable to you thanks to their local knowledge and fluency in Spanish.

    Contracts are often written in Spanish and there’s no guarantee that all involved parties will be able to communicate in English.

    The solicitor can help you to:

    • Review contracts and certifications
    • Give you recommendations of real estate agents
    • Check the title deed
    • Help you with translation
    • Confirm that the seller is the owner of the property
    • Confirm that there are no encumbrances or liens attached to the property, such as mortgages or unpaid taxes. In Spain, mortgages are directly transferred to the buyer, if existing

    8. Finding a real estate agent in Spain

    Real estate agents are less controlled in Spain compared to many other countries, like in Hong Kong, where EAA (Estate Agent’s Authority) makes sure that agents work in favor of buyers.

    Yet, Spain has a similar register called API (Agente de la Propiedad Inmobiliaria), but estate agents are not obliged to join this register.

    If you find a member via the API register, you’ll minimize the risks of coming across unreliable agents.

    Before you chose a real estate agent, do due diligence and make a list of questions to assure that he or she is licensed and capable of helping you.

    As explained in my article about buying real estate in Canada, some of the questions you can ask are:

    • Can you provide previous case studies?
    • How many properties have you sold in the past years?
    • What will you help me with through the buying process?
    • Do you have a license and a proof that you’re a member of API?
    • Are there any fees I should be aware of, that I haven’t seen yet?
    • Have you helped clients from my home country before?

    Do your research and add questions to the list, to avoid future problems.

    9. Signing the preliminary purchase contract and paying the deposit

    When you’ve agreed on a price with the seller, you need to sign the first contract, which is called the Preliminary Contract.

    The deposit you need to pay at this stage is 10% and the contract should contain all the necessary information about the property, like the property price.

    Talk with your solicitor, real estate agent and notary to get help drafting the Preliminary Contract and before signing.

    10. Signing the Final Contract

    Lastly, you need to pay the remaining cost and the title and ownership will be transferred in your name.

    The solicitor will help you with the transfer of the property and make a registration at the Land Registry and Tax Authority.

    You’ll also need to involve the notary, he or she will act as a witness during the final phase of the conveyancing process.

    11. Finalizing the mortgage

    Now, it’s time to finalize the mortgage.

    The final down payment required depends on your financial situation, how many homes you already have, your residential status, and what your occupation is, for example.

    What documents should I bring when applying for a mortgage?

    • Your NIE number and certificate of non-residency
    • Bank statements and proof of income
    • Employment agreement
    • Tax returns
    • Your contract with the seller
    • A copy of the title deed
    • Documents showing other properties you currently have and related mortgages

    For up to date information, contact your bank and get the latest details. The requirements can also differ depending on where you come from, an individual assessment should be made.

    Down payment required for non-resident foreigners in Spain

    If you’re a non resident and a second time home buyer, you’ll be required to pay a down payment of 30-50%, depending on your financial situation and which bank you choose.

    Residents can expect a lower down payment that is around 20%.

    On top of the down payment, you should reserve an amount of 10% – 20% of the total property value, to be paid for taxes and other fees.

    The taxes and fees differ depending on where you buy your property and what notary, real estate agent and solicitor you chose.

    Property taxes in Spain

    Below I’ve included fees and taxes you need to pay when acquiring a property in Spain.

    Taxes when buying an established home (second-hand home):

    • Property transfer tax: 6-10% (depending on where you buy)
    • Commission and fees to your estate agent: 3-6%
    • Fees to your notary: Up to 0.5-2% (depending on the property value)
    • Fees to your solicitor: Up to 2%
    • Fees for the registration of the title deed: Up to 0.4%
    • Land registry fee: 2%
    • Surveyor’s fee: Can cost up to EUR 2,000
    • Mortgage and Gestoria fees: Up to 2%

    On top of that, you need to pay stamp duty and other taxes that I explain more about below.

    Taxes when buying an off-plan property

    If you buy a property that is under development, you usually need to pay a VAT of 10%.

    The only difference is the VAT paid in the Canary islands that is set to 4.5%.

    Stamp duty for non-resident foreigners in Spain

    A transfer tax is applied to established (second home) properties, however, for off-plan property you pay a stamp duty instead.

    The duty is currently set to 0.5% – 1.5% of the purchase price or appraised value.

    Property tax for non-resident foreigners

    The property tax is paid to let the municipality take care of your community and handle different kind of services.

    The property tax is generally set to 0.3% – 0.5% of the property value or the appraised value.

    Rental income tax for non-resident foreigners

    The rental income tax is set to 24% for non residents, which can be considered a bit high.

    You’ll be able to deduct any relevant expenses from your taxable rental incomes.

    Capital gains tax for non-resident foreigners

    The Capital gains tax increases progressively as shown below:

    • Less than EUR 6,000: 19%
    • EUR 6000 to 50,000: 21%
    • More than EUR 50,000: 23%

    As I explained in my article about buying property in New Zeland, you’re able to deduct relevant expenses paid for maintenance and repairs of the property.

    The Capital gains tax might be reduced or removed completely depending on your age, residential status and for how long you’ve lived in the property.

    Can I get a residence permit if I buy property in Spain?

    In comparison to many other countries, Spain gives you the opportunity to get permanent residency, in case you buy a property that’s worth EUR 500,000 or more.

    This can be compared to the EB-5 VISA found in the US.

    One of the main reasons why Spain offers this kind of visa is that the Spanish Government wants to boost the economy and attract foreign investors.

    As you might know, Spain struggled a lot during the latest financial crisis in 2008 and has experienced problems with high unemployment rates since.

    Best places to buy property in Spain

    Below, you’ll find information about some of the most popular places to buy property in Spain at the moment.

    Buying property in Barcelona

    Barcelona is by far one of the most popular city among property buyers and an international melting pot. With its grand history and architecture, you’ll find plenty of tech-events, start-ups, universities, and other commercial activities going on here.

    barcelona-property

    Not surprisingly, prices have increased much in Barcelona over the years and with an average rate of 7% since 2013. Now, you need to pay around EUR 300,000 for a newly built and spacious 1-bedroom apartment in the city center.

    The market has started to cool off a little due to the current political climate. Yet, Barcelona will always be interesting for long-term investments.

    Buying property in Madrid

    Madrid is the capital and one of the most popular cities among foreign property buyers.

    Investors have been drawn to Madrid’s property market, thanks to the lucrative investment opportunities for rental properties. The government has even went so far as to introduce new regulations in Madrid.

    The main reason is that home-stay websites like Airbnb has become increasingly popular and some property owners can earn thousands of US dollars a month.

    Be prepared to pay everything between USD 200,000 – 300,000 for a newly built 1-bedroom apartment.

    Buying property in Valencia

    Valencia is the most popular place to buy property in Spain at the moment. So far, 60% of the buyers in 2019 have chosen the Mediterranean coastal regions on the mainland, in the Balearics, and the Canary Islands.

    Valencia is more of a tourist destination and you can find studios for as little as USD 40,000 – 60,000. You can also find new modern studios for as little as USD 100,000.

    Property is sold for as little as Valenciana EUR 1,304 (USD 1,465) per square meter on average, which is just crazily low compared to places like Thailand and Philippines, for example.

    Buying property in Mallorca

    Mallorca is a strong contender and prices are expected to continue rising until 2022, at least.

    Prices have increased by around 8% yearly and the average cost is EUR 5,000 (USD 5,617) per square meter for holiday property along the coast. If you move in-land, the average price is EUR 3,500 (USD 3,932) per square meter.

    Mallorca is predicted to perform comparatively well in the coming years and should be under your radar.

    Buying property in Marbella

    Marbella is a city and resort area located in Costa del Sol, southern Spain. It’s famous for hosting many wealthy retirees and families, look at it like the Miami of Europe.

    Here, you’ll find everything from plush villas, hotels, golf courses, bars, restaurants, and clubs.

    Interestingly, the highest valuation per square meter for an apartment sold in Marbella was EUR 11,343 (USD 12,744) per square meter. That’s on par with many properties in the central areas of Shanghai and Shenzhen.

    You can find modern and newly built apartments with a size of 140 – 180 square meters for as little as EUR 400,000 – 500,000 (USD 450,000 – 560,000). Villas with a size of 350 – 400 square meters are sold for as little as EUR 1 million (USD 1,123,000).

    Can I rent out my property as a non-resident foreigner?

    Since 2014, non resident foreigners are capable of renting out their properties in Spain. This is a big game changer of course.

    Spain is a bit different compared to countries like Thailand, where it’s sunny and warm all year around. Even if Thailand has its peak seasons, you’ll be sure to find tenants over the whole year.

    That might not be the case in Spain, where the weather tends to be cooler during the winters and the amount of travelers drop.

    Therefore, to minimize your vacancy rates, the easiest way is to let a real estate agent help you find tenants on a long term basis. For a short term basis you can also go via a real estate agent or through Airbnb.

    If you plan to rent out via Airbnb, be sure to hire a company that can manage your property and handle the communication with the tenants.

    The contract for long term rentals should be thoroughly made and include all the relevant details needed.

    For short term rentals you can make the contract less extensive, or simply make a document including a list with obligations and requirements that are applied to both you and the tenant.

    How much can I earn from rental incomes in Spain?

    Spain hosts many European tourists and high-net individuals that don’t have problems to pay high rentals during a 2-week holiday, or even for long term stays.

    The rental incomes can be everything from EUR 300 a week up to several thousand euros a week, during the peak seasons.

    mallorca-property

    The rental income will also depend on the location of the property, the size of the property, and how luxurious it is. Sea view property and properties close to the coast will of course be in a higher demand.

    And don’t forget that you need to pay rental income tax of 24%.

    FAQ

    Below, I’ve included some frequently asked questions and my replies.

    What are the common pitfalls when buying property in Spain?

    Below I’ve listed common pitfalls among foreign property buyers in Spain.

    1. Paying the deposit too quickly

    Paying a deposit too quickly is not optimal as you don’t know whether there are any encumbrances mortgages, or other issues with the property. Also, you don’t know whether the deposit is refundable, which can set you back a lot of money if you don’t proceed with the purchase.

    2. The purchase price is lower than the appraised value when calculating taxes

    Sometimes, property buyers faulty believes that they should use the purchase price when calculating property taxes. In many cases, the government used the purchase price, or the appraised value, whatever is higher.

    As such, you might end up with penalties from not paying sufficient taxes to the Spanish tax authority.

    3. Coming across bad developers

    Another issue that we see in places like the UK and Asia as well are problems with unreliable developers.

    From time to time, developers can’t finalize projects due to financial issues. There might also be other reasons why a developer can’t finalize a project.

    Therefore, be sure to do due diligence and with the help of a solicitor to confirm that the developer has a good track record, good financing, and is credible.

    How much deposit do I need to buy a house in Spain?

    The deposits vary but normally range between 10% – 30%.

    Can US citizens live in Spain?

    Americans can stay in Spain for up to 3 months without having a visa. Luckily, it’s fairly US citizens to become permanent residents in Spain.

    If you’ve lived in Spain for 5 years, you can apply to become a permanent EC resident. Also, keep in mind that if you buy a property for more than EUR 500,000, you will automatically be eligible for a residency visa.

    Conclusion

    Spain welcomes foreigners with open arms and you have no particular restrictions to invest in properties. Might it be land, apartments, condos, or villas.

    The buying process and regulations differ from other European countries, for example, you must hire a notary. I advice you to hire a solicitor to help you through the screening and conveyancing process, to avoid that you don’t come across unexpected pitfalls.

    Spain has struggled financially since 2008 and want to attracts foreign investors. As such, if you buy property for EUR 500,000 or more, you can can apply for permanent residency, which is highly beneficial for persons who seek a second home.

    The market is comparably healthy and prices have increased much in places like Mallorca, Barcelona, and Madrid since 2013. We can expect a cool down in the market in places like Barcelona, while prices will continue to increase much in Mallorca.

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