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

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    Spain is one of the most popular locations among Europeans that look for holiday homes. Asians have also started to favor the nation, thanks to generous visa options, access to the EU, and low real estate prices.

    Yet, navigating the Spanish real estate market can be both bureaucratic and challenging.

    In this article, we review how you can purchase real estate as a foreigner, covering the most important topics. Let’s get started.

    Topics covered:

    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 different from places like Singapore and Hong Kong, where the governments have introduced hefty buyer’s stamp duties, to cool down the markets.

    Another benefit of investing in Spanish property is that you can buy any kind of property such as a unit in a condo, a villa, land, or an apartment. There are no restrictions to the property types.

    In many Southeast Asian countries, unfavorable property regulations leave foreigners with the only option to buy units in condos. These are protective measures, resulting in fewer investment options.

    buy-property-spain

    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. This can be a game-changer for persons that plan to buy landed houses or commercial real estate, for example.

    Spain is well-known for attracting many foreigners that buy villas in places like Marbella, Malaga, and Seville.

    Having said that, even if regulations towards foreign property ownership are comparatively favorable, you need to be cautious and study the buying process well in advance.

    Process when buying property in Spain

    In this section, we review the complete process when you buy a property in Spain.

    Get a Foreigner’s Identity Number (NIE)

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

    Without the NIE number, you cannot make local transactions such as paying property taxes and utilities.

    Where can I apply for the NIE number?

    You have two options when applying for an NIE number:

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

    The application can also be submitted on your behalf if a person is authorized to do so. I highly recommend you contact your local embassy or the Spanish Ministry for Foreign Affairs for advice.

    Documents Required For the NIE

    You need to bring the following documents when applying 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)

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

    You need to fill in the application in Spanish. It can be a great advantage to let your notary or translator fill out the document.

    2. Getting a Non-Resicence Certificate

    If you open a non-resident bank account, you also need a non-residence certificate. Apply for the non-residence certificate at the same time as you apply for the NIE, to save time.

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

    3. Opening a Spanish Bank Account

    spain-bank-account

    You need a Spanish bank account before you can buy a property. Some of the most popular banks are:

    • 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

    Consult with your agent if you need help to open the account. The process is generally simple though and similar to other European countries.

    Documents Required for the Bank Account

    You need to bring the following documents before you can open an account:

    • 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 a handful of banks by phone or email and ask for up-to-date information. Banks might require different documents.

    4. Getting an Insurance

    In addition to the NIE and non-residence certificate, you need local insurance to buy real estate.

    Your bank can help you find insurance. Preferably, you should handle most parts through the same bank.

    To summarize:

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

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

    If you need a property loan, you should first receive a preliminary mortgage agreement.

    The preliminary mortgage agreement will assure that you can finalize the purchase at a later stage.

    6. Finding a Notary

    Notaries represent the state and have different duties compared to property lawyers.

    They can help you review titles, contracts, terminate lease contracts on a landlord’s behalf, and give you general advice.

    In Spain, you’re required to hire a notary to manage 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 recommend you contact your local embassy to see if they can offer help to find a notary. Sometimes, you can work from abroad and let the notary help you handle local matters in Spain.

    You should also check the official website for notaries in Spain.

    7. Hiring a Solicitor

    Foreigners typically don’t buy off-plan condo units in Spain. Instead, villas and established housing are common.

    Thus, you should start looking for a solicitor earliest possible. They can give you advice from the start, acting independently from the real estate agent.

    The purchase process can differ quite much, even when comparing Northern Europe and Spain. It’s always good to have a local partner, helping you to avoid pitfalls.

    8. Finding a Real Estate Agent

    Real estate agents are less controlled in Spain compared to many other countries and regions. In Hong Kong, the EAA (Estate Agent’s Authority) regulates the industry.

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

    9. Sign the preliminary purchase contract and pay 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. Sign 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

    The final down payment required differs depending on your financial situation, how many properties you have, your residential status, and your income, for example.

    Documents needed when applying for a mortgage include:

    • 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

    Down payment for non-resident foreigners in Spain

    If you’re a nonresident 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

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

    Established Homes

    • 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 among others.

    Off-Plan Property

    Properties under development are generally subject to a VAT of 10%.

    In the Canary Islands, the VAT is set to 4.5%.

    Stamp Duty

    A transfer tax is applied to established properties. However, purchasers of off-plan properties are subject to stamp duty instead.

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

    Property Tax

    Property tax is paid to let the municipality take care of your community.

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

    Rental Income Tax

    The rental income tax is set to 24% for non-residents, which is considered high. You can deduct relevant expenses from your taxable rental income.

    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?

    Spain gives you the opportunity to get permanent residency if you buy a property worth EUR 500,000 or more.

    Best places to buy property in Spain

    Below we review some of the best cities to buy real estate in Spain. If you have any other recommendations, feel free to write a comment below.

    Barcelona

    barcelona-property

    Barcelona is one of the most popular cities among property buyers and an international melting pot.

    With its grand history and architecture, you find plenty of tech events, start-ups, universities, and other commercial activities going on here.

    Not surprisingly, prices have increased much in Barcelona, averaging at 7% yearly since 2013. Nowadays, you need to pay around EUR 300,000 for a newly built 1-bedroom apartment in the city center.

    Barcelona will always be popular among many real estate buyers.

    Madrid

    Investors have been drawn to Madrid’s property market thanks to its rental market. The government even went so far as to introduce new regulations in Madrid.

    The main reason is that Airbnb has become increasingly popular, resulting in eye-watering incomes.

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

    Valencia

    In 2019, as many as 60% of all property buyers chose 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.

    Real estate still costs a fraction, even in comparison to many cities in Thailand the Philippines.

    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 inland, 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.

    Marbella

    Marbella is a city and resort area located in Costa del Sol, Southern Spain. It’s the home of many wealthy retirees and families. Some compare it to Miami in the US, despite its smaller size.

    Here, you’ll find everything from luxury 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 in 2019.

    That’s on par with many properties in Shanghai and Shenzhen.

    You can find modern and newly built apartments covering 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 can rent out their properties in Spain. This has affected the rental market positively.

    If you plan to rent out via Airbnb, be sure to hire a company that can manage your property and handles 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.

    FAQ

    Below, I’ve included some frequently asked questions and my replies. If there’s anything else you wonder about, write us a message or a comment below.

    What are 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 the taxes

    Sometimes, property buyers faulty believe 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 for not paying sufficient taxes to the Spanish tax authority.

    3. Coming across bad developers

    A universal problem is the prevailing issue of non-reliable developers.

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

    Do due diligence 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.


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