Some of us have only ever dreamed of owning a place
in the sun but the reality of owning a Spanish
retreat whether for weekends or the longer term is happening for a growing number of people.
Holidays can be wonderful relaxing experiences
but for most people they are only a couple of
times a year and since they are often in locations
or accommodation not visited before, they can
be rather a gamble.
Buying a home for overseas holidays ensures that
you know the location and accommodation and can
do what you want with the house to make it a real
"home from home", but you may still
only be able to stay there a few times a year
because work or other commitments in the UK prevent
you from spending long periods abroad. However,
transport within Europe has now become so swift,
frequent and inexpensive that it is possible to
have a holiday home in a wonderful location (and
climate) which is near enough to visit for weekends.
Once there you can simply relax, or use it as a base
for exploring the surrounding areas. You'll be surprised
at how much you can fit into a weekend and still
feel relaxed at the end of it.
There's no shortage of people willing to make
a substantial commitment by moving lock, stock
and barrel to Spain. Now we have faxes, mobile
phones and the internet an increasing number of
people are no longer working nine to five anymore
from a fixed location but are able to relocate
their business overseas.
Despite recent increases in Marbella property
prices it is worth considering that like for like
a property on the Cote D'Azur, France, will cost
on average over three times the price. With the
introduction of the Euro it is likely that property
prices in Europe will begin to level out and with
the strong pound and low interst rates now is
the ideal time to buy. So for all these and many
more reasons escaping cold, grey and expensive
Northern Europe may be the best move yet![Top]
First steps to buying
Finding out what you can afford is one of the first
steps to buying a property in Spain, which can
be done by applying for a home loan and have
it accepted. This step will help you narrow
your search for both a neighbourhood and particular
houses. The approval is a simple calculation
that considers several factors, but primarily
your income. The mortgage formal approval by
the lending entity enables you to have a feel
of the price of the property you can afford,
knowing that, where approved, you will be able
to borrow a percentage between 60 and 80 per
cent of professional valuation price.
The
pro's & con's of moving to Spain
For
the vast majority of ex-patriate residents,
living in Spain means an escape from grey skies,
traffic jams, stress and restaurants which charge
you a day's wages for a second-rate meal. The
year-round sunshine, the relaxed way of life
and the relatively cheap cost of living make
this country a paradise for the thousands of
people from northern Europe who have made Spain
their home.
But
it's not all sunshine and sangria…so
if you're considering moving to Spain it's
important to be aware of the some of the
drawbacks which are serious enough to send
some people running straight back home
after a disastrous venture into the Spanish
property market.
One
of the biggest problems encountered by
most ex-pats (especially women) is homesickness.
When members of your family are driving
you mad, it can be tempting to put as much
distance between them and you as possible!
You picture yourself lounging by a pool
in the sunshine with a gin and tonic at
a safe distance from all the stresses and
strains of daily life in your native land.
But be warned - after a few weeks on your
sun bed you may find yourself missing all
the "problems" you left behind
(family members, nosy neighbours, a stressful
job, even the English rain).
Many people move
to Spain to escape problems in their own country
- only to find themselves confronted with a
new set of problems which are even worse than
the ones they left behind. The Spanish have
a different way of doing things than most Europeans,
the language can be a problem in certain areas
(unless you take the trouble to master some
basic Spanish) and some people just can't cope
with the summer heat of the southern coastal
resorts even though sunshine was probably the
biggest factor in their decision to move to
Spain.
Women who leave
behind grown-up children to retire to Spain
(especially women with grandchildren) normally
suffer greats pangs at being parted from the
family after an initial period of euphoria.
So it's a good idea for retired couples who
don't have work commitments to rent a property
for a few months to see how they like the lifestyle
before they commit themselves to buying a house
in Spain.
One
of the most endearing things about the
Spanish is their wonderfully relaxed "mañana" attitude.
If you don't have enough cash to pay a bar
bill in rural areas of Spain the owner will
normally just shrug his shoulders and tell
you to come back tomorrow. That's great -
unless you're a businessman who wants something
done in a hurry at a specified time of day.
That's when Spaniards can drive you nuts!
If you're planning
to work in Spain you need to be aware that job
opportunities are fairly limited, especially
if you don't speak fluent Spanish, and wages
are much lower than in north European countries.
The key to success
is to test the water before you make a long-term
commitment to moving to Spain which could cost
you dearly in terms of both money and emotional
trauma.
For
those who make a success of life in Spain,
the country is a wonderful cocktail of
cheap food and wine, non-stop fiestas,
freedom from the "nanny-state" and
a year-round outdoor lifestyle with like-minded
souls who believe life's simply too short
to spend in a grey London office block.
[Top]
Where to buy
Most of the buyers of property in Spain will have a
choice of location as to where to buy. A friend,
a previous visit to the area or simply the fame
or notoriety of the city, town or rural area is
enough to form the choice. But a buyer will want
to know, as well, whether the location is in itself
a good investment. A precise answer in this regard
is difficult. There are locations where the rental
value of the property is high (Costa del Sol,
Costa Brava, Costa Dourada...generally all touristic
resorts).
Rural areas have a lower demand for rentals, although
the regional authorities are increasing the financing
of many rural tourism resorts to make them more
attractive, not without success. There are areas
which have consolidated a growth and are secure
investments.
Others are in the process of growing. Generally
speaking, Spain is growing from strength to strength
in real estate investment and predictions are
that sales will shoot up in the following years,
with an estimate of 4 million people investing
on property in Spain and 600.000 European families
purchasing a second home only in Andalusia in
the coming years.[Top][Find
a Property]
Finding the right home
There are 2 main set of circumstances which should be
born in mind when looking for the right home:
Personal circumstances (family size, purpose of
purchase, funding availability, time spent in
the property and many more). Property circumstances
(size of property, price, views, or interruption
of these by a future development, easy access,
orientation, investment value, facilities in the
surrounding area, associated expenses and many
more). Making an assessment of those sets of circumstances
blending pros and cons to suit one's personal
convenience is a must. [Top][Find
a Property]
Buying a townhouse
A townhouse is a good investment given its all-year-round
high demand. They require little maintenance,
have low running costs and are comfortable to
live in. Against this choice is the prospect of
living door to door with other property owners.[Top][Find
a Property]
Buying a villa
A villa is a choice for those seeking tranquillity and
independence. They require a higher investment
in maintenance and the higher prices have the
logical effect on annual running costs. Countryside
villas or 'fincas' have low running costs, at
times ridiculously low. These however tend to
be located at some distance from towns or cities.
For those buyers with a good amount to spend,
villas are the choice. Take a look at our selection
of property throughout Spain.[Top][Find
a Property]
New and resale
From a strict investment point of view, new sales are
more promising in terms of making a gain when
selling. Resales have already been squeezed for
a gain, and thus the gain to be made is less predictable.
There are however no fixed rules in this respect,
which makes the gain predictions a bet for the
future. Certain buyers will necessarily choose
a resale: villas are not normally for sale from
a project developer, although the building restrictions
in some areas and the demand for one-family villas
are encouraging developers to build these close
to other kind of developments.[Top][Find
a Property]
Finance
Many developers of new properties are now offering up
to 80% over 20 years for non-residents. Local
banks will offer anything up to 60% for European
residents. Most loans are long-term and secured
on the property. When seeking a loan, make sure
you are aware of the interest rates and if they
are fixed or floating. Banks will ask for passports,
residence permits, payslips, sale contracts and
copies of the title deeds. There are many advantages
to taking out a loan to purchase your property,
in the form of tax allowances. We have not listed
them here as they are subject to fluctuation.
You may need to transfer money into Spain and
you need to protect yourself.
When buying a property in Spain, you will know
the price of the property in Euros but you will
not know the actual cost until you buy all of
the currency to pay for it. This means that the
property could either cost you more than you had
planned (if the Euro strengthens) or the property
could become cheaper (if Sterling strengthens).
Recently Sterling has fluctuated more than 10%
against the Euro within a matter of months, so
this does deserve careful consideration.
On the basis that you are buying a property and
not speculating on the currency markets, it is
worth fixing the exchange rate for all of your
future stage payments to the agent / developer.
[Top]
Foreign
Currency
When
purchasing a property overseas, it's essential
to understand the potential implications
that sharp movements in the currency markets
may have on the final purchase price of the
property. The following represents a typical
example of how a property purchase can cost
you far more than you anticipated.
You have been warned...
For example, in five months, from January
to May this year, the euro has been as high
as 1.5279 and as low as 1.4096. Depending on
when you purchased the currency, a property
worth €200,000, could have cost either
£130,898 or £141,884, a difference of £11,000.
Much of this loss could have been prevented
by securing the rate with a Forward Contract.
This mechanism is especially useful when market
conditions are currently advantageous, but
the currency is not actually needed until a
future date. The situation can become more
complex when purchasing a new property off
plan. This will typically involve multiple
stage payments over periods of up to 18 months
or longer. Due to only guide dates being given
for completion of each stage, a series of Forward
Time Option contracts could secure the rates
right up until the final completion, whist
remaining flexible in order to accommodate
unspecific dates. No
one would dream of buying a house in the
UK without knowing the final cost. In the
same way, you can buy and fix a rate for
your currency ahead of time, so you will
know exactly how much you will end up paying
for your home abroad. But how many of us
have the tume or sufficient knowledge to
be in a position to confidently gauge when
the foreign currency rates are at their
most favourable?
If you are considering the purchase of
a property abroad and would like to find
out how Foreign Currency Direct can
help to safeguard your interests - or
simply save you money by arranging a
better deal than your high street bank
- Visit
Currencies
... Don't make an expensive mistake ~ Secure
your currency at today's rate!!
So
why should you use Moneycorp?
1. They are the market leader in foreign
exchange.
2. Each client is assigned a dedicated
dealer who, using plain English provides a bespoke
service.
3. You are kept up to date with currency
movements and predictions on market fluctuations.
4. Both private and corporate clients
get competitive rates on all major currencies.
5. We work hard to identify the best opportunities
for your money.
6. No registration fee.
7.
No obligation.
8.
No commission fee.
9. Stress-free, prompt and accurate methods of
transferring funds.
10. We can help reduce your exposure to exchange
rate volatility.
11. Spot transactions - the Buy Now, Pay
Now option, ideal if your capital is readily
available and if you need to act swiftly.
12.
You can forward transactions using our
Buy Now, Pay later option, ideal if you have
tiem before your money is due overseas or are
waiting for funds to arrive. A small deposit
secures your rate for up to 18 months securing
you currency at a guaranteed cost, protecting
the price of your house if the pound falls against
the euro.
13. Limit orders - Place an order with
your dealer for your desired rate. Your dealer
tracks the market movements and if your desired
rate is reached, contacts you to arrange the
purchase.
14. Regular Currency Transfers - transfer currency
overseas at competitive rates. Ideal for regular
monthly payments, foreign mortgages, pensions
or salaries.
[Top]
Mortgages
There are banks and other financial companies in many
countries as well as Spain that will lend money
to purchase a property in Spain. They will secure
the loan either on a property in your own country
or on the Spanish property itself. Spanish banks
in Spain will also lend funds to non-residents
to purchase properties. The normal limit is 60%
of the purchase price.
There are both advantages and disadvantages to
obtaining a mortgage in Spain instead of the UK.
With a mortgage in Spain, there may be high set-up
costs, £1,000-£2,000 is not unusual.
You may also have to pay taxes and fees to the
country where the property is located. These can
be around 2.5% of the value of the mortgage. One
advantage is that you will pay local interest
rates which are normally lower than those in the
UK.
Be aware that if you are going to be repaying
your Spanish mortgage from your UK income, you
may lose a substantial amount of money in the
ever-changing exchange rates.
In any circumstances, you must take qualified legal
advice before you sign anything. It is advisable
to start the mortgage process before you look
for a property. At least if you have a mortgage
offer from a bank in principle, you will not waste
time looking for a property you cannot purchase.
Another thing to consider when purchasing a property
in Spain is, in what name(s) to purchase. You
can purchase it in your sole name, with a partner
or in a company name. All have good and bad points.
There are substantial tax savings to be made because
of the Spanish tax system and in particular, Inheritance
Taxes, which can be higher than 70%. It is in
your best interests therefore for the property
to change hands as little possible.
Click Here for more info[Top]
Legal matters
All property in Spain is registered in the Registro
de Propiedad where you will see who owns the property,
the exact size of the property and if there are
any mortgages etc on it. Only the people named
on the title deed have the right to sell the property.
You must seek legal advice as the Spanish law
system is complex. A lawyer will usually charge
1% + tax, money well spent for peace of mind.
He will usually tell you in advance what the fee
will be.
The seller of a second-hand home
should provide the following documents:
The title deed of the property, Receipt of
payment of the real estate tax for the last
year, Receipt of payment of the tax on the
increased value of Urban Land Certificate that
any community charges (if applicable) have
been paid up to date.
Seller or developer of a new property should
provide you with:
Deed of declaration of new construction, Occupancy permit,
Certificate of rateable value of the property.
Normally, before the purchase of a property
is made official, there is a prior agreement
drawn up between the buyer and seller. This
document will identify the two parties and set
out the terms of purchase. You must seek legal
advice before signing this and you must be sure
that this is the property you want to buy. You
can lose any deposit you have paid if you pull
out of the purchase and there is a penalty clause
in the contract. In the case of the seller defaulting
then he has to pay twice the amount. When it
comes to signing the contract, this has to be
before a notary, in the form of a public deed.
This ensures that the details are entered onto
the public records.
[Top]
Lawyers
Using a
good, independent lawyer to buy property in
Spain is an absolute must. Not all owners would
agree and many have successfully completed a
Spanish property purchase without a lawyer and
without any hitches. But thousands of others
have come a cropper and in many cases have lost
their life's savings because they tried to save
a few hundred pounds on legal fees. There are key
differences in the property laws, taxes and
administrative procedures in Spain which are
hard to fathom even for those of us who have
been living here for years. Maybe it's the
strong sun; maybe it's the cheap wine. Whatever
the reason, many a foolish foreigner has lived
to regret buying a Spanish property without
the benefit of professional legal advice when
they would never have dreamt of doing such a
thing in their native land (where they understand
the language and culture). During the 1980s "run for the sun" more
than half the foreigners buying property
in Spain failed to use a solicitor. And the
figure is still thought to be around 20%
- so it's hardly surprising that so many
dreams turn into horror stories. Don't make the
mistake of thinking that an estate agent will
do the legal checks for you that your own lawyer
will. And be wary of taking the recommendation
of an estate agent when it comes to legal advice
- the lawyer they recommend may be a perfectly
good one but if you're using an agent it's a
good idea to hire a lawyer who's completely
independent of that agent. It's rare, though
not impossible, to find an English lawyer practising
in Spain but there are law firms in England
and other European countries which specialise
in Spanish property law. There are plenty
of excellent Spanish lawyers and many of
them in the popular ex-pat areas speak perfect
English. You'll find many of them advertising
in the English language press. But a far
better route to a good lawyer is the golden
rule of asking around. Ask friends, neighbours,
people in local clubs and restaurants where
your fellow countrymen meet. Listen to their
experiences, recommendations…and
warnings. The local consulate
may be able to provide you with a list of English
speaking lawyers in your area but they won't
actually recommend a lawyer to you. It's a good idea
to find a good lawyer who's based in the area
where you want to buy. He or she will probably
be well in with the local notario (notary public)
and will be able to play the local system to
speed your purchase through as quickly as practically
possible. He or she is also likely to be aware
of any drawbacks involved in purchasing in your
chosen area - even before the essential local
searches are done.
Generally, lawyers'
fees are around 1% of the purchase price but
if unforeseen complications arise you'll be
charged more so make sure you agree in writing
at the outset exactly what's included in the
basic fee. [Top]
Insurance
Spain
Fire insurance is compulsory by law when taking out
a mortgage. Comprehensive household insurance
is available to protect your home and contents.
Life insurance can be taken out to guarantee payment
of the loan in the case of death. For Low Cost
Home Insurance in Spain visit
www.intasure.com[Top]
The cost of property
Official figures for the Costa Del Sol state that property prices will increase this year by 12-15%. It is claimed that an average new property with two bedrooms in a block now costs 241,000 euros (around 2,000 euros per square metre). An average villa costs 388,100 euros. On the Costa del Sol there are around 20,000 homes for sale, 40% of which is in the Marbella area. 75% of home buyers on the Costa del Sol are foreign. The increase in prices is leading to an increase in the number of smaller, cheaper municipalities springing up, away from the coast.
Running costs
Obviously the annual running costs of a Spanish home will vary according to the size, type and location of the property. But for an average villa in one of the popular investment areas you can expect to pay between £1,500-£2,000 a year in utility charges, insurance and taxes. It's
impossible to give the exact amounts
you'll be charged for things like your
water, electricity, council tax etc because
of the regional variations but when you
buy your property you should secure the
services of a good "asesor"
or "gestor" (fiscal adviser) who
will be able to tell you exactly what needs
to be paid and when. This is important because
the bureaucratic systems in Spain operate
in a very different way than in the UK and
you'll probably have the added complication
of not speaking the language fluently. If
you don't use a professional adviser you
could suddenly find your electricity or water
cut off or a heavy fine slapped on you for
non-payment of a tax you didn't know anything
about. The fact that the bill was sent to
the wrong address doesn't necessarily excuse
you in the eyes of the Spanish authorities! It's best to
open a Spanish bank account and arrange to
pay as many of your bills as possible by standing
order to avoid the danger of incurring a fine
for non-payment. But make sure that you go
through the bank statements with a fine toothcomb
because it's not uncommon for the utility
companies and local authorities to take more
than they're entitled to. If you're not sure
what everything is on the statements, get
your fiscal adviser to check that appropriate
amounts have been deducted.
For most homeowners
the cost of maintaining their Spanish property
consists of the following:
Water
Electricity
Gas
Council
tax (IBI)
Wealth
tax (patrimonio)
Property
income tax (IRPF)
Community charge (where applicable)
Financial
adviser ("gestor" or "asesor")
House
and contents insurance
Water is a precious commodity in many parts
of Spain and due to problems of uneven distribution,
drought and the pressures of mass tourism, many
local authorities have increased their charges
dramatically in recent years. All properties
are metered and most authorities charge a quarterly
rate for a minimum consumption (even though
you may not use any water) then charge you a
set amount for each extra cubic metre used.
This amount varies from one area to the next.
Electricity
is billed every two months, normally after
the meter has been read. Gas is cheaper than
electricity but it's rare to find a mains
supply except in the major cities. Most people
rely on bottled gas which is cheap but very
inconvenient…lugging full gas bottles
up the stairs of an apartment block with no
lift is no joke!
Whether or
not you let your Spanish home you'll still
have to pay income tax based on an assumption
that you're letting it. This property income
tax is called Impuesto sobre la Renta de las
Personas Fisicas (IRPF) and applies to all
non-residents. The local town hall will charge
you according to the rateable value of the
your property (known as the "catastral").
They'll assume you're making 2% of this value
each year from letting your property and charge
you 25% of that "income" (whether
it's real or imagined!). The IBI tax
(Impuesto Bienes Sobre Inmuebles) is like
the British council tax and usually includes
rubbish collection although this is sometimes
charged separately. It can vary from under
£100 a year in isolated rural areas
to more than £1,000 a year in the most
exclusive areas. Non residents
are also liable to wealth tax (Impuesto sobre
Patrimonio), commonly known as "patrimonio",
on any assets in Spain (primarily property).
For assets totalling less than 160,000 Euros
the tax is 0.2%. The rate increases with the
value of the assets.
[Top]
See
also... 
