THE ULTIMATE GUIDE TO
PROPERTY THE COSTA DEL SOL, MARBELLA TO BENALMADENA
Insider insight of the Spanish market, How to buy a property the smart way, Navigate the foreign law and have the edge when it comes to currency and costs
sunnyviewproperty.com
1
INTRODUCING SPAIN’S GLOBAL SIGNIFICANCE Why Andalucía & Costa del Sol
2
GETTING STARTED What is the Perfect Property?
3
BUYING PROCESS: START TO FINISH Reservation Contract Purchasing Agreement Taxes & Costs Completion
4
POST-COMPLETION: SOLD! Sale Complete, So What is next?
5
MONEY & MORTGAGES What to expect at the Bank…
6
CURRENCY Best practices, ideas and experienced insight
We have over a decade of experience helping foreigners purchase a property safely and successfully in the sun. Through the course of this guide we share our findings along with invaluable insider knowledge from top property experts! Helping you make informed decisions and navigate the pitfalls when buying a home in Spain!
S
pain's Global Significance The age-old saying ‘Mighty oak from little acorns grow’ says it all.
Spain has a colorful history and is above all, a mosaic of cultures. The rich heritage is showcased in Spain’s heavenly cuisine and breathtaking cities. Boasting one of the greatest collections of historical and architectural monuments, along with a wealth of museums, traditions and fiestas. With Spanish theatre and cinema even becoming a reference point in Europe, this country is really beginning to step up to it’s place on the global table more than ever. The country boasts championship golf courses, famous Formula 1 races and is home to some of the most powerful football clubs and successful athletes.
Spain has one of the most decentralized governments in Europe, with King Felipe VI as head of state.
A
ndalucía, Costa del Sol & Buying a Property?
It is Spain’s most southern point, the meeting point of Europe and Africa! You can fly from the UK (and most other European destinations) to Malaga in under 3 hours! Key fact: The province of Andalucía gets on average 320 days of sunshine annually.
With first-class shopping, broad sandy beaches and the vibrant atmosphere you would expect of one of Spain’s major cosmopolitan provinces, Andalucía has an abundance to offer all year round.
W
hy I want to Buy in Andalucía?
Indisputably in a league of it’s own. All things to all people, of every age and outlook, it is whatever you want it to be… and so much more! Andalucía has been one of the most sought after destinations for Britons and European Expats for decades. Whether its for the intoxicating mix of contrasts, combining breathtaking scenery with vibrant towns and cities or it’s cultural heritage with sports, leisure, shopping and dining to rival major cities. On the other hand, Andalucía offers the peace and tranquility of rural solitude in a spectacular ‘cortijo’ (farmhouse) or a traditional lunch at a ‘venta’ (an old inn now used as a restaurant) Don’t take our word for it though, just ask the millions of tourists who visit every year - or even the thousands who buy a home in the sun too!
As Spain’s second largest autonomous community, Andalucía also holds a vast population. Although Seville is officially the Capital, the Province of Malaga has been very popular among foreigners. With regular flights from the Costa del Sol Airport in Malaga, even professionals and entrepreneurs find the commute very laid back. With fibre optic internet and just a short train journey to Madrid or Barcelona, location could not be better; — It’s the enviable climate and lifestyle you’ve always promised yourself and your family. Lightyears away from the monotony of grey skies and traffic jams. And not only that, children thrive in Andalucía's family-friendly environment. They benefit not only from world class schools and education but keeping fit and healthy with an infinite outdoor lifestyle.
ETTING STARTED
We have put together a starting list of important questions you can use to ask yourself: About the location:
How close do you want to be to the airport? How far away do you want to be from the bars, restaurants, shops and beaches? What else needs to be in the area – public transport, schools, entertainment, golf course, marina?
About the property:
What area are you looking at? For example Benalmadena or Marbella? Would you like to live in the inland, by the beach or in a village or town? What type of property is ideal – a modern contemporary villa, rustic country townhouse, or maybe a quirky Spanish cortijo (farmhouse) or apartment/ penthouse in the town center? What type of area do you want to be in? Do you want to be amongst other expats and foreigners? What size build do you need? How many bedrooms? How many bathrooms? Do you want a terrace, garage, some land or garden, pool? What type of view, if any, would you prefer from the property? Are there any special needs or unique requirements you have?
About your budget:
Will you be purchasing cash or looking to consider a Spanish mortgage? If the latter, is this already arranged or would you like to talk to a professional in the area? What is your ideal price and what is your maximum? Are you looking for an investment or opportunity - If an old build, are you happy to manage a serious renovation? Or is a simple redecoration more in line with your plans? Do you intend to rent out the property?
About your timings:
When can you realistically think about viewing any properties? Are you in a financial position to purchase and what is your budget be? When do you actually want the keys in hand to your new property?
By answering these points, you will give yourself a decent foundation to proceed to the next step which is choosing a professional agent who can not only provide suitable properties and spend your time wisely but who can ensure the entire process is hassle free and easy.
Your personal Property Consultant at
Sunny View Properties will help with your buying process from start to finish and also ensure post-purchase needs are covered so the only thing you need to worry about is what swim suit to pack for the beach!
R
emember to visit our website sunnyviewproperty.com, for more information about buying property in Spain, weekly articles and a regularly updated blog written by our incountry British writer.
Meanwhile, sign up to receive our weekly e-newsletter. To speak to someone about the process in further detail, you can call our team of Property Consultants on +34 603 294 324 or write us an email to info@sunnyviewproperty.com and we will happily give you a call.
We have over a decade of experience helping foreigners purchase a property safely and successfully in Spain. Through the course of this guide we share our findings along with professional insight to help you make the right choices! By the time you have read this guide, you should have a decent perspective on how to buy a property in Spain successfully.
B
UYING PROCESS: START TO FINISH
GOOD HELP, ADVICE, RIGHT PEOPLE . . .
T
he process of buying a property abroad can seem daunting. The reality is that with the right help and advice, and by working with the right people, it is very straightforward. By understanding the role of the law and solicitors in Spain, together with the various stages and costs of the purchase, you will be fully prepared for a stress-free transaction.
Step 1
What happens after my offer has been accepted? Should I pay a reservation fee and when do I enter a purchase agreement? Do I need to check my contract? What are the costs of buying a property in Spain? What happens at completion?
Reservation Form -
‘Documento de Reserva’ Offer accepted, what’s next!? You will be expected to sign a reservation contract and pay a deposit, usually €5,000.
The Reservation Form (like a contract) should include identification of parties involved and the property, define the amount to be paid upon its signature, the total price, payment conditions, the period in which the Purchase Agreement will be signed; and consequences of not signing the Agreement and/or any parties withdrawing from the transaction. The amount paid on reservation is deducted from the total price paid on completion. The Reservation Form must be singed and dated by both parties. It is not uncommon for the Estate Agent to sign on behalf of vendor.
Step 2
Purchase Agreement -
'Contrato Compraventa’ This type of contract is used in almost all transactions in Spain. The 'Contracto de Compraventa' is a private agreement and legally binding on both sides. Before signing, your solicitor must make sure of the following; - A document has been obtained from the Land Registry Office confirming the description, ownership and charges (if any) of the property. This is known as ‘La Nota Simple’.
Step 3
Step 4
Notary & Land Registry Fees
Legal Fees
Notary fees can cost up to €1,750 on average although can vary according to the complexity of the Title Deed.
Solicitors’ fees should never be any more than 1% of the purchase price. These fees typically include the following services; examining the reservation form requesting and examining all relevant documents regarding the property and the parties involved prepare or examining the purchase agreement signing the purchase agreement assisting the purchases on completion dealing with the post completion formalities
Municipal Value Added Tax ‘PlusValia’ This is the taxation on the increase of the value of the land from the vendor's prior purchase to the present sale. It is typically the responsibility of the Vendor unless otherwise negotiated. This is not usually a significant amount, perhaps less than €3,000 for most apartments and slightly higher for villa with land.
You must check with your solicitor exactly which services are provided within their fee structure.
Step 5
Transfer Taxes (I.T.P.)
Completion
Taxes must be paid before registering the purchase at The Title Registry. The transfer tax when buying a property in Spain is approximately 8-10% of the declared Purchase Price. Previously, it has been known for a developer to try and convince you to not declare the full purchase price. Do NOT accept it as it is illegal and risky.
The formal act of sale takes place before a Notary in Spain when all the above has been completed.
Stamp Duty Tax ‘Impuestos de Timbre Fiscal’ A stamp duty tax of approximately 1% of the purchase prices is payable when buying a property.
The 'Escritura' (which are the Deeds for the property) is then taken to the Inland Revenue office to pay the taxes and then be registered with the Title Registry Office. In some cases, properties can in fact be purchased in a matter of weeks where it is obviously apparent everything is in order and both parties are happy to proceed on the terms agreed. All is then dependent on when the next notary is available or how detailed the title deeds must be for this particular property.
Now, here is an example to show you all the stages of the buying process.
10% VAT (IVA).
1.5% Stamp Duty
1.21% Legal Fees
Approx 1% Notary and Registration costs
Remember all costs are applicable on completion except for part of the VAT
VAT is applicable on all payments, IE: When you pay your 30% deposit it is plus VAT.
You deposit €6,000 with your solicitor/estate agent, that will take the property of the market.
The money will remain in a client account until approval of due diligence.
Your solicitor/agent will contact the vendor for confirmation of all details and on your behalf do the due diligence.
Within 30 days after the payment of the Reservation, you will sign the contract and pay 30% +VAT. This will be covered by a legal bank guarantee.
The remainder of the purchase price, all costs, and the remaining amount of the VAT will be paid when you are signing the title deed for your property and handover of the keys.
Investment Structure Mortgage Purchase Example: €6.000 Reservation 30% + VAT downpayment (reservation) 70% + Purchase costs on completion Purchase price example: 30% down payment VAT on down payment (10%) Total down payment 70% completion payment by mortgage VAT on completion payment (10%) Stamp duty (1.5%) Approximate notary & registration fees (1%) Typical Legal Fees (1.21%)
€ 370,000.00 € 111,000.00 € 11,100.00 € 122,100.00 € 259,000.00 € 25,900.00 € 3,885.00 € 2,590.00 € 3,133.90
Total completion Total purchase price including costs Minus mortgage Total cash investment
€ 294,508.90 € 416,608.90 -€ 259,000.00 € 157,608.90
BUYER’S TOOLS: PROPERTY DETAILS SHEET, COVER ALL THE ANGLES. Purchase details
Investment potential
Price of property: ..................................................
Avg. capital growth in 5 years: ...........................
Deposit: ................................................................
Forecasted future growth: .................................
Stage 1: ................................................................
Rental demand: .................................................
Stage 2: ................................................................
Avg. rent for this type of property: .....................
Stage 3: ................................................................
Estimated rent per year: ....................................
Stage 4: ................................................................
Less Mortgage per year: ....................................
Stage 5: ................................................................
Net Gross Yield ............... ..................................
Est. Yearly Mortgage Costs: .................................. Mortgage Options: ................................................
Costs to maintain property
Mortgage Fixed/Variable: ......................................
Cost to maintain the property: ....................... Electric/water/gas rates: ................................ Taxes: ........................................................... Pool cleaner: ................................................
Costs to purchase property Cost to buy ‘habitable’ property (plus price of property): .............................................
House cleaner: .............................................. TV/Cable/Satellite: ........................................ Internet access: ............................................
Solicitors: ............................................................
Gardener: .....................................................
Accountant: .........................................................
Repairs & Maintenance: ................................
Survey & Searches: .............................................
Letting Agent: ...............................................
Stamp Duty & Taxes: ...........................................
Marketing Costs: ...........................................
Building/Contents Insurance: ..............................
Servicing Costs: ............................................
Life Assurance: ..................................................
Other: ............................................................
Finance/Mortgage fees: .......................................
Total (running costs): .....................................
Estate agents/developer fees: ............................ Refurbishment/Build costs: ................................ Furniture costs: .................................................. Other: ................................................................. Total: ................................................................. Total including price of property: ......................
Currency options Current exchange rate for £1: .......................... GBP needed to purchase currency: ................. Past market trends: ........................................ Currency strategy: .........................................
Utilities—Electricity
Schools, Where can I send my children?
Since 2003, the market opened up to more utilities providers, such as Iberdola, to introduce competition and as such, consumers can benefit in the resulting prices. Never the less, in Spain your best option is ‘Sevillana-Endesa’. You can set up a contract on/line, by phone or visiting a local office. Bills can be monthly, or bi -monthly and will be linked to your local bank account via direct debit.
There are many international schools across the Costa del Sol, one of which provides weekly boarding facilities for students. Pupils are taught in English, but have a wide variety of native spoken classe such as Spanish, German, French, Russian. Wide choices of curriculum are offered between G.C.S.E. and A-Levels to an International Baccalaureate.
Telephone & Internet
There are a variety of options available depending on the type of property you have purchased. As a guideline, for an apartment valued at €300,000 and contents at €50,000, you can expect to pay between €390-400 a year. Whereas for a Villa it would tend to be slightly elevated.
Bills are all charged on a monthly basis and installation rates are trypically free. There are various companies providing telephony and internet services in Spain, along with Fibre Optic now being readily available in most towns or cities.
Water and Rubbish (Basura) Agua (Water) consumption is calculated by a water meter at the property and payable quarterly at the Town Hall. The rubbish collection rate is applied by the Town Hall according to the property and is paid every 3 months.
How long can I stay in Spain as a tourist? Any non-resident living in the country for 183 days or more will considered a resident for tax purposes.
Insurance (Home)
Medical (& Insurance) Marbella has the most modern and well-equipped Regional Hospital in Spain (La Hospital Costa del Sol). Spain’s social system allows E.U. residents to access he healthy network via an E-101 or E/111 document. Alternatively, private medical insurance is available through many groups in Spain, such as SANITAS. This can cost between €30-€130 per person per month.
Furniture The Costa del Sol offers a fantastic choice when it comes to interior design. Ultimately, it depends on budget and what you will be using the property for.
POST-COMPLETION You’ve made it & will soon have the keys to your new home… There are just a few last bits and pieces to pay attention to. Here is a small list to help you get started!
M
ONEY
& MORTGAGES
T
he main annual taxes and expenses to be aware of in Spain are:
Municipal Added Value Tax (PlusValia) Rates or Annual Property Tax (IBI) Rubbish Tax (Basura) Wealth Tax (Impuestos de Patrimonio) After having been abolished in Spain in 2009, this was re-introduced on a temporary basis between 2012 and 2013, and then again from 2015 onwards. Current tax-free allowance is €700,000
Property Income Tax (Impuestos sobre la Renta) The ‘IRNR’ relates to income earned on the rental of a property. Any such gains on rentals are subject to a 24.75% tax on returns.
Mortgages Since 2008, Spanish banks have slowly began to lend money again, with loans becoming easier to obtain since 2010. Never the less, the criteria required to qualify is far more stringent than ever before.
A foreign applicant can expect to obtain a mortgage loan approval for 50% - 70% of the official value of the property. However, you must prove that 30% - 35% of the NET disposable income, after taxes and other debt commitments, is free to service the new loan. Do not be discouraged. However, it is important to meticulously prepare the documentation needed by the bank. Your agent and solicitor can be very useful in this process. The sample documentation required by the Spanish banks does not vary much from that required by banks in other countries. Typically will include:
Two years’ tax returns If employed and receiving salary, the previous 6 months of pay-slips If a director of a business, proof of various means of income must be justified A list of senior debts or mortgages (if any) A self-declaration of assets and liabilities accredited by a professional accountant. Bank statements dating back one year prior to date of application Passport copies In all cases, a mortgage application form will be completed.
URRENCY
T
his section is relevant only for those buying from outside of the EU or who plan on purchasing with non-European currency.
One of the biggest mistakes that anyone can make when buying a property in Spain is failing to realize the impact of exchange rates on the final purchase price! The important question you must ask yourself is, Should I use a specialist firm to convert my currency? Even the slightest change in the currency exchange rate can enormously affect the cost of your purchase in Spain. Banks and Foreign Exchange specialists are able to buy and sell currency in large bulk and therefor obtain preferential rates of exchange. We recommend you seek professional advice from a fully authorized and regulated entity whom can guide you correctly.
Case study: A Buyer’s Story... Philip, an IT Contractor from London, and his partner, Anne, moved into their new home in Malaga in November 2014, after previously renting in the area. The couple’s home is a brand new, Mediterranean style duplex penthouse in the heart of Nueva Andalucía. It is a stone’s throw from the Golf Course, which Phil plans to learn now he has time, and just a five-minute drive to the shops and restaurants. “The asking price was €580,000 but we got it down to a lot less than that,” says Phil, “thanks to our agents and local solicitors, we saved almost €50,000 on the asking price!” Anne happily boasts. “The Currency firm did exactly as they said on the tin,” said Phil. “Our agent put us in touch and we got an excellent rate to swap the pounds into euros. I would use them again and I’ve already recommended them to friends out here in Spain.” Make your story also happy one like Phil and Anne’s - don’t lose out when exchanging money and make smart decisions.
I buy a property priced at €500,000 and a difference in the exchange rate could cost or save me over €4,000!
W
e hope that the guide, tips and general information here will help you with the purchase of your dream home on the Costa del Sol. We regularly publish articles, newsletters and market updates from our resident writer on the Costa del Sol. Feel free to sign up for more information at sunnyviewproperty.com or speak directly to a Consultant on +34 603 294 324.
With over a decade on the Costa del Sol, we work alongside a wide range of service providers within the Spanish property market. On a final note, a highly respected lawyer we work with once said that there are three key necessities for a successful property purchase abroad:
A good estate agent
A good lawyer
A good currency exchange specialist
We couldn’t agree more! Get in touch for a Consultant to answer any queries you may have!
+34 603 294 324 info@sunnyviewproperty.com sunnyviewproperty.com
CONTACT US +34 603 294 324 info@sunnyviewproperty.com sunnyviewproperty.com
COPYRIGHT & DISLCAIMER: I want to… BUY IN SPAIN No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of Sunny View Property. Visit our website at: sunnyviewproperty.com Copyright © Sunny View Property, 2015 The author makes no representation or warranties with respect to the accuracy, applicability, fitness or completeness of the contents of this report. The information contained in this guide is strictly for educational purposes. Therefore, if you wish to apply ideas contained in this report, you are taking full responsibility for your actions. The author disclaims any warranties (expressed or implied), merchantability or fitness for any particular purpose. The author shall in no event be held liable to any party for any direct, indirect, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this guide, which is provided ‘as is’, and without warranties.