First Time Buyers of a Spanish Property
Welcome to a simple guide for first time buyers of Spanish property. A number of excellent books have been written on the subject of buying a property in Spain; here we aim to give you a broad brush view of key points for consideration in your quest for Spanish property ownership.
To begin with, establish in your mind exactly what you want to achieve from owning a property in Spain. There are many benefits and features in owning Spanish property. List your objectives and prioritising these will help to provide a good basis for a structured search.
Your objectives might include:
- Holiday home
- Holiday home with income potential
- Buy to rent
- Short term capital appreciation only
- Medium/long term capital appreciation
- Capital appreciation with rentable income
- Retirement home
- Home for family emigration
- Properties for investment portfolio
It is possible that your plan might be to achieve a number of objectives over a given period, examples of this might “I want a holiday home/apartment with income for now but later I will sell it to buy my ideal retirement home” or “I want to buy one property off plan now, sell before completion then purchase another property for the purpose of buy to rent”.
The importance of having the clearest possible objectives from the outset is that your deliberations over the following key points may be more meaningful and also it will help you with any exit plan you may want to have in place.
Choosing the Right Location
Understanding your reasons for buying, as covered in the last section, will help with your choice of location. Some thoughts for you to contemplate:
Holiday Homes: Think about the time of year you will be using your property. Some parts of Spain can be arid all year round, with blistering heat in July and August, whereas other parts might have something of seasons and other regions may have good all year round temperatures and climate.
Is travelling time an issue? Do you need easy access to airports? What amenities do you need for yourself and any family?
Holiday Homes and Income: How important is the income aspect of your investment? Check our local rental values in relation to capital outlay, i.e. yield, if income is an important factor.
You will need to take advice on legal and taxation matters.
Buy to Rent Properties: You idyllic choice of location may not be where you might achieve the best letting potential. Look at the competition. You might want to consider long term lets. Remember you can consider tenants from across Europe, not least Spaniards as most Spanish people rent their homes.
You will need to take advice on legal and taxation matters.
Capital Appreciation: How long are you prepared to wait for the optimum sales price appreciation?
The location you choose will be equally important if capital appreciation is your main objective. Factors to take into account are:
- Off Plan Purchases: How long before completion of the property you contract to buy? How long before completion of the whole complex? What will the finished area look like? If possible, look at price uplift comparables for other similar established developments in the region?
- Bank Repossessions can be excellent investments for reselling, but check that the location is right for the property specification and again check comparables.
- Key in Hand Properties: There are some outstanding bargains to be had. If good capital appreciate is your goal, you will one day be looking to sell on, so most importantly check the desirability of the market for the property in the future.
Retirement Homes: Your first choice of location will have to be supported by relatively easy access to a good medical centre and principal amenities which are important to you.
Home for Family Emigration: If you need employment, the location where work is must be a major factor.
Property Specification
As they often say in Spain “life is mainly on the outside”. Whether it’s a holiday home, a buy to rent, an investment or a retirement home, the end user in most parts of Spain will be looking for balconies and community gardens preferably with a pool, if there is no access to a private garden or pool.
Most property specifications are given in square metres (m2). A two bedroom apartment average is normally between 65 m2 and 90 m2, town houses between 80 m2 and 120 m2 and detached villas from 120 m2 upwards.
Crime in most parts of Spain is lower than in the UK, but window security grills, alarm systems and security doors are often fitted as standard to new build properties.
Budget
A little initial research into affordability can save disappointment by having unrealistic expectations.
Added to the base cost of any property or land, you will need to add approximately 11% to cover VAT or Transfer Tax, registration charges, taxes and your solicitor’s fees.
When comparing prices, check whether the builder has included VAT within the price as some do and some don’t.
When buying a resale, you will often find that the furniture is included in the purchase price. Check it out. Ask for an inventory of any items to be left.
Property prices compare favourably with those in the UK and the cost of living is also somewhat lower. All in all, living in Spain can be easier on the pocket and a rather better climate to boot.
Raising Finance
Interest rates are inclined to be lower in Spain and some good deals are available.
Over the years we have noticed that most purchasers have raised their initial payment in the UK (possibly by refinancing a UK home) and paid the balance for the property in Spain with a Spanish bank mortgage.
In many instances on new build property, elements of mortgages in place for the builder can be transferred to the end property buyer. Generally this is at competitive rate and can save mortgage registration costs at the Notary.
It is good to know your affordability levels from the outset.
(Some link to a Finance page)
Buying Off Plan
This can be a really good route for first time buyers, especially if the builder’s timeframe to construct and complete the property is over 2 years. Some builders will accept as little as 20% down payment (generally no more than 50% is required), with the balance paid on completion.
As you have committed to purchase sometimes before a brick is laid, you pay the lowest possible price which is fixed. Even in times when the economic climate is difficult, prices still climb as the property is constructed and completed.
When buying off plan, bank guarantees should be in place which will ensure your down payments are secured by the bank in the event of a financially failing builder. Your solicitor will advise you on the detail in this regard.
Buying Procedure
Buying with the GPS-Direct full agency service can help to ensure an enjoyable, stress free buying experience.
Our experience is your strength.