> General market situation in Spain

> Taxes and costs

> Financing facilities

> Special features and terms of the Spanish property law

General market situation in Spain

After information of the renowned Spanish savings bank La Caixa the average annual profitability already with living real estate lies at more than 7% in Spain.

In the Spanish vacation regions it is often in the two-digit area. This may contribute that 53%(!) of all German, who would like to buy a vacation property, prefer Spain.

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Taxes and costs

1. The buyer must pay approx. 7% tax on acquisition of real estate (Impuesto de Transmisiones Patrimoniales) depending on region, or if it is a new building or a buyer liable to VAT 7% value added tax. 
2. The seller must pay a tox of 35% on the profit made by the sale. To prevent that an abroad resident seller escapes of the payment of this tax, the buyer is compelled to retain 5% of the selling price mentioned in the notarial purchase contract document and to pay to the tax office as a payment in advance on the tax owing which is to be paid by the seller. The retained amount is then settled with the 35% profit tax paid by the seller. Should the situation arise that there is a surplus it can be claimed back in a longer procedure.
3. In addition, the seller still must pay the so-called Plusvalía, the municipal increase in value tax. Generally this tax is often paid by the buyer.

Notary and entry into the catastral register

For the legal execution of the sale and the entry of the new owner into the catastral register, incurs 1% of the selling price notary costs.

Usual broker's commissions in Spain

The usual procurement commission for the disposal of a property in Spain is 3-5 % of the selling price. This commission would be an inside commission after a German use and is carried by the seller. In the re-d Spain offers this provision is included in the mentioned selling price.

Down payment (las arras)

A sum of money which has to be understood as a down payment on the purchase of the property. It is a little percentage of the total amount of the property which the buyer hands over to the seller. The amount usually is regarded as assurance, that the property is purchased within a particular time period. If you decide after expiry of the period not to buy, then you lose the sum (guarantee amount) done before. If the seller, however, sells the property to another interested party before expiry of this period,  he must repay you the double sum.

In case of advanced purchase negotiations of a re-d Spain object incurs that arras with signing of a preliminary contract prepared by us and insures buyer and seller until the definite sale of the property.

Cost overview and examples

By rule of thumb as a buyer in Spain one can reckon with approx. 10% additional costs at the selling price for carrying out and taxes.

Noncommittal cost example at a selling price of € 120,000:

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Financing facilities

Traditionally good financing facilities are offered in Spain. The current mortgage sentences are far below 4% effective annual interest depending on duration.

The Spanish legislation provides a number of mandatory expenditures for the purchase of an apartment or a house and the load with a mortgage, so that problems arise at the execution of the transaction.

Before the application for a mortgage:

The actual value of the property must be estimated to establish the maximum amount of the mortgage before a mortgage is applied. This assessment is carried out by experts who are registered at the Spanish national bank. For a mortgage to the value of 60,000 to 120,000 euros there is a good chance for costs of approx. 180 euros.

Costs at the constitution of the mortgage (at the purchase of the property):

Notary costs for the issuing of the mortgage note. These costs mount up to approx. 600 euros for a mortgage of 120,000 euros.

Catastral register entry of the mortgage. For a mortgage of 120,000 euros these are approx. 220 euros.

Preparing the public document over the constitution of the mortgage a stamp tax (Impuesto sobre Actos Jurídicos (IAJD) has to be paid whose amount is fixed by the respective autonomous region. If there is no explicit regulation, 5% are raised on the mortgage liability (responsabilidad hipotecaria).

Further costs

For the required formalities for the payment of the taxes to the tax office and for the entry of the mortgage note and the notarial sales document into the catastral register. These costs amount respectively to about 250 euros at a mortgage of 120,000 euros.

A legally prescribed building insurance covers damages to the property. The costs are of between 50 and 100 euros per annum for a mortgage of 60,000 and 120,000 euros.

Furthermore costs for the conclusion of a mortgage have to be scheduled. These are different from bank to bank.

Please ask us for recommendations on renowned bank institutes in Spain.

Current financing example

Example of a mortgage at a property value of € 120,000:

This financing example is noncommittal and does not lay any claim to completeness and correctness. Mistakes and changes are excepted.

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Special features and terms of the Spanish property law

Notarial sales contract (escritura de compraventa )

This is the most important document. The seller and you yourself sign this contract in front of a notary. The notary witnesses the sale and certifies the contract publicly. With the entry into the catastral register the buyer is expelled as a new owner opposite every person.

Read all contract clauses carefully and don't forget those which fix who must pay for which taxes incurring in the context of the purchase and tax either. Pay attention to the rights and duties of both contract parties.

When buying with re-d Spain you receive extensive advice and explanation of the clauses and duties of the Escritura. In complex cases we advise the inclusion of a local lawyer.

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