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Spanish Buyers Guide
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.


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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!
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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.
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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.
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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.
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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.
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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]

Insurances

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.
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