A place in the sun: Your guide to buying a home in Spain

Many Londoners have a hankering to buy a second home abroad, and Spain ranks as one of the most popular places to own one. There are officially 750,000 British people living in Spain, and thousands more who own property but live in the UK.

 

Spain’s economy was hit hard by the financial crisis, and property prices fell sharply. Average prices are yet to return to their 2008 peak, although there are regional variations, so there’s potential to buy cheaply and perhaps see capital appreciation in the coming decade.

 

Spain’s agreeable climate means the country is home to beautiful lakes, quiet mountainous regions and, of course, the legendary coastline which draws so many foreigners each summer.

 

The most popular areas for Britons to buy in Spain are the Costa del Sol, Murcia, Costa Blanca, Almeria, Costa Brava and the Balearic islands.

 

It all depends on the kind of experience sought. These areas are undoubtedly popular for the convenience of having English speakers around and the potential for friendship. Quite possibly the most British area in Spain is El Campello, a town north of Alicante in Costa Blanca, which is home to the English Speaking Club. The only requirement for membership is that one speaks English.

 

Away from the hubbub, interest has been picking up in the north-western region of Galicia, by those looking for a quieter lifestyle and more reasonable prices.

 

In terms of pricing, some inland areas of Spain such as Navarra, which is home to the bull-running festival town of Pamplona, have house prices still half what they were before the crisis. And in the popular coastal provinces of Valencia, Murcia and Andalucia, property is still 20-25 per cent lower than it was pre-crisis.

 

Most importantly for Britons, the depreciation of the euro this year means our purchasing power is greater than ever. The euro has weakened substantially in the last four years and is down nearly 20 per cent since 2011. At the time of writing in early September, £1 could buy €1.35, which translates to a €250,000 property costing just £185,185, before taxes and legal fees.

 

But although the euro’s weakness relative to history means buying abroad is generally cheaper, the timing of the purchase is crucial. Even small currency movements have a big impact when the sums of money involved run into the thousands.

 

The euro strengthened over August and by early September was actually less beneficial for sterling buyers. The difference is stark. At the start of August, £1 bought €1.43, which meant a €250,000 property cost £174,825 – over £10,000 less.

 

“Very often, someone will view a property and decide to buy based on the exchange rate of that day. As rates fluctuate every minute, by the time they come to complete on the purchase and make the transfer, the rate could have dropped dramatically,” says Tracey Van Den Berg of Smart Currency Exchange.

 

Because of this, anyone thinking of buying a property overseas should consult one of the big foreign exchange companies. They will be used to dealing with large transactions and can help advise on how many euros your budget will buy at a particular time. 

 

FxCompared.com is a website which gives quotes from various currency transfer companies. These rates for sending money abroad are often more competitive than a bank.

 

Some can also offer specialist products called forward contracts, which will let people lock-in a particular exchange rate for a period of time, in return for a fee. This will provide a defence against currency movements, but the charges will have to be weighed against the potential benefits.

 

The UK government has a guide to buying a property in Spain, which can be found at gov.uk/guidance. This should be the first stop as it covers all the essentials. Living in Spain and buying property there is fairly straightforward (from a legal standpoint) for citizens of the European Economic Community.

 

The internet is awash with advice, but one containing forums and tips from expats is SpainBuyingGuide.com.

 

The property search could start at RightMoveOverseas.com, which is owned by the UK property site of the same name. The Channel 4 television show about buying abroad, A Place In The Sun, has a very informative website which lets users search for properties in Spain. These websites can help in finding a local estate agent, based on the region and type of property desired.

 

There are several property shows worth visiting too. A Place In The Sun runs its show three times a year, with the London stage held in May. There will be a Luxury Property Show on in London on 3 November this year.

 

The law varies by region and a Spanish speaking, independent solicitor will be vital for anyone hoping to buy. There are quirks of the law and processes which differ from the UK. 

 

For example, in Spain, buyers pay a large deposit which is a percentage of the sale price to secure the property. This means the buyer cannot renege without losing their deposit. 

 

Urbanismo is the Spanish word for land and property law, so find a solicitor (abogado) with a specialism in this. It is best to go via a recommendation, but for those lacking a local friend, the Foreign & Commonwealth Office website has lists of solicitor firms by region. The list explains each firm’s specialisms and languages spoken. Some have experience representing Britons.

 

There are charlatans out there, so don’t be tempted by the solicitor offered by the estate agent or property developer. They may draw up a contract which favours the seller, to secure their on-going business.

 

Be sure to check the solicitor’s registration number, and cross-check this with the local bar association, known as a colegio de abogados. There is one for each region in Spain, and these bodies should be able to show the solicitor is qualified and practising.

 

It is also best to enlist the services of a solicitor before viewing properties, as if the right property comes up you may feel rushed into picking one.

 

As with buying at home, the headline price of the property is only the start. The purchase price will include a 3-5 per cent estate agent fee.

 

After that, Spain’s Treasury takes a 10 per cent tax on the purchase price, where it is land or property being bought. Legal fees will be 1 per cent plus VAT of 21 per cent. 

 

Then there are fees for the notary (a Spanish official who witnesses the signing of the contracts) and property registration fees, both of which can vary. 

 

Few people have the luxury of being cash buyers, and a mortgage will cost a further 3 per cent in fees to set up. Once the property is yours, you will have to pay a council tax-type fee to the local town hall, which pays for amenities like rubbish collections and streetlights. 

 

Getting out of the Spanish property market is not so easy either. Prices are down because there are fewer buyers, and for sellers this means a home can easily be left on the market for two years awaiting a buyer. Estate agent commission on the sale could take 6-7 per cent of the proceeds.

 

People looking at buying a rental property in Spain are advised to do their homework. Recent changes to rental licences have led to a rather patchy regional approach to the regulations, says Richard Speigal of España Breaks.

 

“There were big problems with holiday rentals being unlicensed, untracked and ultimately allowing a situation where foreign owners paid no tax on their income. Central government pushed responsibility for licensing to the regions and we’ve ended up with a very mixed picture. Some regions are doing a great job, making it easy for owners to register their property and creating good schemes to get some uniformity into accommodation standards. Some less so,” he says.

 

Speigal advises buyers do their research and opt for areas with well-run licensing systems if they want to let their property out.

 

 

It was so stressful to know the money was lost in the ether, and no-one knew where it was

 

Julie Marsden, a 42-year-old IT consultant from London, bought her second home in Spain last summer with her husband David Marsden, an accountant, after falling in love with the country eight years ago. The pair holidayed frequently in Spain and had travelled all over, and knew they wanted to own a permanent base with a view to retiring there. They picked Saifores, a town in Catalonia 40 minutes south of Barcelona and 20 minutes away from the Roman seaside city of Tarragona.

 

They chose a four bedroom restored medieval townhouse, with a garden, small swimming pool, garage and cellar.

 

The Marsdens wanted to take their time with the purchase. They started by renting holiday homes in Saifores to get a feel for living there, and this was lucky as they started working with an estate agent they grew to trust and who would later help them buy.

 

“We didn’t rush because we wanted to make sure that what we were doing was right, that it was in the right area and we would use it,” says Marsden. “We considered many different regions and honed in on Saifores because we liked that it wasn’t too touristy. We felt we were getting into the heart of Spain.”

 

She searched for properties online every weekend and they viewed around 20. They found their ideal home was being sold by a Dutch couple, who spoke English. The Marsdens were cash buyers, so they did not have to arrange a mortgage.

 

But things were not entirely plain sailing. Julie had set up an account with local Caixa Bank, which is popular with expats. She then used Money Corp to transfer the funds to her Spanish bank account, but when the payment was sent, Caixa rejected the cash on concerns about money laundering.

 

“They said they didn’t know me, even though I had banked with them for eight years. It was so stressful to have the money in the ether and no one knew where it was.” After asking her estate agent to intervene, to no effect, she had to open an account with a different bank, which allowed her to transfer the funds with no problems. This is unusual, though, as both Money Corp and the estate agent had never heard of such an issue.

 

When they bought the property last year, the exchange rate had fallen considerably, to their advantage. But it fell further shortly after. “We kept a very close eye on that. We lost out a little because the rate changed subsequent to purchase, but we have the property we want.”