One of the first questions we ask of those considering buying a house in Spain, is ‘What’s your budget?’ Knowing what your budget is, is crucial if you are going to make the right purchase for you.
What many people do is forget to include buying costs within their calculations. Either that or they totally underestimate the cost of buying a house in Spain. You are better to overestimate how much you will need and have a little left over for added extras than find you leave yourself with nothing to set up your new Spanish home.
So, to make sure you are prepared, we have put together our own little buying guide as to how much you will need to spend.
The cost of property
We have seen a drastic drop in the price of houses in Spain since 2008. There is still speculation as to whether this trend is likely to continue or whether house prices have truly reached rock bottom.
In some areas the price of property has decreased up to 44% since the boom years. This means that property can be on offer for almost half its original asking price in some cases, bringing the cost of buying property in Spain down significantly.
Although not all properties have seen such a decrease it is likely that you can pick up a property for a very good price in comparison to what you would have paid in 2004, for example.
However, you perhaps shouldn’t wait too long to pick up your bargain property. In some places the cost of buying a house in Spain is now on the increase. For example, in Jávea in Alicante house prices have been rising.
Property prices might have plummeted but the cost of purchasing hasn’t gone down. You will still have the same taxes, notary and solicitor’s fees to pay. So what can you expect those to be?
There are four types of fees that you will need to build into your calculations:
- Legal fees for the purchasing process
- Banking procedures and money exchange
- Mortgage costs
Both buying and selling you will incur taxes. These do vary, however, depending on whether it is a new or second hand property that you are buying. For new build you will pay IVA (VAT), currently at 10%, and stamp duty (AJD). Stamp duty is usually around 1.5% which varies according to where the property is located.
If it is a resale property that you buy then there will be transfer tax to pay. Transfer tax (ITP) is currently around 10%, depending where the property is located. This means that there isn’t a great deal of difference between the taxes on new and resale property.
There are two types of legal fees – those from your solicitor and those that are external and include the notary fees.
The notary witnesses the signing of some essential documents. He/ she is a professional who legalises agreements and contracts and will witness the signing of the Title Deed. The amount that notaries charge is prescribed by law and starts around €800. The Title Deed is inscribed at the Spanish Land Registry and the fee for this usually starts at around €400.
You will also have your own solicitor to pay. This fee can vary significantly but to cut corners here is to run the risk of the sale not being completed properly. An independent lawyer will represent your interests and is a must. They will give you a cost estimate of how much their services will be.
This is one area that people frequently forget to build into their calculations of the cost of buying property in Spain. When you transfer money from one country to another, there is a charge. Transferring such large quantities at one time also means that a fluctuating exchange rate can make a difference of thousands rather than just hundreds.
Transferring money through the normal process using a bank can mean you pay up to 4% of the amount transferred. They will also choose their own time to make the transfer and this might not be the best time as far as exchange rates are concerned.
Many people choose to use a currency exchange company. These companies don’t actually physically transfer your money from one country to another. They have funds in both and you pay into one account in one country and they pay into your account from their bank in the receiving country.
They will also transfer money at a time that suits you – when the exchange rate is at its best.
Mortgages are now becoming slightly easier to come by. However, the costs associated with them are still steep. You will be expected to be able to contribute a fair proportion of the cost of the house as a deposit to start with. It’s likely to be at least 30 to 40% of the total price of the property. Proof of income will be needed and administrative costs can be anything up to 3% of the mortgage itself.
In every country there are costs associated with the buying process. The cost of buying a house in Spain is no greater than in many countries. What is important is that you build this into your calculations from the start and, if necessary, reduce your budget for the property itself. No one wants to be left cash strapped when they’ve a new home in Spain to enjoy.