As you gaze into the estate agents’ window it’s easy to forget that the price you are seeing there is only part of the overall cost to you. It’s important that you take into account the additional fees that will come your way. In this article we outline what buying property in Spain costs overall.
Property in Spain is good value. This article is not to deter you from finding the property of your dreams and making it your own. Far from it. Even when taxes and fees are added on, it is likely that what buying property in Spain costs will compare very favourably with what the total would have been in many another countries.
That said, you should be sure from the outset what the additional or added charges will be so that you can ensure that you are purchasing within your budget. This might include not only the immediate purchase costs and fees but also the longer-term regular commitments that you can expect such as IBI property tax, utilities and annual community fees. After all, you want your Spanish home to be a blessing and not a financial burden.
One word of warning. Whenever we try to estimate what buying property in Spain costs, we also have to also take into consideration the differences that you will find between the autonomous regions. Not only are there variations in what you can expect the house prices to be but also there are differences in the application of local rates and charges that will impact on the total cost. Each case, in other words, is unique and we always recommend that you take local advice to ensure the final figure applies to the community you are buying in.
There are different types of fees that will need to be taken into consideration when working out what buying your property in Spain costs. Some are applicable to everyone but mortgage fees, for example, will only apply when you are not a cash buyer.
Here is where your most significant expenditure is likely to be. When you are purchasing a new build property you will have IVA (VAT) to pay and stamp duty (AJD). IVA is currently set at 10% and stamp duty is usually around 1.5% but this depends upon where your property is located.
A resale property incurs transfer tax or ITP. This is currently 10% depending on location. So all in all, the cost of purchasing property in Spain when it comes to tax is more or less the same whether you are buying brand new or not.
It is vital that you obtain the proper advice and legal representation. Although there are more safeguards now than in the boom years, there are still ways in which an unsuspecting buyer might find themselves with more costs to the purchase than they’d expected.
Property can have unpaid debts held against it that you can become responsible for if they are not cleared before you buy. A search prior to paying a deposit on the property will confirm who is the legal owner and raise any immediate issues there might be. Your conveyancing solicitor is an important part of what buying property in Spain costs. You should ask them for their estimate prior to agreeing to their services.
In addition to your solicitor’s fee you will have the notary to pay. The notary witnesses the signing of documentation such as the Title Deed. The amount that they charge is set by law and usually starts at around €800. The fee for registering the property in the Spanish Land registry usually starts at around €400.
Banking and money exchange
Purchasers often underestimate how much it can cost to transfer money from one country to another. If you are not careful this can add a significant amount to what buying property in Spain costs. If you use a bank then it can cost you up to 4% of the amount being transferred – a sizeable amount when you are moving a large quantity of money.
Our recommendation is to use a currency exchange company. The system works on the basis that you transfer money to their bank in your home country. They then pay for the property from their account in Spain. The money hasn’t actually been transferred across countries. This is the cheapest method and it also has the advantage that you can fix the exchange rate and decide exactly when the transaction is made.
If you have bought a property in your home country then you will already have been involved in the process of estimating how much it will cost you in the longer term. It’s a similar process for property in Spain. You will need to have a rough estimate of the electricity cost for your prospective property. We know it’s warm here in the summer but heating is still essential in the winter and it is likely that you’ll also want air conditioning in the summer. How your water is heated can make a big difference too and old-style energy inefficient systems can make a big difference so take a look at the energy rating certificate for the property you’re buying.
IBI, council tax, is relatively low in Spain but, of course, it does vary depending on where your property is located and its size. Don’t be caught out. It’s a once-a-year payment and shouldn’t break the bank but you need to make sure that you have sufficient funds to cover it.
Finally, take into consideration community fees. Having a property that’s part of a community can be very useful for ensuring that the grounds and environs are maintained. However, it comes with a cost and you should be made aware of this when first deciding on your property.
It’s also worth taking other factors into consideration. Is there a local supermarket? How ‘pricy’ is the area when it comes to eating out and how far will you have to travel to amenities? All these factors can add up over time. However, with just a little forward planning and a realistic outlook you can make sure that you are clear about what buying property in Spain costs and have enough left in the bank to really enjoy your time here.