Yes, it is possibly the right moment to start the process of buying a property in Spain. Spain is slightly behind other countries with vaccination so it is possible prices will stay down for a bit longer than elsewhere in the world.
Once you make your choice you could be tempted to pay a deposit and secure the house… first mistake. Make sure an independent lawyer carries out a competent legal check before anything else because terms included in the deposit contract could compromise the rest of the sale to a bigger extent than you expect.
Why is it important to check the deposit contract?
The deposit contract (contrato de arras) is like a road map of the purchase: it establishes price, conditions, penalties… for both parties. Many buyers are unaware of its importance or believe it’s worth little because the part of the price that is paid as the deposit is just a few thousand euros (say, €5,000 to 7,000) or 10% of the price at most. But, when you sign the contract and pay the deposit, you are designing and compromising your position for the rest of the sale.
What does the deposit contract need to include?
It must contain the main aspects of the sale agreement: full identification of seller and buyer, sufficient official and clear identification of the property (Nota simple required), denomination of the contract as contracto of arras penitenciales as per article 1454 of Spanish Civil Code”, agreed price, method of payment, who will pay the expenses and taxes, date for signing of public deed etc.
Bottom line? The more detailed and clear the contract is, the more secure your purchase process will be.
If you are buying from a developer, the contract needs to also comply with Consumer Law.
What if the agreement included in the deposit contract is not met?
The Spain Civil Code article states that the deposit amount acts as penalty if the contract is not honored. The buyer will lose it if they breach the contract and the seller will have to return it plus the same amount again (i.e. double the initial deposit) if they breach it.
If there is no breach of the deposit contract, that amount will be considered part of the purchase.
Find out about buying property in Spain.
How to know I am paying a good price for the property?
Market price in Spain is set by what others are paying for similar properties and, in many occasions, due to the pandemic, the buyer is willing to accept a price reduction. So, try to negotiate. Your lawyer can help you negotiate this.
What does the cadastral value of the property indicate? Is it the official price?
Well, it depends on what you mean by “official”. The cadastral value is the value of the property for the Administration. It is the value for taxes.
It is generally much lower than the market value of the property.
What are the taxes associated with buying a property in Spain?
It depends on whether you are buying from a developer or from an owner.
If you are buying from a developer:
- You need to pay VAT. VAT is 10% for a house as the general rate- a very reduced VAT rate exists for Social Housing. In the Canary Islands, VAT for housing is 6,5% as general rate and 3% for Social Housing. VAT is 21% for commercial premises. If you are buying off plan, a portion of the VAT will be paid in each of the advanced amounts paid to the developer.
- You also need to pay Stamp Duty when you sign the title deeds at the Notary. Depending on the region where the property is located, this can be from 0.5% to 2% as stated below:
|Region||General Rate||Reduced Rate|
|Andalucía||1.50 %>||0.3 % for buyers under 35 and 0.1% for disabled people.|
|Aragón||1.50%>||0.5 % for protected refurbishment activities and 0.1 % for suppression of architectonic barriers and functional adaptation of permanent home of handicapped people|
|Canarias||1 %>||0.4 % for purchase of permanent home by large families, by people under 35 and disabled people.|
|Cantabria||1.50%>||No reduced rates|
|Castilla y León||1.50%>||0.01 % for purchase by people younger than 36 years old and for property located in rural areas|
|Castilla-La Mancha||1.50%>||0.75 % under certain conditions|
|Cataluña||1.50%>||0.5% for purchase of property by buyers under 33 or with disability of at least 33%.|
|Comunidad de Madrid||0.75 %>||0.4%, 0.5% or 0.75%, depending on the value of loan to purchase, provided the borrower is an individual|
|Comunidad Foral de Navarra||0.50 %>||No reduced rates|
|Comunitat Valenciana||1.50%>||0.10 % for financing of permanent home for large families and for disabled people.|
|Extremadura||1.50%>||0.75 % for the purchase of permanent home and 0.1% when it is Social Housing of middle classification.|
|Galicia||1.50%>||1 % for first acquisition of permanent homes and 0.5 % when property is for the disabled, large families or the under 36s.|
|Islas Baleares||1,20 %>||0.5 % for property that will be the tax domicile or work premises of newly created companies.|
|La Rioja||1 %>||No reduced rates|
|País Vasco||0.50 %>||No reduced rates|
|Principado de Asturias||1.20 %>||0.3 % for beneficiaries of financial aids from the authorities.|
|Región de Murcia||1.50%>||0.1 % when it is a house that comes under the Youth Plan in the region|
If you are buying from the owner:
Property Transfer Tax (ITP in Spanish),which is aprogressive tax that depends on the price of the property. It varies according to each Region.
|Andalucía||8-10 %>||3.50 %>||Permanent Home valued under €130,000 for a person under 35 years, or under €180,000 for someone with over 33% disability.|
|Aragón||8-10 %>||Refund of50 %>||Permanent home for large families|
|Canarias||6.50 %>||4 %>||Permanent home for large families, buyers under 35, disabled or Social Housing.|
|Cantabria||8-10 %>||5 %>||Properties for large families, the under 30s or buyers with at least 65% disability.|
|Castilla y León||8 %>||4 %>||Permanent home for large families or buyer or family member with a disability above 65%. Also, for buyers under 36 for a permanent home.|
|Castilla-La Mancha||8 %>||7 %>||First permanent home for the tax payer, provided the property value is under €180,000 with at least 50% mortgaged.|
|Cataluña||10-11 %>||5 %>||Large families of members under 32 or those with disabilities.|
|Ciudad Autónoma de Ceuta||6 %>||N/A>||No reduced rate|
|Ciudad Autónoma de Melilla||6 %>||N/A>||No reduced rate|
|Comunidad de Madrid||6 %>||4 %>||Permanent home for large families|
|Comunidad Foral de Navarra||6 %>||5 %>||For first €180,304 of the permanent home for families with more than 3 members.|
|Comunitat Valenciana||10 %>||8 %>||Social Housing or buyers under 35. It is a 4% for social housing, permanent homes of special class, large families with disabled members with a disability above 65%|
|Extremadura||8-11 %>||7 %>||Properties valued under €122,000 and addition of general taxable amount plus taxpayer saving under €19,000 in individual declaration or €24,000 in joint declaration.|
|Galicia||10 %>||8 %>||Permanent home for family with assets under €200,000. 4% for people with over 65% disability or large families with assets under €400,000.|
|Islas Baleares||8-11 %>||N/A>||No reduced rate|
|La Rioja||7 %>||5 %>||For social housing, or the setting of charges on them. Also for permanent homes of the under 36s.|
|País Vasco||4 %>||2.50 %>||Large families|
|Principado de Asturias||8-10 %>||3 %>||Social housing|
|Región de Murcia||8 %>||4 %>||Special social housing. 3% for large families or those under 36.|
This tax is paid after signing the public deed (the total amount). Deposit amounts paid before the completion of the sale do not include the corresponding prorated ITP percentage. All taxes are paid at the end.
What are the expenses associated with buying a property in Spain?
This depends on several factors such as:
- Price of the property
- Existence of mortgage
- Number of pages/sections of the deed.
- How many parties are involved in the transaction
Estimate between €300 and €1,000.
Land Registry Costs
Estimation: 500€. 0.1% to 2% of the property value declared on the deed.
A good, independent lawyer by your side will not just make the process clear and smooth, avoiding complications, but will certainly be able to negotiate the price with the seller and save you money.
The lawyer may charge you a fixed price or a percentage that ranges from 0.5 % to 1.5% of the purchase price (plus VAT).
We can help you through the whole Conveyancing process.
Estate Agent fees
There is a huge variety of percentages in Spain, from 2% to 15%. There are no regulations in Spain setting a rate.
What are the expenses for setting up a mortgage?
Obtaining a mortgage in Spain has several associated expenses:
Property Valuation: around €500.
Other costs (Notary, Registry, Stamp Duty, etc) are paid by the Bank.
Applying for a mortgage for property purchase?
2 thoughts on “The Process of buying a property in Spain”
Thank you Maria for your returned email at least we know a bit more about extra expenses when buying a house in Spain , I hope to be intouch at a later date this year and hopefully you could help in the process of buying . Has soon as our house is sold we hope to come over to Ciudad Quesada and take a 1 month holiday looking round at houses for sale .Thanks again Mr Carl M cGuigan
A pleasure, Carl. If have any further questions, just let us know