Buying Property In Spain – A Guide
Spain remains a popular destination for people planning work or retire abroad. Many plan to buy a property as they make Spain their new permanent or long-term home. Buying property in Spain is unlike buying in the UK or the US and it is important to understand the processes involved and risks faced. This guide outlines how to find, fund and purchase a property in Spain.
Written by Nigel Ayres, CEO, Expat Network
Spanish Property Market
Euroweekly report that house prices in Spain are on the rise and are expected to continue increasing into 2025, driven by inflation and a growing demand for housing amidst a tightening supply.
They report that prices in the Costa Blanca have risen by 4.3% in 2024 and in the Costa del Sol by 8.3% and that these trends are expected to continue into 2025 due to heightened demand for housing and to the fact that new construction projects are few and far between.
With ECB interest rates reduced to 3.4% in October likely to help mortgage rates in Spain prospects for the property market are further enhanced.
Caixa Bank report that ‘the first half of 2024 has been marked by rapid increases in both demand and prices in Spain’s real estate market, with a somewhat more timid increase in supply’. This greater than expected buoyancy has led them to revise upwards their forecasts for Spain’s real estate sector for 2024 and 2025. CaixaBank Research predict that the number of sales will reach around 565,000 units per year and that home prices will rise by around 5.0% in 2024, followed by a slightly more contained growth rate of 2.8% in 2025.
Foreigners play an important role in the Spanish property market accounting for 15% of property purchases in 2023 (87,300 properties). In the first half of 2024 foreigners purchased 43,232 properties in Spain.
Fine and Country report that foreign buyers mainly target coastal regions and islands. Foreign purchases represent 34.3% of all transactions in the Balearic Islands, followed by 33.5% in Alicante and 27.6% in Santa Cruz de Tenerife.
Caixa Bank expect the production of new housing will continue to be weighed down by structural factors, such as the lack of development land and skilled labour shortages. Theyexpect around 115,000 planning permission applications to be granted in 2024, rising to 125,000 in 2025. The gap between supply and demand will steadily widen due to this lack of significant housing supply increase causing potential further pressure on home prices.
Rent or Buy
Even if you plan to but your home in Spain it is worth considering renting before you buy to ensure you get a good understanding of the market in the area you plan to live in so you buy the right house, in the right location at the right price. It is easy to think you know an area but it is only once you have lived there full time for a period that you understand the pros and cons of areas around your parget destination and other lifestyle issues that will impact your decision on where and what to buy.
Many choose to rent long term as it gives them greater flexibility. This is especially true if you are uncertain about how long you plan to stay in Spain.
Other advantages of renting include the fact that renting requires a smaller initial investment compared to buying. You’ll generally need to provide a security deposit and the first month’s rent rather than a sizable down payment and closing costs associated with purchasing a property.
As a tenant you do not have to incur the costs of property maintenance, repairs, or other homeowner-related expenses. This can save you time and money, allowing you to focus on adjusting to your new environment.
On the other hand many seeing buying a property as a way of feeling stability and permanence in your new home country. It also means that instead of paying rent which is an expense rather than an investment buying your home is an effective way to build equity and benefit from local real estate market appreciation. Over time, as you pay off your mortgage and property values increase, you can accumulate wealth through your investment.
Buying a property may also give tax advantages such as deductions for mortgage interest or property taxes, which can offset the costs of homeownership.
As a property owner, you bear the costs of maintenance but are also free to make changes and improvements to your home without seeking permission from a landlord. This allows you to ensure your home truly reflects your tastes and preferences and fits your lifestyle.
Finding a property in Spain
Initial research into the sort of property you feel will meet your needs in the areas you are targeting can be done using property portals. This can help to identify what your budget will allow you to buy in the area and monitor price movements while you plan your move. The major property portals include Rightmove Overseas Spain and the main specialist Spain Property Portals are:
Once you decide it is time to get serious about your move it is worth finding an agent to work with for your property search. There are two basic options here, a Property Finder or a Property Agent.
Property Agents will help you to find a property but you should always remember that their primary loyalty is to the seller and not to you as the buyer. They may tend to direct you to properties where they are the primary agent and to developers they have a contract with as this will mean they do not have to share their commission. In Spain the agency listing a property charges 5% to 10% agency fee. If a buyer is represented by an agent the seller’s agent will have to share the fee.
In some areas of Spain agents actively co-operate with each other whereas in others they are more directly competitive and reluctant to share the agency fee. Regulations are fairly low and there are some unscrupulous agents. You should ensure you do your due diligence when selecting who to work with.
A Property Finder works exclusively for you and most do not list properties for sale. They will work with you to identify your needs and priorities and shortlist the properties for viewing. They will have access to all of the properties listed by Property Agents in the area and have a good knowledge of the local market.
They will charge a fee for their services. If they are able to earn a share of the selling agent’s fees this may be offset. The benefit of using them is that they are devoted to meeting your needs and will support you throughout the search and process of buying your home (most will also help with other practicalities like visa requirements, residency, NIE, opening a bank account and setting up utilities). They are also able to help in price negotiations with the vendor which may fully offset the fees paid.
Costs incurred when buying property in Spain
When buying property in Spain you need to consider all costs associated with the purchase, including notary fees, property registration, legal fees, and taxes. These additional expenses will vary by region and with the value of the property being purchased but generally you should allow 11-16% of the property price to cover these additional costs.
See Costs Incurred When Buying Property In Spain for more detail.
Financing the property purchase
If you do not have the funds to purchase the property direct you can either use a second mortgage on your property in your home country assuming you are holding onto it or you can take out a mortgage on the property.
You can get a mortgage from some domestic lenders or from a Spanish mortgage provider. It is possible to approach banks direct but a mortgage broker like Mortgage Direct will be ableto identify the best option for you and often find better rates than you can find on your own.
For more details see Getting A Mortgage In Spain – A Property Buyer’s Guide and Spanish Mortgages – Frequently Asked Questions Answered.
If you are transferring funds from outside Spain to pay for the property purchase or if you are paying for the mortgage with funds from outside Spain you will need to use money transmission services. You can use a bank or a specialist forex/money transmission service. See Managing Foreign Exchange When Buying Property Overseas.
Property buying process in Spain
When you have found the property you wish to buy you will make an offer. If the offer is accepted, then a preliminary contract (contrato privado de compravento) is signed by the buyer and the vendor and the buyer pays a deposit, which is typically 10% of the purchase price. This specifies the period within which the sale must be completed and any conditions. This ties the buyer to buy and the seller to sell the property.
The agreement will normally last for 30 days, with the money held in an escrow account, by the agent or by lawyers appointed by the agent. In some cases the deposit is refundable if the purchase does not go through but generally if the buyer withdraws they will lose their deposit and if the seller withdraws they will have to pay the intended buyer double the deposit.
You will need to run the terms of the agreement past your lawyer to be sure you understand the terms and that they are fair
Always ensure you find an independent lawyer not connected to the seller or his agents as failure to do so is at the base of many of the frauds and other legal problems seen in Spanish property purchases.
At this stage your lawyer will conduct searches to ensure that the seller has the right to sell, that there are no debts on the property (as these will be inherited by the buyer if not cleared) and that it has planning permission. In Spain one of the common issues faced is where properties have been built in an area that is not designated for development.
The agent will then ask you to sign the contrato de arras, the private purchase contract. This is a binding contract and requires between 10 and 20% of the purchase price to be paid.
At this point the Public Notary (Notario) gets involved. Notaries are not lawyers, they are civil servants overseeing the transfer. Both seller and buyer, or their representatives (a power of attorney can be signed if the buyer is not going to be in the country or otherwise unavailable), go to the notary’s office and sign the Escritura de Compraventa which formally completes the purchase when the final payment is made and all relevant taxes and other fees paid.
Final registration of the title deed follows but can take some time after the buyer has moved in.