How to Purchase a Property in Spain

Buying a property in another state offers numerous chances, from generating rental income to becoming a resident or even a citizen.

With a diverse range of places to choose from, finding the ideal house in Spain is within reach. While the acquiring procedure may appear daunting at first, this guide provides a clear and concise gradual roadmap for non-citizens.

Property market

There are enticing prospects for both investors and those seeking a new home. However, it’s crucial to remember that Spain’s real estate landscape is diverse, with each region possessing unique characteristics and chances.

For savvy buyers, understanding these regional nuances is key to finding the best deals. Whether you’re searching for an apartment or another type of housing, strategic research will be your greatest asset.

Is it feasible for non-citizens to purchase housing in a state?

Absolutely! Buying property in Spain is feasible for non-citizens. The key necessity is a NIE, which acts as your unique number. Summon in mind that there are various kinds of NIEs based on your individual circumstances and nationality.

For EU Inhabitants:

* Temporary NIE: Ideal for short-term stays, especially if you’re going to a state solely to acquire housing and don’t intend to live there permanently.

* Resident NIE: This constant number is vital for those planning to live in a state long-term.

For Non-EU Inhabitants:

* Resident NIE: Similar to the EU citizen version, suitable for those who live in a state for a majority of the year.

* Non-Resident NIE: Even if you don’t plan to reside in Spain, you’ll need this type of NIE to acquire housing.

You can find more detailed information in the article “NIE NUMBER in Spain: Definition, Types, Procedure and Papers”

Main steps for expats for purchase procedure

The steps you should adhere to:

1. Get a N.I.E.
2. Open a country’s bank account
3. Find a real estate you like and negotiate
4. Secure a reservation or security agreement
5. Get a homeowner’s loan
6. Finalize the procedure through the notary
7. Transfer possession of the housing to yourself
8. Make obligatory tax payments (ITP or IVA)

Finding your dream house can take 3-12 months, based on your criteria. Once you’ve found it, expect another 2-3 months for the purchase process, potentially longer if you need a homeowner’s loan.

A Simplified Breakdown of the Pre-Purchase Procedure

1. Assessment (Property Investigation):

• After securing your number and selecting a housing, thoroughly check all papers for authenticity and legal compliance.

2. Reservation Contract (Optional):

• Secure housing by putting down from 1% to 5% of the purchase price, obligating the seller to take it off the market.

3. Deposit Agreement (Optional, but Recommended):

• Provides greater security with a 10% down payment.
• The seller is legally bound to sell, or face a penalty.
• You lose your deposit if you back out.

4. Secure Financing and Prepare for Final Steps:

• Obtain the property deed and confirm its status (debts, charges, etc.).
• Secure financing (mortgage) within the agreed-upon timeframe (usually 3 months).
• Finalize payment details and conditions within the deposit agreement.

Important Note: While the deposit agreement outlines crucial details, only the public deed is valid for official registration.

Sealing the Deal with the Notary

1. Contract Signing & Due Diligence Presentation: At the notary’s office, you’ll finalize and sign the sales contract. The obligation of a seller is to provide documentation proving possession, legal selling rights, and the property’s freedom from debts or other pitfalls.
2. Crucial Advice: Engage Professionals:

• Architect: Conduct an inspection to identify any structural or hidden damage.
• Lawyer: Provide expert legal guidance, meticulously review the contract, and safeguard your interests throughout the process.

3. Peace of Mind & Final Payment: Once your lawyer and architect give the green light, you can confidently sign the contract and make the final payment, knowing you’re protected.

3 Final Steps to Officially Own Your House

1. Registration: Record the housing in your name at the Property Registry, solidifying your ownership.
2. Tax Obligations: Promptly (within 30 days) pay the current taxes, + transfer tax (or VAT) and stamp duty, to the appropriate regional authority.
3. Utilities Conveying: Officially transfer the utilities into your name.

Taxes in Spain

Acquiring:

• Transfer Tax: Applies to resale housings (6-10% depending on the region).
• VAT: Applies to new properties (generally 10%+1.5% land registration).

Reduced rate of 5% for buyers under 32 purchasing their primary residence.

Selling:

• CGT: Relates to the gain made from the sale.
• Residents: 19-24% depending on individual condition.
• Non-citizens: Flat rate of 24%.

Renting Out Spanish Property

Key Point: Income generated from renting out your housing is considered taxable and will be subject to CGT.

Deductible Expenses:

* Non-Residents: Limited to agency fees, lawyer fees, and notary fees.

* Residents: Have a wider range of deductible expenses.

Planning Tip: Carefully track all income and expenses related to your rental property to ensure accurate tax reporting and maximize potential deductions.

Acquiring house with cash

Restrictions: Country’s law (Law 7/2012) sets limits on cash payments.

• Non-Residents: Maximum €15000 in cash.

International Bank Transfers: For larger amounts, international bank transfers are necessary. Be aware of potential high commission fees for convertibility.

Consult with your financial institution to understand the fees associated with international transfers and explore ways to minimize costs.

Mortgages: Key Points

Good News: Non-citizens generally have access to similar mortgage requirements as those who live in a country.

• LTV: Up to 80% for a primary residence, 60-70% for a second home.
• Minimum Initial Fee: Around 20% of the acquisition cost, plus 15% for expenses.
• Debt-to-Income Ratio: Your mortgage payments shouldn’t exceed 30-35% of your income.
• Mortgage Terms: Typically 5 to 30 years, with a limit of 75 at the end of the term.

Best Places to Purchase Housing in Spain

Here, the typical cost is €1886 per m2.

Barcelona, Malaga, Bilbao, Madrid, and Valencia – the best places for housing investments due to job opportunities, tourism, and high demand for housing.

Cheaper homes can be found in inland areas.

Investment as a pathway to citizenship

Golden Visa program, launched in 2013, offers a fast-track residency option for non-citizen investors, especially those interested in real estate.

Spain’s Golden Visa program, launched in 2013, offers a fast-track residency option for non-citizens, especially those interested in real estate.

Investing €500000 or more in a country’s property can give you a residency visa, paving the way for potential citizenship after 10 years

Requirements:

• At least €500000 investment.
• Application within 90 days of intended travel.
• Formalized purchase or preliminary contract with a guaranteed deposit.
• Proof of investment through registry documentation or bank deposit certificate.

Benefits:

• Reside and work anywhere in the country.
• Pathway to citizenship.
• Relatively simple renewal process (requiring minimal presence in a state).

Two Paths to Property:

• Formalized Acquisition: Provide property registry documentation showing clear ownership.
• Pre-contract: Present a preliminary contract with guaranteed deposit and a bank certificate confirming sufficient funds.

However, at a cabinet meeting on 9 April 2024, Spain’s Council of Ministers agreed to eliminate this privilege. They believe this will help ease housing shortages and make homes affordable again for local residents, and it follows on from last year’s decision to impose rental caps in some areas.