Searching for a property to buy in Spain, or perhaps you’re ready to make an offer on your first Spanish property? Then you’ll need to understand the costs of buying a house in Spain.
Just like buying a property anywhere else in the world, the costs involved are considerably more than simply the initial purchase price.
You’ll also need to consider the costs of any legal advice you receive, fees and taxes, including the property purchase tax in Spain, and of course any hidden costs of buying property in Spain that you need to know about too.
Understanding all of these costs is essential to help calculate how much you’ll need to save or secure, in order to purchase the property of your dreams. To help you with this, here is a complete guide to the costs involved with buying a Spanish home:
Costs of Buying a House in Spain
When you choose to buy in Spain, you will be responsible for a huge number of charges: these are payable both to the Spanish government, the property developer or estate agent, and any legal fees too. Knowledge is power, and this means that the better you can understand these expenses, the better prepared you will be.
A new home is Spain is classed as a home that has never been sold before. If you are purchasing a new home, either directly from a developer or from a bank acting as an intermediary, then you will be responsible for the following costs:
- VAT and Stamp Duty
These are standard fees on buying a Spanish property that has never been sold before, and as these are national taxes, the rate is set at governmental level. This means that the amount you will pay for your VAT and Stamp Duty will be the same no matter which region in Spain you choose to purchase your property. (The only exception to this rule is the Canary Islands, who have their own version of VAT).
VAT (known in Spain as IVA) is set at 10% of the property’s purchase price for residential properties and 21% for both commercial properties and plots of land. In the Canary Islands, VAT is referred to as ICIC (Impuesto General Indirecto Canario), and is set at 4.5%. Stamp duty, known in Spain as AJD, is set at 1% of the property purchase price. Both of these taxes are your responsibility, as the property buyer. When you pay the deposit from your property purchase, this will also be subject to VAT.
If you are buying a resale property in Spain then you are, generally speaking, buying a property from a private individual (the previous owner of the property) and your purchase will be subject to a different tax:
- Spanish Transfer Tax
Transfer tax is known in Spain as Impuesto Sobre Transmisiones Patrimoniales (ITP) and is effectively a tax that is paid when the possession of a property shifts from one owner to another. Much like VAT, ITP is also applicable to any deposit that is paid before the sale is complete.
How much is this property purchase tax in Spain? The ITP rate is set by the autonomous regions at a local level, meaning that this figure will vary from region to region. In Andalucia, for example, the ITP rate is scaled at 8%, 9%, or 10%, depending on the value of the property you are purchasing.
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- Income Tax Provision
If you are purchasing a property from a non-resident (i.e. someone who does not live permanently in Spain) then you have to withhold 3% of the purchase price and pay this to the tax authorities. If this protocol is not followed then the property could be considered as asset, and subject to capital gains tax liability to the seller. It is worth checking the residency status of your seller, therefore.
Regardless of the status of the property you hope to buy (whether is it classes as a new build property or a resale property) you can also expect to pay the following costs of buying a house in Spain:
- Estate Agent Fees
If you have used an estate agent to buy your property then you should be aware of potential estate agent fees, but as a general rule these will be paid by the seller rather than the buyer. An estate agent will charge between 2% and 15% of the property sale price: this figure is determined when the seller lists their property. The buyer will not cover this fee, unless it is specifically agreed between the buyer and the seller.
- Legal Fees
It would be sensible to employ the services of a lawyer when buying a property in Spain: A lawyer will draft and review contracts for you, offer advice and explanations of legal jargon and issues, and carry out due diligence to ensure the property you are buying is exactly what you think you are buying. For these services, and more, you will be charged a fee of around 1% of the purchase price of your property. Some lawyers will charge slightly more, but if you are offered a rate that is significantly more it might be wise to shop around for your legal advisor.
- Mortgage Costs
If you need to secure a Spanish mortgage in order to buy your property then you should be aware that mortgages in the country are subject to several costs. Firstly, your mortgage provider will require that you have a property valuation at a cost of around 500 euros. You will also need to pay an opening fee to secure a mortgage: this varies from bank to bank, but you can expect to pay 1% of the mortgage cost. The notary costs that you will be charged will also be higher if you have a mortgage associated with your purchase.
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- Notary Costs
You will need to be aware of the Spanish notary expenses, as these are almost always paid by the buyer in Spain. These are calculated based on the purchase price of the property, and other paperwork costs are charged separately, and by item. Notary fees are set by the government, so unlike legal fees these cannot be negotiated, but the number of documents you will require varies from purchase to purchase, so it is difficult to know what, exactly, these fees will be.
To give you an idea, and manage expectations, if you have a property that is worth 400,000 euros or more than your notary costs are likely to be 0.1% of your purchase price and if your property is worth under 100,000 then the notary costs will be 0.4% of the purchase price of the property. You will then pay administration and paperwork fees on top of this figure, and VAT is also charged on this service. These same notary fees will apply again if you also need to notarise your mortgage deeds.
- Land Registry Inscription Fees
In order for your property to be officially yours, you have to have your title inscribed in the Land Registry. These expenses are almost always covered by the buyer, so these costs would be your responsibility. The fee is paid to the property registrar, and the amount payable is on a sliding scale, depending on the purchase price of your property. This ranges from 0.1% of the most expensive properties to 0.3% of the most affordable properties. VAT is also added to the registry’s fees.
The Hidden Costs of Buying in Spain
We’ve already gone over the fixed costs of buying in Spain: you have to pay these taxes and fees if you wish to purchase a Spanish property. You can’t negotiate these figures, or do without them, but have you considered the hidden costs?
The costs outlined below are considered to be hidden costs of buying in Spain. Whilst you will need to pay these costs, you can make them more affordable to a certain extend. These include:
- Banking Costs
You will need to open a Spanish bank account in order to buy a property in Spain, and there are costs associated with this. You may also need to transfer money from the UK to Spain, and the currency exchange charges for this can be considerable, thousands of euros. Be sure to clarify with your bank how much they will charge to issue a bankers draft in order to complete your property purchase, as this could also be a considerable sum.
- Furniture Costs
Once you own your Spanish property, you will need to furnish it in order to live in it comfortably. You could opt to move your furniture from your home country, but you will have to consider the removal costs involved in this decision. Alternatively, you could buy new furniture in Spain. The costs of this are a how long is a piece of string question: do you want hand carved furniture or the cheapest flat pack. A good rule of thumb is that a 2-bedroom apartment will cost around 10,000 to 15,000 Euros to furnish nicely if you buy everything new. If you choose to buy second hand items, or use stores such as IKEA, you can lower this figure considerably.
- Plusvalia Municipal Tax
Finally, if your vendor fails to pay their plusvalia municipal tax (which is one of their obligations) then you could become liable for this charge. This can be a particular problem if the vendor doesn’t live in Spain: you should ensure that this tax has been paid when you exchange contracts, in order to prevent the obligation for paying this tax from falling on you.
Are you in the process of searching for your dream property in Spain? If you’re looking for trusted estate agents on the Costa Del Sol then why not get in touch ? Our locally based property experts are a font of local knowledge, and are perfectly placed to help you find the home of your dreams.