Complete Guide for Foreigners to Buying Property in Spain

Step-by-Step Guide on Buying a Property in Spain for Foreigners

Here is the consequence of steps that you should undertake to purchase a property in this Mediterranean country.

1. Get an NIE. It's an identifier that every foreigner needs to carry out financial and economic activities in this country. It's available in three variations: temporary, for non-residents and for residents. You can apply for it remotely.
2. Contract an experienced lawyer who speaks both Spanish and your language.
3. Open an account in a local bank. Transferring funds through a local banking institution will be much faster, cheaper and easier than using the services of a bank in your homeland.
4. Find your dream property and negotiate its price with the owner.
5. Find a worthy mortgage offer in Spain, if you need it.
6. Sign the contract with the property owner to reserve it for you. The owner or their real estate agent will stop offering it to other potential buyers and will take out its ads. Typically, the buyer gives the vendor from €3,000 to €6,000. In exchange, the vendor enables the customer to examine the property during 2-3 weeks. It's important to check whether the building was erected on its piece of land legally and whether there are no debts attached to it. Plus, it's crucial to make sure that the structure doesn't require immediate renovation and genuinely meets the characteristics that were provided in its description.
7. Sign a deposit agreement. Banks will take you seriously only after you provide this document to them, so let's list the brief rules of composing it. You'll have 10 days to deposit 10% of the purchase price. After all the checks are over and you understand that the property lives up to your expectations, transfer the remaining 90% to the vendor. Make sure to specify the respective amounts of the deposit and the remaining part in the text of the contract as well as the validity duration of this document. If you change your mind, the vendor will keep your deposit. If the vendor decides to cancel the deal, they will have to pay you 200% of your deposit.
8. Get an official valuation for the mortgage, if you need it. The bank that will provide you with the funds will make the valuation and you'll pay for it (usually, up to €1,500).
9. Prepare the papers: the characteristics of the property, the list of its previous owners and the confirmation of its structural integrity as well as the lack of debts. If the previous owner made debts in the past three years (for instance, failed to pay the utility bills), you'll have to pay them.
10. Visit the notary and sign the title deeds. You should do it not alone but in the company of the vendor, lawyer, real estate agent and, if you take a mortgage, the bank representative. The notary will make sure you fully understand all the terms of the deal.
11. Register the property. Pay the transfer tax and stamp duty.

That's it! Now, let's talk about the national real estate market and the opportunities that it offers to you.

Market Perspectives

Here is a brief timeline of what happened with the Spanish real estate market in the last few years:

• Before the coronavirus pandemic, property prices were steadily growing
• During the pandemic, the market slowed down a bit
• After the pandemic, the number of property purchase deals went up because locals and foreigners wanted to spend the savings that they made during the lockdown
• In 2023, property prices might go down by 1-3% because of the global economic crisis
• As soon as the international situation stabilizes, the prices are expected to keep increasing

Thanks to the above-listed economic pitfalls, you have a chance to purchase a house or apartment on favorable conditions in 2023.

Golden Visa

If you purchase a commercial property, a house or an apartment in Spain that costs at least half a million EUR, you'll qualify for Golden Visa. In other words, you can get a residency for your investment. You may buy not one but several properties to reach this price threshold.

The target audience of the Golden Visa program is individuals who tick these boxes:

• Are aged 18 or older
• Are residents of a state that is located outside the EEA and the EU and is not Switzerland
• Have always been law-obedient
• Earn enough money and won't seek employment in Spain
• Have local health insurance
• Have never had problems with entering this country or the Schengen zone

To apply for Golden Visa, you'll need to visit Spain in person to submit your biometric data. Your family members can apply together with you and your minimum required investment threshold won't grow because of that. The authorities will take around 3 months to review your application. After you get the visa, you can apply for residency in 5 years. In 5 more years, you can apply for citizenship.

Rumors have been circulating about the possible cancellation of the Golden Visa program in Spain. Its neighbor, Portugal, already announced its plans to cancel such a program on its territory. On the one hand, Golden Visas enable governments to attract large funds to the country. On the other hand, such a program drives up property purchase and rental prices so that they become prohibitive for locals. It's impossible to predict whether Spain will indeed cancel its Golden Visa program — and if yes, when it will do so. If you'd like to become a local resident, it might be wise to hurry up. If you get your Golden Visa before the program is canceled, you'll retain it for the future.

Cities and Regions to Look for Properties

Below, we'll list the locations that generate the highest demand among expat property investors, with their respective pros and cons:

• Barcelona and Madrid require large expenses. The properties and the cost of living aren't cheap in these two large cities. The rental prices seem to have reached the ceiling. These locations are beginning to lose their popularity among foreign investors because the real estate market is entering a stagnation phase there, it simply can't keep growing quickly.
• The Mediterranean coast attracts people who love living by the sea. Costa del Sol and Mallorca are the first two names that come to one's mind. The property prices there have been growing steadily and the best sales offers don't stay too long on the market. You'll hardly be able to enjoy solitude there. Marbella is one of the most high-end locations in the Andalucia region, its Golden Mile attracts very wealthy people.
• Costa Dorada is a smart alternative to Costa del Sol. It's located not far from Barcelona. The temperature of the water in the sea tends to be lower here than in the South of the country.
• The inland regions, such as Castile-La Mancha or La Rioja, feature the lowest property prices. You may purchase a charming farmhouse there at a fraction of a cost of an apartment in Barcelona. On the one hand, you'll be mesmerized by the tranquility of the local lifestyle. On the other hand, there might be no large shopping malls, international schools, airports or decent healthcare services nearby.
• Alicante is a colorful place with an extensive selection of budget-friendly accommodation options.
• Almeria should be your go-to destination if you love Moorish culture. In some towns, you can find very cheap apartments for sale in an extremely beautiful environment.
• On the Canary Islands, you can find many affordable options and enjoy more laid-back vibes, compared to the mainland.
• If you fancy the Balearic Islands, hurry up. The authorities of this region are about to prevent foreigners from buying properties here. The prices have skyrocketed in the last few years and locals can't afford to buy accommodation anymore. Who knows, maybe, some other regions will introduce similar limitations soon.

Let's have a look at the property prices in different locations:

Mortgage for Expats

You may get a mortgage from a bank in your homeland. However, it would be wiser to do so in Spain. Many local institutions cater to foreigners. They will process the transactions in EUR, so you won't lose a lot of money on conversion operations with cash.

To apply for a mortgage, it's essential to get an NIE and prove with documents that you earn enough to afford the purchase. Plus, you should inform the bank that you don't have outstanding debts.

For residents, the terms of the mortgage are more lucrative than for non-residents:

The interest rate can be either fixed or variable. Most borrowers opt for the former: they know how much they will need to pay each month from the onset and for decades ahead.

The latter variant has become two risky in the current economic situation. The variable rate is calculated with the formula "Euribor + X%". In 2022, Euribor rose from 0% for the first time in 7 years. Maybe, it will keep on growing in the next years and you'll end up paying too much.

Mixed-rate offers are also possible. You pay a flat rate for the first few years and then, switch to a variable one.

If you'd like to buy a modern and energy-efficient property, you might be able to get a green mortgage for it on more favorable conditions. Each case is discussed individually.

Here are important facts to remember:

• Most banks can provide you with a mortgage only in EUR
• If you get a mortgage, you won't be able to apply for the Golden Visa (unless you pay €500,000 from your pocket and ask for a mortgage for the remaining part of your premium property)
• The bank should pay all the expenses related to signing the loan (such as notary fees and registration fees)
• Probably, the bank will ask you to insure the property against fire and maybe other types of damage — but asking you to buy life insurance is not too common
• You might be allowed to pay out your debt sooner than initially planned if your contract lets you do so

First, ask only one bank for an offer. Then, take this offer to another bank and open tell its representatives that you'd like to get better conditions. Keep doing so until you receive an offer that seriously appeals to you. Such an approach is a norm in Spain.

If you fail to pay out the mortgage, the bank can repossess your property. The good thing is that modern laws make it difficult for institutions to do it. During the first half of your mortgage terms, repossession will become possible if you miss 12 payments. During the second term, you'll need to miss 15 payments. Plus, there will be penalties. If you face a force majeure, inform the bank about it as soon as possible. It will come up with a solution that will allow you to keep your property.

After Brexit

After Brexit, people from UK can spend no more than 90 days per half a year in Spain without a visa. However, they retain the right to buy, sell, rent and rent out properties here as well as get a mortgage. The main difference is that the conditions for you will be less lucrative than for EU residents — be ready to pay as much as an American for your taxes.

Taxation

The tax when buying the property depends on whether it's new or second-hand:

• VAT for new properties is 10%. Only for individuals aged younger than 32 who're planning to live in their purchase permanently, it is 5%.
• The property transfer tax on second-hand real estate varies from one region to another and normally falls within the range of 6% to 10%.

To register your purchase and get the stamp duty for it, be ready to pay 1.5% of its cost. Add around 1% for notary expenses. The lawyer will charge you around 1% of the property's cost. In total, your expenses for finalizing the deal can amount to around 10-12% of what you pay for the property.

As an owner, you're supposed to pay an annual tax. Its rate varies from one region to another and normally falls within the range of 0.405% to 1.166%.

If you rent out your property, you'll need to pay a tax for your income:

• Flat 19% for non-residents who spend most time of the year within the EU or EAA
• Flat 24% for the other non-residents
• Progressive rate of 19% to 47% for residents

When you decide to get rid of what you own, you'll be obliged to pay a capital gains tax. For residents, its amount will depend on the profit that you make on the sale:

Non-residents pay a fixed amount of 19%.

The amount of this tax might decrease if you tick one of these boxes:

• Sell your old Spanish property to get a new one in this country
• Are aged 65 or older and get rid of a house or apartment where you live permanently

As you see, Spain is good for long-term real estate investments but not short-term ones.

Paperwork

To sign the purchase contract for your new property, it's enough to provide a passport and NIE. If you won't be physically present in the country and entrust a lawyer to finalize the deal for you, you'll need to provide proof that you allow this professional to represent you.

To get an NIE, it's necessary to submit:

• Application
• Original and copy of passport (with a valid visa, if you need it)
• 3 color photos
• Return ticket to your homeland
• Purchase contract
• Prepayment invoice
• Proof that you have enough funds to finalize the purchase

If you can't visit Spain in person to get an NIE, your lawyer can do it for you.

To open an account in a local bank, you should prepare:

• Copy of passport
• Document that proves your position in the organization that you work for, your earnings and how long you've been with the company
• 2 certificates of your income tax

Most banking institutions would ask you to visit them in person.

To apply for a mortgage in a local bank, it's mandatory to provide:

• Copy of passport
• Proof of your earnings, including your salary for the last 3 months and any other sources
• 2 certificates of your income tax
• Bank account extract of the last 12 months
• Extract from the credit history bureau

Ask an official translator to prepare Spanish versions of your papers and apostille them.

Guides to buying real estate in other countries:

• Buying property in France
• Buying property in Greece
• Buying property in Cyprus
• Buying property in Portugal