If you are searching for that dream holiday home abroad or simply looking to invest in an overseas property then buying property in Spain could be just what you’ve been looking for. Spain, or to give its formal title the Kingdom of Spain is one of the largest members of the European Union and is located to the South West of Europe on the Iberian Peninsula. The Spanish mainland is bordered by Portugal, France and Andorra, with coastlines on to the Bay of Biscay, the Mediterranean Sea to the south and east, and the Atlantic to the west and northwest. Spanish territories also include the popular holiday destinations of the Canary Islands in the Atlantic Ocean, and the Balearic Islands in the Mediterranean.
When you speak to any British holiday home investor, if you ask them where they would most prefer to own their ideal holiday home they will tell you more often than not that it is Spain – and it is not hard to see why.
For many years Spain has been the destination of choice, not only for us Brits, but for the French and Germans as well, and this popularity is still growing as more Brits than ever look to search out their Mediterranean property gem.
According to recent figures more than 700,000 Britons own a property in Spain and despite the recent global down-turn, this number continues to grow.
The hot climate, crystal clear waters, relaxed way of life, culture and historic holiday links with the UK and other European countries all help to lure people in.
Investment Property Partners overseas property buyers guide covers a number of important issues that you will need to consider if you are considering buying property in Spain either as an investment or as a Spanish holiday home abroad.
Buying Property in Spain
Before the last global economic down-turn hit, property prices in Spain were increasing at a rapid rate as demand far outweighed supply, but since then Spanish property prices have fallen or stagnated at best, and has led to many investors showing more interest and looking to find that property investment “bargain”.
Of course, if you are serious about buying property in Spain then the price you can expect to pay will be very much dependant on what area of Spain you are looking at and the type, size and quality of property.
Spain is a large, diverse country situated within the European Union and offers many different styles of property and many different environments which impact directly on individual property prices, so you will need to have done your research, have a very good grasp of current market prices and have a budget in mind before you start pursuing your dream Spanish holiday home.
Spanish villas overlooking the beach, and farmhouses situated in open countryside are typically the most popular types of property that those searching for their dream holiday home are interested in, so it will come as no surprise to learn that these types of property often attract the highest asking prices.
However, there are many good buys to be found in quaint cities and towns which have all the Spanish charm and character that so many of us crave.
Some of these holiday home bargains often require repairs and renovation works, but for those of us who appreciate culture and the traditional Spanish way of life more than beaches; older towns and the more traditional Spanish cities… they are well worth checking out.
What about Eco-Friendly Homes in Spain?
One of the other things that you may want to watch out for nowadays, are eco houses, homes and properties that are constructed to be environmentally friendly and energy efficient.
Spain, just like Britain, Portugal and so on is really taking its environmental responsibilities seriously and has implemented climate change regulations and eco-targets that it hopes to meet within the next ten- to twenty years.
Such an eco-friendly approach impacts on property development.
The Spanish government now insists that a lot of newly built properties must include solar panels to heat hot water and must be constructed using natural building materials.
These new eco-regulations will need bearing in mind, especially if you are looking to invest in off-plan or new-build property in Spain.
The Investment Potential of Buying Property in Spain
Now we’ll get to the really important bit – the investment potential of buying property in Spain and those buying factors associated with Spain’s property market.
Even though Spain was hit hard by the global economic recession, it still offers a solid investment opportunity, especially for investors prepared to put some time and effort into researching the Spanish property and holiday home markets properly.
Of course, common sense will tell you that if you plan on renting out your property out as a holiday let, you will still have stiff competition as there are many properties in Spain that were purchased with this in mind, so you will have to be prepared for a battle.
It’s currently estimated that there are somewhere in the region of ten thousand privately owned properties in Spain that are available to rent to holiday makers, so be prepared.
The most important thing you can do when buying property in Spain, or anywhere else for that matter, is research… research… and more research.
Taking the time to really understand the Spanish property market, get a good feel for property sale prices, getting to know local agents, property developers and builders etc. will all stand you in good stead as you start your search for your ideal property investment.
The Process of Buying Property in Spain
If you are seriously considering buying property in Spain then it is important not to assume that the property buying process there is the same as it is in the UK – it isn’t… and if you assume that it is you could be in trouble.
If you have spotted a property or holiday home you would like to buy, rather than contacting the estate agent, you should first enlist the services of a reputable English speaking Spanish lawyer so that they can help guide you through the process, run through any contractual small print and raise questions on your behalf… they’ll basically represent your interests throughout the whole buying process.
Once you have engaged the services of a reputable legal representative, you will then be required to put a ten per cent deposit down on a resale property, or if it is a new build a preliminary or reservation contract will be signed and a deposit of between 25 and 40 per cent will be required depending on the individual property developer’s purchase terms.
With regards to buying new-build property, you will more than likely receive a deed of declaration of new construction, rateable value proof and occupancy permit, and then as building progresses, you will be asked for staggered payments.
These staggered payments will normally be linked to the completion of key building works, for example completion of floor slab and foundations.
You will normally be required to pay in stages, often three stages with a final lump sum once the build is certified as being complete.
Once completion is reached you will then be required to sign a deed of sale, which will be witnessed by a notary.
Once everything has been agreed by both parties and any other required documents are exchanged, the contract will be signed and the property ownership documents will then be taken to the land registry office.
Property Acquisition Costs & Fees
Just like in the UK, as well as your property acquisition costs, you will also need to budget for a number of other costs and additional fees… we recommend you budget for at least an additional 11 per cent to take account of these.
Even though you may feel apprehensive about buying property in Spain, or overseas for that matter, it is worthwhile noting that Spain still has a lot to offer property investors, and if you spend time looking and researching, there are still some great bargain buys to be had.
Because of the economic downturn there are still lots of holiday homes on the market and this, coupled with the fact that interest rates are at an historic low means that there is a lot of bargaining power for those investors looking to buy property in Spain… however, don’t get carried away and always exercise caution, though.
Remember the Spanish property market tends to be sporadic so any investment should be seen as medium to long term, especially while the supply – demand situation re-balances itself.
Financing your Spanish Property Purchase
Before you start the process of buying property in Spain you will need to consider how you will pay for it, will you need property finance or a mortgage?
One of the things you will also need to decide upon is what currency your mortgage will be in… Euros or Sterling?
Remember it isn’t always about opting for the cheapest deal; sometimes it pays to think a little in depth.
For instance, it sometimes pays for you to take your mortgage in the local currency; this will help to avoid the effects of exchange rate fluctuations.
Just like in the UK, you should also try to obtain mortgage approval in principle, which helps because it will tell you how much you can borrow and what property prices are within and outside of your budget.
Spain, even though it has been hit hard by the last economic downturn still has a relatively healthy lending market and many financial institutions are still keen to lend to non-residents.
You should however, thoroughly research this area to ensure you secure the best mortgage deal to suit your personal circumstances.
Overseas Property Investment Solutions
As a leading independent property and land investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.
If you are an investor searching for overseas property investment opportunities or a second home in Spain please contact us today to discuss how Investment Property Partners can help you.
More information about Spain… here →
More about and buying property in Spain from the Spanish Land Registry… here →