For over 50 years, Spain has been by far the most popular tourist destination for British holidaymakers.
Ever since the early days of package holidays, millions of British tourists have flown over to Spain to the warm climate and stunning beaches every year. Indeed according to official statistics, just under 14 million British visitors visited Spain in 2002, with over 90% of these visiting leisure purposes. As with so many large property markets, the demand for property for sale in Spain is predominantly driven by the country's hugely successful tourism industry.
Despite the more challenging economic climate of the past two years, Spain is still the number one tourist destination for visitors from the UK. Understandably this translates into a considerable demand for properties for sale in Spain, and today more people are attracted to the country than any other overseas property market. On top of the tourist driven demand for Spanish property for sale, it should also be noted that there are a huge number of British expatriates living and working in Spain today. Larger than any other expatriate community in Spain, these also represents a large portion of the demand, particularly in the more popular tourist destinations along the southern coast.
So why is it that the Brits love Spain, and is this love affair, which has lasted over 50 years, said to continue for the foreseeable future?
Just a short visit to Spain will show any visitor why it is so easy to fall in love with this stunning country. With its stunningly beautiful scenery, warm, year round climate and incredible food, the appeal is there for all tastes and budgets. Having genuinely captured the imagination of the British tourist industry so many years ago, it is easy to see why so many people choose to visit Spain year after year before making it their permanent home.
On top of things, there is today an increasing number of cheap flights to Spain on a daily basis from a large number of airports throughout the UK. Airlines such as EasyJet, Ryanair and Flybe, offer a huge number of flights, many of which are less than a national train journey in the UK. This increased accessibility has led understandably to a large increase in demand for Spanish properties for sale, as people began to see the country as a viable option for long weekend breaks rather than simply once a year holidays.
With an average of over 300 days sunshine every year, Spain offers a year round option for people wishing to escape the hustle and bustle of everyday life in the UK. This, coupled with the slow pace of life, and relatively low cost of living in Spain, has seen many people attracted to this part of the Iberian peninsula.
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Spain is a potentially lucrative place to buy a property, but as with any property purchase you will find location is key.
Several areas in Spain, especially around the coast, are noted for their strong markets. These include:
Malaga forms one of the most prominent parts of Spain's famous Costa del Sol. With long, sunny summers, mild winters, and world-renowned beaches, the region is one of Europe's top destinations for tourists and expats. This makes property for sale in Malaga very popular with tourists wanting accommodation close to the beach.
Alicante, part of the renowned Costa Blanca, is another of Spain's prime tourist spots. It receives over 2,800 hours of annual sunshine and is home to some of Spain's best beaches. It is also one of the most popular provinces for foreigners looking to take up a place in the sun, with foreign nationals making up close to a quarter of the population. This helps to fuel the growth for properties for sale in Alicante.
Murcia, of the scenic Costa Calida, is a very historic province as well as a culturally varied one. This combined with the characteristically fine beaches of the Spanish coast make it another key tourist spot. Tourism is the key driving force of Murcia's economy, providing investment opportunities in the tourist sector and helping commercial ventures to thrive on foreign spending.
Almeria brings in international visitors not just for the beaches which dominate the Spanish tourist trade but also for the many cultural and historical sites to be found there. It is, however, home to a number of world-class beaches as well. The area's resulting popularity with tourists, along with a strong agricultural industry, makes Almeria an economically robust province.
Prior to the global financial crisis, properties for sale in Spain went through a massive boom which saw values skyrocket. Unfortunately, the economic crisis brought this to a sudden and dramatic end, with values going into freefall.
At first, this was bad news for investors. However, when prices began to bottom out (35-50% below boom levels) many buyers began to see an opportunity to pick up properties for sale in Spain in one of the world's most popular tourist destinations while prices were low.
2012/2013 saw the first tentative signs of recovery. Prices are still low but seem to be on the way back up, attracting bargain-hunting investors in greater numbers as a result. However, the recovery is not consistent across the nation. Rather, it is focussed in the popular coastal tourist markets as well as the big cities. The Costa del Sol was the first region to enter recovery, while Costa Blanca has been one of the most prominent markets to pick up recently.
Properties in less popular regions, by contrast, are still struggling to regain ground. Even in some popular spots, such as Menorca, supply is simply greater than demand and this hinders recovery. With a well-chosen location, however, this could well prove a good time to get back into Spanish property for sale. The off-plan and luxury sectors, in particular, are performing well.
The British continue to make up the most prominent group of foreign buyers. Beyond that, however, the appeal of Spain is widespread. Non-EU investors, in particular, have taken more and more interest thanks to the country's "golden visa" scheme.
Initially, the market was flooded with bargain properties from banks keen to get "distressed sales" properties off of their books. As the recovery continues to gather pace, however, many banks are having second thoughts about shifting these properties. The result of this is a reducing number of bargains and less room for negotiation, but at the moment there is still a fairly strong buyer position.
One of the key factors attracting British buyers to Spanish properties for sale at present is a strong pound/euro exchange rate. This means that UK investors can get more for their money, but the process of actually turning your pounds into euros – ready and waiting for the purchase in a Spanish bank account – is less simple than it might appear
Many buyers just head straight to their bank and ask for money to be transferred abroad. This might seem the natural way to go, but specialist currency firms are much more cost-effective. They almost always offer better exchange rates than banks, along with much lower (sometimes non-existent) transfer fees.
There will, of course, be additional costs attached to the purchase of property for sale in Spain beside your property's actual price tag. These can include things such as utility connection, Transfer Tax (the equivalent of the UK's stamp duty), land registry fees and the cost of obtaining an NIE number. If you obtain a Spanish mortgage, there will likely also be a 2-4% cost. The exact extent of these will vary as things like transfer tax will differ from region to region, but in general you should probably allow for at least 10% of your property's value and up to 14% to be charged in additional costs.
Once you have made your purchase, you will also need to consider ongoing running costs. These will depend on factors such as the property type and whether or not you are a Spanish fiscal resident. Some of these are obvious, such as utility costs, maintenance and repair bills, and insurance. IBI – Spanish council tax – will be charged on all properties for sale in Spain but tends to be much cheaper than in the UK. Some estates and developments carry community charges for the upkeep of communal areas. If you are not a tax-resident in Spain, there will also be a nominal, annual tax paid whether or not your property has made a profit.
The first step in buying Spanish property for sale is a reservation agreement – a contract agreeing upon a price and taking the property off of the market for 30 days in exchange for a reservation fee (usually between €3,000 and €12,000). After this, your lawyer will carry out the necessary checks on the property.
For example, they will make sure the seller really owns the property, that all planning permissions are correct, and that there are no outstanding charges.
This is followed by the private purchase contract, usually within ten days of the reservation agreement. This contract must be signed by both buyer and seller. This is the equivalent of exchanging contracts when going through the UK property purchase process, and usually requires payment of a deposit of between 10% and 20% of the property price. Once the contract has been signed by both parties and the deposit paid, the agreement is legally binding. The seller is under obligation to transfer ownership of the property to the buyer, and if he or she fails to do so then the twice the original deposit must be paid to the buyer as compensation. Similarly, the buyer is under obligation to pay the rest of the agreed price, and if he or she does not do so for any reason then the seller will keep the deposit.
To finalise the sale, the title deed must be signed before a Notario – a public official – along with the final payment for the property and payment of all taxes. The title deed is then given to the Notario for registration with the land registry and the property handed over to the new owner. Note that it can take a few months to achieve final registration of the title deed.
Lastly, you must make sure you have all necessary arrangements in place to take over the property. This can include utility contracts, property insurance, and registration of ownership with the local Town Hall.
Investors in Spanish property could benefit from the "Golden Visa" scheme, providing a residency permit in exchange for a property purchase. This is a powerful incentive for purchasers from outside the EU, who would not otherwise have many of the benefits that EU investors have. You must own at least €500,000 of Spanish real estate in order to qualify for a residency visa.
Residency and tax residency are two different things, and understanding the differences between them is very important. Should you plan to purchase property for sale in Spain and be resident in the country for three months or more, then you are under obligation to apply for the National Foreigner's Registry. This does not, however, mean that you are tax resident in the country. For this, you must make a declaration to Spain's tax office every year. Under some conditions, this is obligatory – for example if Spain is where your main home is located, if you live there for 183 or more days of the year, or if your spouse and children reside there. Being a tax resident qualifies you for certain tax exemptions, notably on inheritance tax, and for free medical care. Even if you are deemed to be a tax resident, you will only be eligible for these if you complete your annual tax return.
Spain has a complex inheritance tax system, which also varies from region to region. The key thing to bear in mind is that you will have no entitlement to any exemptions unless you are a tax resident. Without tax residency, your estate will be subject to inheritance tax regardless of value. With tax residency, inheritance passed to your spouse could benefit from exemptions of up to 99%.
Published: 9 January 2017A new report out from the Spanish property portal Idealista has shown a two speed market beginning to emerge as property prices within the urban areas seeing strong rises, despite considerable decreases in the more rural areas.
Published: 5 August 2016According to the ‘Real Estate, Hospitality & Construction Capital Confidence Barometer’ published recently by Ernst & Young, Spain is the ninth country in the world considered most attractive to investors that are looking to invest in real estate.
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