Buying property in spain
More than a quarter of UK citizens, who buy property abroad, buy in Spain. This is not, perhaps, surprising, since it is often the scene of many happy holidays, the weather is beautiful and there is a large ex-pat community which can be a source of help.
We have a general guide on buying property abroad which you will find useful, and if you are considering buying property in Spain, read this handy Prudent Minds guide and you will hopefully avoid the pitfalls and thus, save money.
Some basic information you need to know before buying property in Spain
Spain has a wide variety of property available, from urban to rural, from inland to beachside and from farmhouses and villas to townhouses and apartments. These are some of the things you might find useful to know:
Residency in Spain EU citizens have the right to move to any other EU country to live and work, however, if you intend to move to Spain for more than 6 months, you will need to become a resident by applying for a residencia. This may seem a pitfall, but residencias benefit from lower taxes. If you choose not to apply for residency you have to appoint a:
Fiscal Representative This is a person nominated by yourself, who can receive official correspondence on your behalf. This includes things such as letters from the tax office. You can choose anyone to be a fiscal representative; a friend, a lawyer etc, but the must be a resident of Spain.
Finca A finca is a piece of land in between villages and towns. They vary widely in appearance as they can be anything from a fabulous new villa to a deserted and derelict farm building. They generally will come with land, which can be used to subsidise income, being such things as orchards.
A Gestor As opposed to a Jester! This is a local legal representative whom you appoint to help you fill in forms such as work permits, licences (if you intend to start a business), help you with transportation of your furniture, bringing pets into the country and other things such as bank accounts and pensions to name but a few. For these reasons, the reasonable charges that you will pay are well worth it for the good advice and help you will receive, and may save you money in the long run.
Estate Agents As we said on our buying property abroad guide, it is important that you work with a registered, licensed estate agent. Make sure they provide you with all the expenses connected with any property they show you, from estate taxes to rubbish collection charges. Remember - it is fairly easy to find estate agents with an excellent command of English on the Costas of Spain, but it will be much harder if you choose to buy property in Spain, inland.
Buying property in Spain - What you need to know
These are some of the best hints and tips we have found to help you before you buy a property in Spain:
1. Currency - when you find the property of your dreams, consider whether it works out better for you to buy in Euros or Sterling; you may find that some builders are willing to drop the price slightly for payment in their chosen currency!
2. Planning - At the height of the property boom in Spain, allegations of bribing planning officials was rife, and buildings were erected, quite simply, anywhere. UK ex-pats as well as ex pats from other countries, are now finding they have to demolish their dream homes, sometimes with hundreds of thousands invested in them, as they are not in line with planning law. Check the small print and make sure your property is either being built with full permissions, or if it’s an existing home, that it does not contravene planning law.
3. Debt - make sure, before you sign on the dotted line, that your property is free of debt! In Spain, any debt on the property becomes your responsibility once you own the home.
4. Benefits and Healthcare - Spanish authorities have decided that British expats over the age of 50 are placing far too high a burden on their health and benefits system. If you are over 50 you need to register an E121 form with the health authority in order to receive free health care. Under 50, you will simply need a European Health Insurance Card. If you are unemployed when you leave the UK you MAY be able to have your claim transferred to Spain, BUT, if you leave a job to move you will not be entitled to make a claim.
5. Capital Gains Tax - Once you have bought your property in Spain, it will be liable to Capital Gains Tax should you sell it on. Until recently, non-residents were penalised by paying a higher rate of tax than Spanish residents, but that has now been equalised to being 18% for all.
6. Pensions - You can still receive your state pension whilst living in Spain, and you will receive the annual increase as Spain is in the EEA. You have the choice of where you have it paid, but you should bear in mind that if you have it in a UK bank account, you will loose on currency conversion when you withdraw it. Many private pensions have a stipulation that it is paid in Sterling and into a UK bank account, so you cannot avoid the loss in exchange rate there. You can still pay into a private pension once you have moved to Spain and will receive tax relief for 5 years on the first £3,600 paid in each year.
7. Banks - Nowadays, you can withdraw from your UK bank account almost anywhere in the world, and so accessing funds isn't as difficult as it used to be, however, as already pointed out, you will loose out when withdrawing dependent upon the current exchange rates. You will also be charged a fee each time you withdraw. Banks such as Lloyds TSB have a range of accounts available in other countries, including Spain, and you can get more advice by clicking on their link on the right of this guide. Your final alternative is to open a bank account with a Spanish bank. This is fairly straight forward - but beware - Spanish banks don't tend to be as lenient as UK Banks on unpaid items and unauthorised overdrafts etc.
We hope this guide has provided you with some useful advice and that, in combination with our advice on buying property abroad it will help you save money by not making expensive mistakes. If you have some information which may be useful to other users, please let us know by using the comment form below.