The Most Comprehensive Guide for foreign investors Buying Property in Spain

For many foreign investors, Spain is not only a country rich in history and culture with beautiful scenery but also an ideal place for real estate investment. Whether it’s a leisurely holiday villa by the beach or an apartment in a bustling city, the Spanish real estate market can meet various needs. This article will detail the complete process for foreign investors to buy property in Spain, from selecting the ideal property to the final handover of the keys.

Before deciding to buy property in Spain, you need to know: for foreign investors wanting to buy property in Spain, first, you must obtain an NIE (Número de Identificación de Extranjero), also known as a foreigner identification number. This is a financial number in Spain, and as a foreign national, you need it to carry out any financial activities in Spain. Circle Expats can apply for an NIE number for you; contact us.

With the NIE, you can start your Spanish property buying process.

Understanding the current housing price level in Spain: According to the housing transaction data of 2023,

San Sebastian is the most expensive capital in Spain (€5,365/square meter), followed by Barcelona (€4,167/square meter), Madrid (€4,118/square meter), Palma (€3,877/square meter), and Bilbao (€3,241/square meter). The cheapest capital, Zamora, is priced at €1,118/square meter. Valencia is (€2,287/square meter), Sevilla is (€2,211/square meter), Tarragona is (€1,896/square meter), Girona (€2,457/square meter), Granada €2,019/square meter.

Determine the Purpose and Budget for Buying a House

• After understanding the current housing price level in Spain, you can clarify your purpose for buying a house according to your financial capacity: is it for investment, personal use, or a holiday home? Different purposes may affect your choice of region and type of property. At the same time, set a realistic budget, including the cost of buying a house, taxes, maintenance costs, etc.

Choose a Region and Property

• The Spanish real estate market is diverse, from bustling big cities to quiet seaside towns, each with its own characteristics. Research the market trends, cost of living, infrastructure, and future development potential of different areas, and choose the region that best meets your needs.

Find a Property

• Once you have determined the area and budget, you can start looking for a property. You can view available properties through Circle Expats’ recommended listings or online real estate platforms. At this stage, choosing Circle Expats to guide your property buying journey in Spain, we can provide professional advice to help you find your ideal property.

Conduct Due Diligence

• After finding a property you like, conducting due diligence is very important. This includes verifying the legal status of the property, ensuring there are no unpaid mortgages or debts, and checking the physical condition of the property. This is especially important when buying a second-hand house in Spain.

As a foreign buyer investing in Spanish property, it’s especially important not to fall into “traps”. Circle Expats will guard you by:

• Checking the property’s title at the Land Registry (Registro de la Propiedad)
• Ensuring that every detail of the house has received proper planning permission before construction
• Checking if the property is used to secure any debts
• Verifying the qualifications of any lawyers or real estate agents you plan to work with
• Having an architect check whether the property complies with standards and is not cheaply constructed
• Checking the property’s energy certificate
• Checking the condition of the property’s floor and building to facilitate future sales
• Assessing whether the property is in a “prime”/”safe” area with convenient transport

Sign a Preliminary Agreement and Pay a Deposit

• Once you decide to buy, the next step is to sign a deposit agreement (Contrato de arras) and pay a deposit (usually 10% of the price). This agreement will detail the purchase conditions, including price, payment method, and expected completion date of the transaction. After this step, the transaction is considered legally binding.

Arrange Funds

• When buying a house in Spain, you may need to transfer funds from China to Spain. This process may require some time and procedures, involving currency exchange and international bank transfers. For clients making their first overseas property investment, we can provide detailed guidance, including advice on opening a bank account. At the same time, if you need a loan, this is the time to apply.

Prepare and Sign the Notarized Purchase Contract

• In Spain, all property transactions must be completed in front of a notary. The purchase contract (Escritura de Compraventa) will be signed under the supervision of a notary to ensure the legality of the transaction. Before signing the contract, the notary will verify all relevant documents to ensure the seller has the legal right to the property and there are no legal issues with the property.
• Pay the Remaining Amount and Related Taxes for Buying Property in Spain

• VAT (IVA): When buying a new house, the buyer needs to pay VAT. The rate is usually 10%, but in the Canary Islands, the rate is 6.5%. For commercial properties and land, the rate can be as high as 21%.
• Stamp Duty (AJD): In addition to VAT when buying a new house, stamp duty is also payable. The rate varies by autonomous region, usually between 0.5% to 1.5%.
• Property Transfer Tax (ITP): When buying a second-hand house, property transfer tax is payable instead of VAT and stamp duty. The rate varies by region, usually between 6% to 10%.
• Lawyer’s Fees: Although not a tax, lawyer’s fees are an important expense in the buying process, usually about 1% of the total purchase price.
• Notary Fees and Registration Fees: The notary fees for completing the sale and the costs of registering the new property at the property registry are also mandatory, depending on the value of the property.
• Capital Gains Tax (Plusvalía): This is a tax paid by the seller, but in some cases, the buyer and seller may negotiate for the buyer to pay. It is a local tax, based on the increase in value of the property since the last transaction, determined by the local government where the property is located.

Property Registration

• After signing the purchase contract and paying all fees, Circle Expats will complete the registration of your property for you. We will register it at the local property registry. This step is a legal step to confirm you as the new owner, safeguarding your ownership.

Key Handover and Property Delivery

• After completing all legal procedures and payments, the seller will hand over the property keys to the buyer (if you are not in Spain, Circle Expats will handle the property inspection handover and key custody for you), and the property transaction is officially complete. At this point, you can start planning to move into your new home or carry out necessary renovations and maintenance work.

Summary:

Buying property in Spain is a complex but rewarding process. By following the steps outlined above, understanding