Your Guide to Buying Property in Spain By 5th Avenue Estates The Costa del Sol Property Experts www.5ave.es
Thanks for reading the 5 th Avenue Estates buyer s guide. There is something for everyone on the Costa del Sol and the lifestyle and climate is unbeatable. Buying here gives you a little piece of this great place, in the warmth of the Spanish sun. This guide contains the main steps to buying a property in Spain as well as key legal and financial information that you need to know to make the process run smoothly. Good news about buying in Spain To start with, we want to reassure you that with the right advice and expertise, buying property here is a relatively simple process and it s a secure long-term investment with many safeguards in place to protect buyers. So please don t worry. We re here to help buyers every step of the way, but with the information in this guide you will know the key points so you can feel in control and happy with the process. Now is a great time to buy. After many years of economic uncertainty, Spain is out of recession and the Costa del Sol s real estate market is booming once more, with 2016 seeing large increases in properties sold, as well as increasing prices. Brexit has not made buyers run for the hills as predicted and due to the long time frame for the exit, it is still an excellent time to buy as prices are still around 40% lower than at the peak. Spain has gone from being one of the most expensive countries in the Eurozone to get a mortgage, to one of the cheapest in the space of a few years. There are fixed-rate mortgages to be had from as low as 2.05%, and in August 2015 the Dutch bank ING launched its Orange Mortgage with a differential of just 0.99% above Euribor. New regulations are making it even more attractive, such as the 2% reduction in Capital Gains Tax for non-residents introduced in 2015 and 2016 (1% per year) and an exemption for people reinvesting their money into a new property in Spain as a principle residence, so it will be a lot cheaper to sell. There is also a significant reduction in non-residents property tax (NRIT), from 24.75% in 2014 down to 19% in 2016. Finally, the Inheritance Tax laws for non-residents are changing to be in line with their local area, which means that in Andalucia, the surviving spouse will get a 99.9% discount on Inheritance Tax on their primary residence, great news for anyone retiring here. So read on and learn about the process of buying a property. If you have any questions please don t hesitate to ask, and remember you are not going through this process alone, 5th Avenue s helpful team of Real Estate professionals and independent legal advisors are on hand to guide you through it. 1
What is 5th Avenue Estates? 5th Avenue Estates is the go to agent for buyers in the Marbella and Costa del Sol area. Our experienced and trustworthy team are specialists in quality real estate in and around Marbella, with a passion for our area and a commitment to supporting the community. Our no-nonsense, honest approach focuses around listening to our clients needs and striving to give them what they need. Conveniently located on the Golden Mile, with great knowledge and access to the whole coast, our multi-lingual, international team of real estate professionals can speak your language and understand your needs. What do we offer? Real Estate sales with exceptional customer care Short term and long term Rentals Off plan developments Plots for sale for individuals and developers Design and build of new properties Construction Refurbishments Wineries for sale Our Mission To find buyers the right property to meet their needs and to help sellers get the best price for their property or development in the least time possible. Our customers are at the centre of what we do and for them nothing is too much trouble! Our Vision To become the go to agent of choice in the Marbella and Golden Mile area and position Marbella as the perfect destination for property buyers Our Experience Our team of multi-lingual, dedicated real estate experts living and working in Marbella, with a passion for the area has over 100 years experience. It is headed up by CEO Miguel Angel Bilbao, who established a chain of real estate agents in Northern Spain 20 years ago and has been working in construction, real estate and security since 1995. Sales Director Gary Oliver has been working in real estate in the UK and Spain for over 15 years and is leading an expanding team of top quality professionals to create a fresh, dynamic real estate brand. Our Values We go the extra mile - nothing is too much trouble for our customers We believe in transparency at all times and ensuring everything is legal and above board We are approachable and our door is always open if you need us We are always honest and will advise you based on our expert local knowledge and your best interests We listen and deliver what we promise We are committed to support our community 2
Our commitment to the community - We believe that living and working in the area, enjoying all the amazing benefits of life in the Costa del Sol means we should take responsibility for making it even better and help people who are less fortunate. This is why we have pledged to support Marbella by donating to the Marbella Red Cross every time we sell a property and will be fundraising for them and supporting their campaigns as much as we can. promote the lifestyle and properties in this amazing area to buyers all around the world and find them their little slice of paradise. Where are we? On Marbella s prestigious Golden Mile You can also find us on social media Professional Bodies - We are members of the Association of International Property Professionals (AIPP) and the Asociación Profesional de Expertos Inmobiliarios and part of the Aurum MLS and Fecinmo. Why do we love Marbella? We believe Marbella offers the best combination of lifestyle, climate, cuisine and sports of anywhere in Europe. There are a wide range of attractive properties here to suit all budgets and it has always remained popular, so buying property here is a great investment. We are proud to Testimonials Thousands of clients have trusted in our experienced team to deliver high quality real estate and construction services, here are just some of our happy customers. We dealt with Gary throughout the purchasing process and he was amazing. He would always get back to us promptly whenever we had any questions or concerns. He was a delight to deal with and always willing to help. Thank you - Jenny - Devon 2016 We have recently purchased and found the Management and staff to be extremely professional. They communicated regularly throughout the whole process and made things a lot easier. All questions were answered and the team was very helpful no matter what the question. Thank you The team - especially Customer Services team, the support staff were excellent and we would have no hesitation in recommending them to anyone looking to buy or sell. Nothing was too much trouble and they were efficient and courteous throughout the buying process.- Steve and Lesley - Manchester 3
How many agents do you need to find the right property? Searching for property is exciting, and most buyers will spend a lot of time browsing properties online, making enquiries from lots of different sites and estate agencies. There are thousands of properties online, and surfing can give you a feel for what s out there, but it s no substitute for speaking to the experts, experiencing the lifestyle and seeing the properties for yourself. Searching and enquiring in lots of different places in this way makes it difficult when you do start searching in earnest and you want someone to be working hard on your behalf. By this point your details are registered with so many agents and you re receiving so many calls and emails that it can be very confusing and overwhelming. Also as you re speaking to so many people, you are not building up a strong relationship with your agents and arranging viewings with many different companies will be tough. dealing with. When you find that trusted agent, explain to them your requirements, budget, preferences and tastes and let them search on your behalf. They will search their exclusive properties, but they will also search high and low to find you the right properties, on portals, with other agents and hitting the streets in your chosen area to find what you re looking for. You can sit back and relax, knowing there s one agent working on your behalf, without being inundated by calls and emails and wait for the right properties to be delivered to you. We d love to help you to find your perfect property, so put your trust in us! The Costa del Sol is a relatively small place and collaboration between agents is common, with even exclusive property listings being widely promoted between agents, so this means you don t need to be registered with lots of agents to be able to access all the properties in your chosen area. Our advice would be to start by finding an agent that you trust, with values you connect with, who listens to your needs and who you enjoy 4
How much does it cost to buy a property? Whilst this is the question we re probably asked the most, there is no definitive answer, as it depends on how much your property costs. As a guide, expect to pay approximately 11% of purchase price for private purchase properties and 12% of purchase price for new-build developments. Expect an additional 1% if you need a mortgage. Your lawyer will prepare a schedule of costs and payments for your purchase which include taxes, fees for services such as lawyers and the notary and mortgage costs, so there are no nasty surprises. Here is a breakdown of some of the costs and what they mean: Notary fees The cost of this is determined by the value of the property, as well as factors such as the number of pages of the deed or number of copies. Please note that notary s prices are approved by the government and do not vary from one notary to the other. Registration fee There are two costs involved here. 1. Verifying property ownership and reviewing if there are any charges on the property e.g. if there are non-paid taxes. 2. Checking the legality of the deeds (nota simple) and registering it with the Land Registry. Costs are dependent on the value of the property and the mortgage. Mortgage Registration Costs of registering the mortgage with the Land Registry, this is a percentage of the total mortgage. Survey A registered surveyor is required to certify the property s value. The buyer has to bear the cost of the survey, which is usually between 100 and 300 Euros. These surveys have a validity of 6 months and must be paid irrespective of whether the mortgage is approved or not. New developments 10% VAT (IVA) and 1.5% Stamp Duty in addition to the asking price. Private Purchase 8-10 % TAX (ITP). 5
What needs to be done to purchase a property on the Costa del Sol There are a few things that you and your legal representative can do now whilst you are starting the buying process GET AN NIE NUMBER The NIE Number (Foreigners Identification Number) is a fiscal identification number for foreigners who want to stay more than 3 months in Spain, or in order to be able to process certain transactions in Spain like buying a property. This will be your key number for undertaking this property purchase, as well as opening a bank account, buying a car and even signing for a package from the postman. Please note that you no longer need to apply for it in person. Notarized powers of attorney (NOA) are able to apply for this on your behalf before you arrive. 5th Avenue Estates offers support to buyers through every step of the buying process and can help with this process if you re buying through us, so please just ask. OPEN A SPANISH BANK ACCOUNT You need a Spanish bank account to buy a property. We advise you to shop around to find a bank which offers accounts with no fees (or minimal fees), as banking can be expensive in Spain. We also recommend choosing a bank which caters for foreigners and has their materials in your language, as this takes a lot of the stress out of it. Make sure that the bank selected accepts fax instructions, as this will be important for the purchase. Our recommended banks are Bank Inter, La Caixa and Banco Sabadell. It is a simple process to open a bank account, there are options to have a residents or nonresidents account and your branch can tell you the best option for you and what you need to do. 5th Avenue Estates can also take care of this for you, to minimise the stress of buying a property. 6
Home Buying Process The process of buying a house in Spain has a number of steps which are slightly different if you re buying properties off-plan from a developer, buying from the owner (private purchase) and if you need a mortgage or not. No matter what, you will have three key stages making an offer, signing the purchase contract and completion by signing the public deed of sale. Below you will see the full breakdown of steps for cash buyers or if you require a mortgage. Home Buying Process Summary as a cash buyer 1. Property Search 2. Make an offer & pay reservation deposit 3. Legal Searches 4. Full deposit paid 5. Visit notary for completion Home Buying Process Summary with a mortgage 1. Mortgage Application 2. Property Search 3. Make an offer & pay reservation deposit 4. Legal Searches 5. Bank Valuation 6. Full deposit paid 7. Visit notary for completion 7
Step 1 Find the Perfect Property This bit is great fun, as you get to explore the Costa del Sol and see lovely properties, which can be surprisingly affordable. The key is to narrow down on the areas you want to be in, the kind of property you want to live in and the priorities in terms of amenities and distance to the airport for example. This will enable your agent to show you the right properties, so be as specific as you can in your requirements, even if you re not sure where you want to be yet. Searching with 5th Avenue Estates Offer Process 5th Avenue is here to help you to find your perfect property and the best place to start is by visiting, getting to know the area and seeing properties. We will pick you up from the airport, give you a tour of your key areas and show you a variety of properties, whilst sharing our local knowledge with you. This is your chance to pick our brains, so you can quickly know what area and what property will best suit you. There are so many great property options and many different areas to choose from, so we re confident that we can find the perfect property for you. When you have selected your dream home, got your NIE number and opened your bank account then then you have everything you need to complete the purchase of your property. Offer in 6000 reservation deposit Negotiating the price 48 hrs When you have chosen the property, then you will make an offer and allow us to negotiate the best price possible for you. Our offer process is as follows 1. Put in an offer on the property to the owner 2. Make a 6000 commitment deposit, known as a reservation deposit, this shows the owner you are a serious buyer and stops others being involved. The proof of transfer of this will be sent to the seller, but the money is safe and will be returned to you in full if negotiations fail. 3. We have 48 hours to negotiate the price with the vendor 4. If no agreement can be reached then the reservation deposit is refunded in full 5. If an agreement is reached then 10% of the purchase price ( minus the reservation deposit) is transferred whilst the paperwork for the sale is processed 6. Lawyers will support you with the legal processes required to purchase the property 7. At the notary the remainder of the money is paid and you are the proud owner of a Costa del Sol property 8. After-sales service We are still available to help you with any issues to do with the property and can help you with renting your property and much more, so don t be afraid to ask No agreement > 6000 refunded Agreement > 10% deposit paid minus reservation deposit > Legal team start purchase process > Go to notary & complate > Pay full price > Enjoy your property > We re still here to help 8
Legal Searches Checking all is in Order Once you have selected the property you want, your legal representative will carry out all the necessary checks such as ensuring the building licence is in place for off-plan properties. They will check that there are no fines on the property, that the property is legal and there are no issues you need to be concerned about. Please note that it is 5th Avenue s policy to do all the necessary checks prior to listing a new development and we request bank guarantees from the developer (a legal requirement often overlooked), 10 years of insurance for structural damages from the developer and we ensure that there are occupation licenses in place. The Notary One of the people key to a property purchase in Spain is the Notary. The Notary is a civil servant who acts with independence and impartiality. The Notary s task is to certify that the purchase has been carried out in accordance with the legislation in force. After the relevant verifications, the Notary s office is in charge of drafting the deeds, a document accrediting that the property belongs to the person who acquires it. Through the public deed and its copy, he provides legal security to the real estate transaction. Purchasing New Properties Off Plan Usually 10-15 days after the deposit is paid, the private purchase contract must be signed. Upon exchange of these contracts, 30% of the price (minus the deposit) plus VAT is paid. Completion At this stage you must request the architect s certificate from the developer stating that the building has been finished according to the building license and the Occupation License from the Town Hall. We would also suggest a full property inspection and the production of a snagging list which must be agreed to be fixed prior to you moving in. 9
Taxes and Tax Implications They say there s nothing sure in life apart from death and taxes, and buying and selling properties unfortunately incur taxes, however this year there have been some important reductions which make life a little easier. Overall, taxes to be considered in a purchase/sale of a property vary depending on whether it is a new house or a private purchase property. Generally, the buyer pays all expenses, except the capital gains, the property tax and any outstanding debts. In 2015 and 2016 there has been a 2% reduction in Capital Gains Tax for non-residents (1% per year) and an exemption for people reinvesting their money into a new property in Spain as a principle residence, so it will be a lot cheaper to sell. There is also a significant reduction in non-residents property tax (NRIT), from 24.75% in 2014 down to 19% in 2016. Finally, the Inheritance Tax laws for non-residents are changing to be in line with their local area, which means that in Andalucia, the surviving spouse will get a 99.9% discount on Inheritance Tax on their primary residence, great news for anyone retiring here. New Property Taxes Value Added Tax (IVA): 10% is paid by the buyer upon completion. Stamp Duty (IAJD): This is the charge applied to the processing of public documents (notary and administrative documents) in real estate transfers where VAT is applicable. It must be paid by the buyer at the rate of 1.5% in Andalucia. Private Purchase Property Taxes Property Transfer Tax (ITP): This tax applies to the purchase/sale of a private purchase property (resale) but does not apply to new developments. It is paid by the buyer at a tax rate which ranges between 8%, 9% or 10%, depending on the property price. The tax must be paid in the Tax Office of the autonomous community where the property is located, and the amount is based on the cadastral value (the official valuation of the property by the Town Hall). 10
Taxes which apply to both new and private purchase properties Onerous transfer tax (TPO): Tax rate of 1%, paid when a mortgage is requested to finance the purchase of a new house or private purchase property Tax on the Increase in value of land of urban character (capital gains tax): This municipal tax applies to the increase in the value of urban land from its purchase to sale. Please note this applies only to the seller. Taxes applicable to foreign buyers Non-residents who are owners of real estate in Spain, but are using it as a second home not a principle residence, are subject to Non-resident Income Tax which is payable on the 31st December every year. This tax assumes that you will be renting your property and taxes you on 2% of the cadastral value (the official value the local authority has calculated), or 1.1% if it was increased after 1994, at the flat tax rate for nonresidents of 24%. Example: A non-resident who has been the owner of a property throughout the year of 2011 whose cadastral value is 100.000 : 100.000 x 1.1%x 24%= 264 per year to be paid. If you do actually rent your property out officially, register your property and declare that income as you should, this will be taxed at 24%. Example: Monthly rent of 600, rented all year: 600x12 = 7.200 a year x 24% = 1.728 to be paid. Taxes when you sell your property We know this is a buyer s guide, but in case you are planning to sell on quickly, here are the taxes you need to think about. Capital Gains Tax 20% of net profits in selling (minus commissions and fees of selling) Local PLUSVALIA Tax Paid to the Town Hall for the increase in the value of the urban land 3% Withholding Tax For foreign sellers, the buyer must retain 3% of the purchase price and pay it to the Inland Revenue to cover potential gains, if the Capital Gains Tax is less than this, then the seller will receive a rebate. 11
Mortgages A mortgage is a loan offered by a financial and credit institution in order to purchase a property. Mortgage Terms Here are explanations of some of the terms you will see on your mortgage agreement - Maximum amount: the amount loaned by the bank. Loan term: Duration of the loan, which is decided between the buyer and the bank depending on repayment levels for the buyer and the banks terms and conditions. Repayments: The amount committed to be paid periodically to the financial institution which has given it. It can be monthly, quarterly, half-yearly or annually. Interest Only Period: A period when only the interest is paid, not the loan itself. Mortgage Process Application The first step to getting a mortgage is to present your application to the financial institution or bank, attaching all the necessary documents to process the loan. Application, survey and verification - It is necessary to know the current value of the property to be mortgaged and conduct checks with the Land Registry regarding its registration. A surveyor will visit the property and draft the appraisal report. At the same time confirmation from the Land Registry will be requested to check its registration, ownership and any possible debts. These arrangements will be performed by your legal representative. Verification result and survey value - After having checked the property s registration and the property s valuation, you will be informed of the result. The lawyer will also inform you if there were previous mortgages, debts on the property or any other issues, and we will make the appropriate arrangements to resolve them before signing. Binding offer - The bank will present you with a binding offer, containing all the conditions and the clauses of the deed to be signed before a Notary. You must read this offer to check that everything is in compliance with what is agreed, and if so, sign it. Preparation of deeds Signing appointment - Your agent will contact you to set the date for signing the deeds before a Notary. Once the date is chosen, your legal representative will coordinate with you the rest of the operation: amount and method of payment, provision of funds for expenses, and 12
the documents to be provided on the day of the signing. 5th Avenue also offers you the possibility of using an independent legal counsel for this service. Signing of deeds - On the scheduled date and place, the purchase/sale and the loan deeds will be signed before a Notary. The sellers (all the registered owners), the buyers (registered holders of the loan) and the bank s representatives will have to attend. The Notary will check the property s ownership and debts and also check the legality of the contract s conditions. The Notary formalizes the contract on the given date, acting independently and impartially in relation to the parties. During this meeting the cancellation or alteration of the mortgage and the constitution of a new one, if any, is also agreed. Registration - The transaction agent for the bank will collect both deeds from the Notary s office, he will settle the corresponding taxes and will present them in the Land Registry for registration. Once they are registered, you will receive the original of your purchase document and the copy of the loan agreement to your address, all invoices paid on your behalf, and the final settlement of your provision of funds made by the bank s agent. These issues are usually included in the management process of the purchase/sale. If required, 5th Avenue has an external legal counsel at your disposal for this service. International Transfer of Funds A SWIFT Transfer from a foreign bank to a Spanish bank takes 3-5 days and should be free of bank charges, this is the best way to transfer funds. Please note that we advise using a currency company or your home bank to convert currency, as Spanish banks may charge a fee of 0.50% of the amount transferred, which can be costly. 13
How can we help you? We hope that this buyer s guide has helped you to understand the process of buying a property in Spain. We know there s a lot of information, but please don t be alarmed, we re here to help you every step of the way! 5th Avenue are here to help you make your property dreams a reality! Contact us today and let us show you how. Visit our Golden Mile office Bulevar Príncipe Alfonso de Hohenlohe, Edificio Milla de Oro, Local 2 B, 29602, Marbella, Málaga (España) Give us a call - (+34) 952 906 201 www.5ave.es Why buy with 5th Avenue? 5th Avenue Estates are the Marbella property specialists, located on Marbella s prestigious Golden Mile and focussed on finding quality properties and providing exceptional service in Marbella and beyond. We go the extra mile to help you find your dream property and nothing is too much trouble! We are the Marbella experts - Our experienced and trustworthy team are specialists in quality real estate in and around Marbella, with a real passion for our area. All our team have lived on the Costa del Sol for many years and so can offer you real life advice and support you to find your perfect place. Nothing is too much trouble for our valued clients. We care - As we are so passionate about our community, we make a donation to the local Red Cross every time we sell a property, to fund community projects in and around Marbella. We listen - Our no-nonsense, honest approach focuses around listening to our clients needs and striving to give them what they need. Conveniently located on the Golden Mile, our multi-lingual, international team of real estate professionals can speak your language and understand your needs. We are always honest Transparency is everything and we will advise you based on our expert local knowledge and your best interests. We also have independent legal and financial partners on hand who can offer advice and cut through red tape, handling everything for you and removing the stress from the process.