SPANISH PROPERTY Costs of purchase
When searching for Spanish property costs of purchase must be taken into account on top of the advertised price. Some of the costs are unavoidable and in this article we will detail what those costs are. Some costs however can be reduced and here we will give some tips to help you save some money where you can!
There are several costs associated with the purchase of a Property in Spain and these costs can vary depending upon the location and type of property being purchased. For example, different regions of Spain set their own levels of transfer tax on re-sale properties and different taxes apply to resale and brand new properties.
We recommend that buyers allow 15% on top of the property’s sale price to allow for these costs. This percentage should be an overestimate and leave money to spare, it is better to have a surplus of money than to fall short.
The details below are intended to give a guide as to the cost associated with a purchase however we always recommend that the buyer employs the services of an independent Spanish solicitor. Part of the solicitor’s role will be to give a break down of costs specific to the purchase being made and to instruct you as to how those costs should be paid. These instructions come as completion approaches and after a commitment has been made to purchase.
Transfer tax only applies to resale properties (ie a second hand property) not to new build or key ready properties.
This tax is set by the regional governments and so varies across Spain. For example, in the region of Murcia (Costa Calida) the tax is 8% of the purchase price. In the Comunidad Valenciana region (Costa Blanca, Costa del Azahar) it is 10% of the purchase price. In Andalucia (Costa del Sol, Costa Almeria) The tax is applied progressively at 8% up to €400,000, 9% up to €700,000 and 10% above €700,000.
IVA applies to new build and key ready properties where you have first occupancy, but not resales.
IAJD tax applies to new build and key ready properties where you have first occupancy, but does not apply to resales.
|PURCHASE PRICE||NOTARY FEE|
|25.000 €||600 €|
|50.000 €||625 €|
|100.000 €||675 €|
|150.000 €||710 €|
|200.000 €||750 €|
|250.000 €||790 €|
|300.000 €||830 €|
|400.000 €||850 €|
|975.000 €||875 €|
Again the land registry fees are set by the government and do not vary. They are applicable to all property transfers and the cost is borne by the purchaser. The law can be seen here
|PURCHASE PRICE||LAND REGISTRY FEE|
|25.000 €||395 €|
|50.000 €||420 €|
|100.000 €||445 €|
|150.000 €||470 €|
|200.000 €||510 €|
|250.000 €||550 €|
|300.000 €||590 €|
|400.000 €||630 €|
|975.000 €||650 €|
One must also account for other expenses associated with the purchase for example, at completion bankers drafts will need to be issued to the various parties (tax authority, vendor etc.) It is common that the bank will charge to issue them. Costs vary from bank to bank but a draft of €200,000 could cost around €300 (ie. 0.15%).
Until recently when purchasing a property the IBI (similar to council tax) would be transferred with the property. The buyer now has to pay the proportion corresponding the time that they are the owners of the property)
There area also costs associated with international money transfer, issuing bankers drafts and the simple practicalities of signing for a property in Spain.
We will look at how we can save on those costs below.
THE COSTS THAT CAN BE REDUCED
All of the above costs are directly associated to the purchase of the property and are unavoidable and non-negociable. There will however be other costs that you will incur and that can be reduced with our help.
As we mentioned before, all property transactions must be witnessed and registered by a notary. This means that you must either attend the notary yourself or appoint a legal representative by Power of Attorney to represent you.
If we consider a purchase in the name of husband and wife, the cost of flights and a hotel room for the night before completion will be in the region of 400€ plus the cost of transfers to the airport in the UK (we would of course help you in Spain) food and drink etc. If you were purchasing an unfurnished property you may need a few extra days in hotel while you wait for furniture to be delivered. The cost could quickly mount up. On top of that you will loose valuable days of holiday (and income if you are self employed).
Granting power of attorney to your solicitor will cost less than €100 and would mean that you can use that money to visit after completion and enjoy your time in your property, not in a stuffy notary’s office. If you purchased through Laddr we would even help take delivery of furniture packages before you arrived so that all you would have to do is unpack your bags and settle in!
There will also be cost associated with the transfer of money from the UK to Spain and the exchange from Sterling to Euros this cost can be reduced by using specialist currency broker such as Rational FX who can reduce the fees associated with an international transfer while also giving a much better rate that you bank.
Specialist Currency brokers trade currency in huge figures, driving exchange rates down and passing those savings on to you.
They also hold bank accounts in each country meaning that you transfer Sterling from your UK account to theirs and then they transfer euros from their Spanish account to yours at the agreed rate avoiding large bank fees levied on international transfers.
You can expect to save between 1 and 2% of the total transfer cost. When you factor that into the costs above the saving you make is in the thousands!
We recommend Rational FX, they have performed very well for our clients, saving money and giving excellent customer service and, importantly, they are FSA Approved.
As mentioned above bankers drafts can cost several hundreds of euros however unlike the tax man you can negotiate with the bank. It is common practice to negotiate free bankers drafts in exchange for taking out a years house insurance with the same bank.
COSTS THAT SHOULD NOT BE REDUCED:
We have already recommended that you do not try to save money by purchasing without a solicitor. However there is another way that you may be tempted to try and save money which could potentially prove to be very costly in the long run.
UNDER DECLARING THE PROPERTY VALUE
There used to be a common practice in Spain of under declaring the value of the transaction and paying a proportion of the transfer in Cash. For example if the property sells at €100,000 a figure of €70,000 would be declared on the deeds. This would mean that the 10% transfer tax (we’ll keep it simple and pretend we are in Alicante) would only be 7,000€ not €10,000, notary and land registry fees would also be reduced. This practice is no longer used and If this is suggested to you DO NOT AGREE!
While it may be tempting to save a bit of money in the short term, this is an illegal practice and could result in you paying a lot more money than you expected. Furthermore, when you come to sell the property later down the line you will be hit with a bigger capital gains tax bill.
At Laddr International we have almost 20 years experience of dealing with Spanish Property. We offer FREE consultations by phone or Skype to anybody who is considering purchasing property in Spain, helping to explain all of the considerations that need to be made when making such a important step.
Once we have helped establish the best areas and types of property to suit your individual needs our network of Local Property Experts can help you to pinpoint the best properties to suit you in that area and then support you through the entire purchase process until you are happily settled in your new Spanish Home.
To arrange a free consultation please contact us using the form below or call on +44 117 230 77 77
Arrange a FREE Consultation
Arrange a consultation by phone or Skype with one of our Spanish Property Experts to discuss your property and lifestyle requirements and answer any questions you may have about the process of purchasing a property in Spain. Following the consultation, if you are happy to work with us, we will produce a portfolio of suitable properties to match your requirements and when you are happy, make arrangements for you to view the areas and properties you like with one of our Local Property Experts in Spain
SPANISH PROPERTY Costs of purchase © Laddr Limited 2018