Buying an apartment in Spain – or how I bought a flat in Torrevieja – costs, law, taxes

After the outbreak of war in Ukraine, I started to look for an opportunity to invest in a foreign property (flat or flat) to secure some of my capital outside Poland, as far away from the war as possible. And although many people may disagree that this is not the best way, I achieved my goal and am satisfied. Below I describe which points I paid attention to in particular – during my ‘journey’ to living in Spain.

Preparing to buy a flat

Which region of Spain to choose? And is Spain for sure? And if so, which city? These were the questions I asked myself at the beginning. I started with economic factors. I checked that Spain is one of the most developed countries in the world, with a high GDP and stable social services. In addition, it is attractive as a tourist destination – for obvious reasons of weather and infrastructure – and as a place that really lends itself to healthy living. The Costa Blanca is rated as one of the best places to live according to the WHO. I started reading the regions statistics. I also started looking at historical weather data and future forecasts. I looked at the level of security and located the most important investment risks.

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Housing prices in Spain

Flats and houses in Spain are characterised by a wide price disparity. One of the more expensive regions is Catalonia. Prices can be twice as high in Barcelona as in other – even larger – cities. Barcelona is not inferior to other larger cities such as Madrid or Valencia. As I did not want to live permanently in the city, I could afford a smaller, cheaper place, but also with tourist advantages. Therefore, the choice fell on a flat in Torrevieja – which defacto, although in the Alicante region, is not far from the city of Murcia. Prices for 2-3 bedroom flats in Torrevieja usually average between €70k – €100k for the secondary market I was interested in (early 2022). However, if I had opted for a flat from the primary market, then one would have to count thickly over 100k euros.

In terms of the number of municipalities with the most expensive average house purchase price in Spain, the province of Alicante leads the way, meaning that the Costa Blanca is ahead of Malaga and Barcelona, according to information published by property portal Idealista.

The regions of La Marina Alta and Baixa lead the way in this respect, as Altea and Xàbia are among the ten most expensive in the whole of Spain, with average prices of €789,365 and €767,263 respectively. The cheapest municipality among the most sought-after in Spain is Santa Pola, with homes going for €156,291.

This average price is still far from the top of the table, which Idealista calls great on the coast, as they exceed one million euros. These are Benahavís with 1.9 million, Calvià with 1.58 and Marbella with 1.37.

In the province of Alicante, after Altea and Xàbia, Calpe ranks 14th with €553,078 and Alfàs del Pi 17th with an average of €457,605. Outside the top 20 are Dénia, in 22nd place with €381,885, El Campello in 31st place with €302,450, followed by Orihuela in 33rd place with €291,475, Pilar de la Horadada in 40th place with €258,343, Benidorm in 49th place with €239,192 and just behind Alicante in 50th place with €236,474.

From position number 50 to 100, Guardamar del Segura appears at 66 with 200,222 euros, Elche in 75th place with 179,713, Torrevieja is near the bottom of the list, or top if we are talking about cheapness, in 89th place with 163,066, and closing the list, as mentioned, is Santa Pola at 93 with 156,291 euros.

The demographic structure of the province of Alicante allows this distribution in more cities than in other regions of Spain, where only Málaga and Barcelona have similar competition. For this reason, it is also one of the territories among which there is a greater search for houses to buy, although in this case it remains behind the Costa del Sol, which leads with eleven locations compared to nine.

The most expensive municipalities and those most sought after to buy property also overlap with those with the highest rental demand, although not in the same order. In the rental ranking, Dénia ranked 22nd in Spain, Pilar de la Horadada 28th and Benidorm 30th. On the other hand, Altea and Xàbia remained in 89th and 71st place respectively(source).

Property price index in Spain. Source

If, like me, you are geared towards a rental flat, these factors determine the greatest benefits when renting:

  • distance from a) the sea and b) the beach
  • distance from large shops
  • distance from expressways
  • garage and veranda
  • air conditioning
  • outdoor pool
  • ocupas ‘free’ neighbourhoods

We are used to thinking of flats as the number of metres. I felt that in Spain they talk more about the number of rooms, because that somehow determines the clients for rent. It’s one thing to rent a studio and another to rent a flat with two rooms.

As in Poland, when buying a foreign property, it is necessary to pay taxes and costs related to the whole process. Usually, the buyer, using the assistance of a real estate agency, does not pay the service costs. These are regulated by the seller. But it is important to pay attention to this, because not every real estate agency follows such a rule.

In addition, when choosing a budget for your flat you have to decide whether you take out a loan to finance the investment – or pay “cash”. I realised that if I chose the first option – only a loan in Spain would come into play. I didn’t find the possibility of a mortgage in Poland, but I wasn’t very interested in this either, as I didn’t use this option in the end.

Most intermediaries indicate that you must be prepared to incur 10-15% additional costs in connection with the purchase of a flat. I calculated this quite meticulously, although I have to admit that I didn’t include fees such as internet connection (€50), airline tickets (€500), bank fees (…) because it would be hard to count the extra costs. In return, I also had my settlements with the intermediary for a lot of things that helped me to settle in Spain – getting electronic signatures, NIE number and a few others, so let’s just say it evens out.

My experience has been that the additional costs of purchase have accounted for around 20% of the value of the property, perhaps with higher house prices, the costs would be lower in percentage terms. The most important cost is the retencion and ITP, which accounts for 13% of the property value.

Additional costs to purchase a property in Spain

I confirm after the entry on morizon that this fee consists of:

  • ITP tax on the transfer of ownership – regardless of the method of financing, it is up to 10 per cent of the value of the secondary market property, depending on the region (autonomous determination of the amount); if the total value of the property does not exceed EUR 1 million; to avoid double taxation, ITP does not apply to operations with VAT (ITP tax in Andalusia, for example, is 7 per cent, so it is worth paying attention to its amount, as this depends on the autonomous community);
  • VAT – 10 per cent of the value of the primary market property (no ITP is paid);
  • notary (acting on behalf of the government) – the rate depends on the value of the property and is regulated by law, and if a mortgage is used, the cost of the mortgage deed must be added;
  • AJD(impuesto de Actos Juridicos Documentados) – this is a tax on civil law transactions, in the primary market it is about 1.5 per cent of the value of the property, in the secondary market it is not paid, unless the purchase is financed with a mortgage, in which case 1.5 per cent of the value of the loan. When buying a new property on credit: 1.5 per cent of the value of the property plus 1.5 per cent of the value of the credit (NB: the amount of this tax is also a matter for the Autonomous Community, in Andalusia it is 1.2 per cent, so it is worth checking this before estimating the costs associated with the purchase);
  • entry in the real estate register – the rate depends on the value of the property;
  • valuation of the property – only for a mortgage loan – approx. EUR 300 – 600;
  • Bank commission on a mortgage loan – a one-off fee on a loan of 1.2 – 2.75 per cent of the loan value;
  • solicitor – hired independently to verify the property and documentation – approx. 1 per cent of the transaction value plus VAT;
  • Bank account maintenance – fee according to the table of tariffs and charges for the bank in question, account opening itself is generally free of charge.

The purchaser has 30 working days from the date of signing the notarial deed to pay the necessary costs when buying a property for cash. With a mortgage loan, the funds to cover the purchase costs and the remaining amount up to the full price of the property must be in the buyer’s personal account linked to the mortgage loan no later than one day before the signing of the notarial deed.

Ongoing charges for the upkeep of a flat or house include:

  • rent – payable every six months or annually (this fee applies to flats and houses located on estates with common areas);
  • IBI property tax(total) – the amount of tax determined locally and for each property individually, payable once a year;
  • Electricity bill(gastos comunes) – payable every two months;
  • bill for water, refuse collection and street cleaning and lighting(gastos comunes) – payable every three months.

Formalities to be completed before buying property in Spain

Spanish law allows foreigners to purchase property, but requires certain procedures to be followed.

Obtaining an N.I.E. number

Any foreigner performing legal, fiscal, financial or social actions must have an identification number, or Número de Identificación Extranjero (N.I.E.). An application for an N.I.E. number can be made at the Spanish embassy in Poland and in all countries of the European Union, as well as at the foreigners’ department of the Spanish police. This number is issued for life. It is usually expected to be issued within a few days to a few weeks. Personal identification will be needed not only when concluding a notarial contract, but also when paying taxes(sums), concluding a utility contract. In order to obtain an N.I.E. number, it is necessary to submit:

  • Application for Número de Identificación Extranjero in Spanish (form EX15) – you must indicate the reason for applying for the number, such as the purchase of a property;
  • a current passport or identity card with two copies;
  • two recent passport photos;
  • an administration fee of €10.71 – this is paid at the bank by completing form NIE 790.

Cooperation with an estate agency

In my case, the key to a smooth transaction was getting in touch with a Polish-speaking real estate agent, more specifically Anastasia, who helped me with the paperwork, understanding the procedures and generally helping me with things I couldn’t do in person.

Cooperation with Spanish lawyer – abogado

The conclusion of property transactions in Spain always takes place in the presence of a notary. They are the administrative staff who supervise the transaction and confirm the documents, checking the payment of taxes. They do not act on behalf of either the seller or the buyer, they simply witness the transaction taking place. Such a notary should not be confused with a self-appointed lawyer. I opted for one, too, which was a great success. Unfortunately, the rules in a foreign country – even if you are a lawyer in Poland – are different in many cases. Ba, the transaction itself went “differently than in Poland”, because how to call that:

  • I paid for the flat … before signing the deed (I made a bank transfer which I could withdraw within 24 hours)
  • I could not add my wife to the bank account, even though I had a so-called apostile (confirmed by the Ministry of Foreign Affairs (!))

So, the lawyer hired will verify the documentation of the property for encumbrances and claims, check the terms of payment and the provisions of the sales contract before concluding it. How do I check a lawyer? Any legally operating lawyer should be registered with the local association of lawyers – the Colegio de Abogados. The general directory of lawyers allows you to locate a law firm near your chosen area and check the lawyer by name or licence number.

Opening a bank account

Keeping a bank account is necessary to pay the day-to-day charges associated with the use of the property. It is also necessary for transactions and with a mortgage. There are more than one hundred financial institutions in Spain, divided into two types: cajas and bancos.

Bancos are networks of private banks or companies, and the most popular include: ING Direct, Banc de Sabadell, Santander.

Cajas are state-run establishments, not as numerous and open to the public as bancos. Cajas generally operate locally.

The account is free to open, but there is an annual maintenance fee of several tens of euros. The account can be opened by a non-resident in Spain.

To open a bank account, you will need an identity document (passport), an N.I.E. number and proof of address, such as a property deed. A private bank account will be needed for a mortgage taken out in Spain. It is important to remember that the own contribution is not paid in cash, but by bank cheques (or direct transfer, as in my case). In addition, banks will only grant mortgages if there is already a preliminary contract for the sale of the property. It is worthwhile for the contract to include a provision about the possibility of withdrawing from the transaction when the bank refuses to grant a mortgage and through no fault of the buyer.

Buying a property in Spain in six steps

Step 1: Search for a property and select an ad of interest.

Step 2 Contact the advertiser. A person interested in buying a property makes a price offer to the owner, usually through the seller’s real estate office.

Step 3 Agreement with the property owner, discussing details. Reservation fee – some sources say it is 10 per cent of the transaction price of the property, and as in Polse – it has the meaning of a refundable deposit – double if the seller cancels.

Step 4 The lawyer working with you verifies the documentation of the property. He checks the issues of financial burdens and claims.

Step 5 Sign the preliminary contract – contrato privado de compravento. From this point onwards, you have 30 days to complete the formalities and sign the target sales contract, unless otherwise indicated in the contract, e.g. longer due to the mortgage.

Step 4 Set up a bank account with the bank of your choice.

Step 5 Apply for a mortgage at a bank where you have previously read the terms and conditions and have the relevant documents ready. The bank’s mortgage officer(hipoteca) – the gestor commercial will tell you what documents are required at the bank in question.

Step 6 Signing of the sales contract – escritura de compravento in the presence of a notary at the notary’s office(notaria). Payment. Receipt of the keys to the property.

What problems can arise when buying a property in Spain?

The Spanish property market is no more problematic than the Polish one, albeit noticeably less protective of the owners’ property rights. As with transactions in the domestic market, before signing any documents, it is necessary to be vigilant, cautious and verify the accuracy of the information contained in them. It is important to know and understand what you are signing and what costs or obligations are involved.

Unfair offers and incompetent brokers or lawyers

There are occasions when properties for which planning permission was never obtained are put up for sale. Eventually, they are usually demolished by the local authorities. So, when you are a buyer, you can check the property register (Registro de la Propriedad), the building permit document and the regularity of rent, tax and utility payments (comunidad arrears). Lawyers can be verified in the census, and estate agents by their licence number and the authenticity of the office.

Transfer of debts from the previous owner

Any debts, mortgages or claims relating to the property are transferred to the new owner when the sales contract is signed. All information can be found in the land registry. Debts related to mortgages, payments and property taxes may appear most frequently.

The ocupas phenomenon

Spanish law does not effectively protect property owners or their private property, which is deeply regretted by owners of flats or houses occupied by wild squatters. The practice of illegal occupation of houses and premises where no one lives permanently or where they are occupied seasonally is large and affects not only autochthones but also foreign owners.

In my case, I secured myself with home security agency monitoring + additional insurance in case I needed to remove intruders. There is no effective law in Spain that allows the owner to take back the property and evict uninvited guests. It is necessary to obtain a court judgment and cases even last for years. Only if an illegal entry is noticed within 48 hours is a quick eviction possible, without a court judgment.

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