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Renting vs. buying property in Spain

Renting vs. buying property in Spain

Owning a property in Spain

With a staggering 80% of Spaniards proudly owning their properties, Spain stands out as a nation with a flourishing homeownership culture—a figure surpassing the 60% OECD average. Notably, foreign investors are warmly welcomed, with no Spanish residency requirement for obtaining a mortgage or purchasing property.

It is important to note that while your residency status influences the amount you can borrow from Spanish banks, non-residents can still navigate the process smoothly. Among the nationalities frequently investing in Spanish real estate, the British, German, and French lead the way

Is it difficult for foreigners to buy properties in Spain?

Contrary to popular belief, foreign buyers encounter a welcoming environment in Spain. While purchasing property for holiday rentals might entail additional considerations, the process of acquiring property in Spain is generally straightforward, even for non-residents. However, certain requirements must be met. A crucial financial identification known as the NIE number is mandatory before making a purchase.

Obtaining this number involves a visit to a police station with your passport and supporting documents. Typically, Spanish or EU citizens receive their NIE number within a few days or a week, while the process may take longer for others. The main challenge lies in securing an appointment for this purpose.

Why choose Spain before other European countries?

From the captivating Basque Country and A Coruña in the north to the sun-soaked Costa del Sol and Tarifa in the south, the Spanish property market offers a wide range of options that mirror its breath-taking landscapes. Vibrant cosmopolitan cities such as Madrid and Barcelona boast elegant penthouses, while cultural gems like Córdoba, Granada, and Seville exude charm through period townhouses.

For those seeking coastal bliss, beachfront villas grace the picturesque Costas, including the ever-popular Costa Blanca and Costa del Sol. Rural treasures such as “fincas” and apartments in the Balearic and Canary Islands complete the diverse tapestry of Spanish real estate. Indeed, Spain caters to the preferences and desires of every prospective homeowner.

Is buying a property in Spain a good idea?

According to the annual report by CaixaBank, one of Spain’s leading financial institutions, the country’s housing market demonstrates lower rates of overvaluation compared to other European nations. This signifies that purchasing a home in Spain carries lower risk when compared to countries like Germany, the Netherlands, and France. Despite the impact of the COVID-19 pandemic, it is worth noting that homeownership in Spain has become slightly more expensive.

The latest report from Idealista, a prominent Spanish property search engine, reveals a 4.2% increase in house prices during 2020-2021. However, it is crucial to acknowledge that prices and costs can vary significantly between cities. For instance, the city centres of Madrid and Barcelona command higher prices. For Marbella, even though the area remains relatively reasonable compared to other luxury destinations, Idealista is estimating a 15.8% increase in average asking prices from May 2021 to May 2022, reaching €3,658/m2 across the municipality (compared to €2,604/m2 for the entire province of Málaga).

In light of these factors, prospective buyers are discovering that Marbella offers appealing pricing in the realm of luxury real estate.

What’s new about the real estate market in Marbella and the area?

In the wake of the Covid-19 pandemic, people’s desire to travel and secure second homes has surged to unprecedented levels. Resort areas worldwide are witnessing a remarkable upswing in demand for properties. The shift in lifestyle preferences has given rise to a novel trend in where and how individuals aspire to live.

Contrary to any signs of diminishing demand, the market is witnessing an upsurge in buyers eagerly anticipating the opportunity to acquire their dream homes on the esteemed Costa del Sol.

Municipalities such as Marbella, Estepona, Behahavís, and their neighbouring counterparts are poised to experience a continuously robust real estate market, fortified by solid foundations.

The real estate market operates in cycles, influenced by numerous factors, including national economies, inflation, interest rates, credit availability, personal wealth, savings, and the availability of high-quality properties. Despite the prevailing uncertainty in Europe and the world at large, the current conjuncture of events has not adversely affected the real estate market in the Marbella area.

The new General urban planning law of Marbella is progressing towards its final approval in 2023

The eagerly anticipated new General Plan of Marbella, that will be definitively approved in 2023, marks the culmination of a long-awaited solution to the persistent urbanistic challenges that have plagued the city for countless years. This momentous achievement brings an end to the uncertainty that has cast a shadow over property owners, investors, and developers alike.

Marbella and its neighbouring municipalities have witnessed an unprecedented surge in sales activity in the market, setting historic records throughout 2021 and 2022. Month after month, the region’s real estate market has witnessed exponential growth.

Marbella has rightfully earned global acclaim as Europe’s premier destination, renowned for its unparalleled quality as a resort hub.

Engage an Expert Spanish Land Lawyer. Protect your interests, verify the property’s legal standing, and mitigate potential risks.

Purchasing a property is a significant decision, and safeguarding your investment requires thorough due diligence. By engaging an independent lawyer well-versed in Spanish land law, you can navigate the complexities of the Spanish property market with confidence.

With the guidance of an experienced professional and a comprehensive understanding of the Spanish property conveyancing process, you can embark on your property purchase journey equipped with knowledge and peace of mind.

Before finalizing your property purchase, it is essential to undertake the following steps diligently:

  • Request the “nota simple,” which provides an extract from the land registry.
  • Verify the property’s ownership by confirming that it is being sold by the registered owner(s).
  • Thoroughly examine the “nota simple” to confirm the absence of any outstanding debts or charges, such as mortgages, associated with the property.
  • Ensure there are no ongoing legal proceedings against the property relating to contravention of land planning laws.
  • Check that there are no legal proceedings initiated against the property for contravention of land planning law

Invest Wisely: Understand the Costs Involved

The diverse costs associated with purchasing a property in Spain can vary from region to region due to the decentralized nature of politics. Spain comprises 17 Autonomous regions, which serve as the primary political and administrative divisions, and each region has its own regulations governing property transactions.

Notably, there are no fixed fees for lawyers or estate agents in Spain. The majority of costs are typically borne by the buyers themselves. The following outlines the general cost breakdown:

  • Property transfer tax: 6–10% (existing properties) / VAT (or IVA) at 10% (new properties)
  • Notary costs, title deed tax, and land registration fee: 1–2.5%
  • Legal fees: 1–2% (including VAT)
  • Other local yearly taxes
  • Yearly Community fees

In Spain, it is customary for estate agent fees to be paid by the seller. These fees are often calculated as a percentage, typically around 3% of the final sale price.

Renting out your Spanish home. Short- term rental investments

The Spanish property market is known for its complexities, highlighting the importance of thorough research before embarking on a home purchase or short-term rental investment. Various factors warrant careful consideration, extending beyond the realm of high capital gains tax.

Regional governments have implemented stricter regulations concerning the acquisition of holiday let properties, including the requirement for short-term let licenses. Each of Spain’s 17 regions possesses the authority to establish specific rules governing the purchase of rental properties. For instance, the Balearic Islands, such as Mallorca and Ibiza, have implemented the strictest regulations, limiting buy-to-let licenses to Spanish residents. Other regions have introduced measures such as restricting stays to a maximum of five days.

Many Spanish citizens enlist the services of a “gestor” to handle bureaucratic processes and tax submissions on their behalf. We strongly recommend following suit.

Buying vs renting in Spain? Long – term rental in Spain

If you have chosen to rent a home in Spain rather than purchasing one, there are several effective methods for finding the perfect property. Online property portals, reputable estate agents, leveraging your personal network, and participating in social media groups are the most common avenues to explore. Additionally, you may come across property listings on real estate websites based in other countries.

Types of property to rent in Spain

The four main types of rental properties in Spain are:

  • Apartment or flat (piso)
  • Townhouse (casa adosada)
  • Villa – (chalet)
  • Farmhouses or estates (casa rural/finca)

Pay Attention to Furnishing Details

Exercise caution when assessing property descriptions that specify whether they are furnished or unfurnished. In Spain, the term “furnished” may not always align with a comprehensive set of furnishings. Therefore, it is advisable to inquire about the specifics before finalizing the rental contract. If a property is listed as “unfurnished” (sin amueblar), it might not include any appliances or furnishings at all.

Understand the rental deposit

When entering into a rental contract in Spain, it is essential to be aware of the deposit (fianza or señal) that must be paid, accompanied by a receipt provided by the landlord. In compliance with Spanish regulations, landlords are limited to requesting a one-month deposit for long-term leases. It is important to note that additional guarantees may be required, but the deposit itself is equivalent to one month’s rent.

By law, the landlord is obligated to place the deposit in the appropriate “Agencia Social de la Vivienda” of the respective region. This ensures the safeguarding of the deposit and compliance with legal requirements.

Upon termination of the rental contract, the landlord is obliged to return the deposit to the tenant within one month from the date the contract is concluded.

Some facts about rentals:

In Spain, a rental agreement (contrato de arrendamiento) holds validity whether it is verbal or written. However, we strongly advise opting for a written contract as the safest and most reliable option. A written agreement ensures clarity and protects the rights of both parties involved.

For short-term rentals, a specific type of agreement known as a contrato de arrendamiento de temporada is employed. This agreement is valid for a duration of up to one year and cannot be extended beyond that period.

In contrast, a long-term rental contract (arriendo de vivienda) is entered into for a minimum period of 12 months or longer. It is subsequently renewed on an annual basis. Should you decide not to continue the rental, it is customary to provide a 30-day notice prior to the contract’s expiration.

Some tips for renters in Spain:

Prior to placing the mandatory deposit, prioritize a personal viewing of the property. Seeing the premises in person allows you to make an informed decision and ensures that it meets your expectations.

Verifying the legal ownership of the property and confirming the identity of the person you are renting from are crucial steps. Ensure that you are dealing with the lawful owner to avoid any potential complications.

Gain clarity on what is encompassed within the rental fee, including utility costs, furniture, and household appliances. Whenever possible, request written confirmation to establish a clear understanding and prevent any misunderstandings.

Safeguard your rights by obtaining a written rental contract. Take the time to thoroughly review and comprehend all terms and conditions. Carefully examine each clause to ensure your interests are protected.

Confirm that your deposit will be securely held by a third-party, as mandated by Spanish law. This guarantees the proper handling of your funds and offers added reassurance during your tenancy.

Before moving into the property, conduct a comprehensive inspection, noting any existing damages and documenting them through photographs. This serves as evidence and protects you from potential disputes regarding the property’s condition.

Whenever feasible, request a final inspection of the property prior to moving out. This allows for the reconciliation of any outstanding matters and facilitates the return of your deposit in its entirety.

Rental costs in Spain

When considering your living expenses in Spain, it’s essential to account for the specific location. Costs can significantly vary between metropolitan areas, coastal regions, and rural settings. Here are estimated monthly rental costs, excluding utilities, based on data from Numbeo, a trusted Cost of Living Comparison tool:

• One-bedroom apartment in the city centre: €750

• One-bedroom apartment outside the city centre: €600

• Three-bedroom apartment in the city centre: €1,250

• Three-bedroom apartment outside the city centre: €950

Secure Your Financial Plan: Gain Clarity on Expenses

By familiarizing yourself with approximate potential utility expenses, you can better plan your budget and ensure financial stability. Utility costs will depend on your chosen suppliers, but typically range from €120 to €200 for an apartment. Additionally, there may be other expenses such as annual or monthly fees for the maintenance of communal areas and local charges like garbage collection.

Rentals in Marbella: Experience the growing demand for quality long-term properties in the prestigious Marbella market.

Over the past five years, the availability of such properties has become limited, making them highly sought after. Previously, a new, modern, and luxurious two-bedroom apartment could be rented for approximately €2,000 per month. Today, prices have escalated, reaching up to €3,500 per month or more. Similarly, a four-bedroom villa in Marbella’s prime locations now commands around €10,000 per month, compared to €6,000 per month five years ago.

The allure of this area attracts families from across Europe and beyond, seeking an exceptional living experience. Many foreigners opt to work remotely from Costa del Sol while enrolling their children in prestigious international schools in the Marbella area.

With robust demand continuing, investing in long-term rentals presents an excellent opportunity for stable returns.

Short-Term Rentals:

In the vibrant summer season, Marbella’s short-term rental market thrives, offering a lucrative opportunity for property owners. Opting for short-term rentals allows owners to maximize their property’s usage while enjoying it themselves during other periods of the year. High-season rental income per week rivals, and often surpasses, the monthly income from long-term rentals. Take advantage of this dynamic market and secure impressive returns on your investment.

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Legal & Accounting Network

Legal & Accounting Network SL is an Estepona based Company that has been operating since 2001 offering consultancy services for individuals and Companies that require assistance with accounting, legal and tax affairs.

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