Illustration by Fay Shelton
Property rollercoaster
Following a good decade or so of rising house prices, the Spanish property market has essentially collapsed in recent months. Work on new builds has ground to a halt and mortgage prices continue to rise despite falling interest rates. However, if you're in a position to buy, it pays to know how the housing market works here.
First off, Mark Stucklin, who runs the website spanishpropertyinsight.com, advises buyers to do their research properly. “It’s box standard advice but it’s amazing how many people don’t have it in mind when they come to buy,” said Stucklin. “There is something about pursuing the dream that makes people drop their guard. Keep your wits about you. It may be exciting but that doesn’t mean to say it’s without risks. The more time you spend looking at comparative properties, getting an understanding of the state of the market in the area you are interested in, the better your position to identify good value. That means doing quite a lot of legwork, visiting the area, talking to people, getting different points of view.”
Xavi Collell, director of the Banyoles-based estate agency Finques Collell Riera, agreed. “It is very easy for people who are in the world of sales to sell smoke, not reality, through publicity and photographs,” he explained. “Sometimes properties are in the middle of areas that are not finished, with bad neighbours, bad services—a lot of things that the photos don’t show. It’s very important not to buy a view, a photo, an idea, but to buy reality.”
When Catalan Adela Robles returned from the US to live here with her English partner Peter Revill, they looked for a house to buy together. “We dreamt of living in a small village,” Robles said. “Once we had started looking we realised there is no little house with a little garden close to the town. That’s not traditional. Traditionally people have a house in town and go to their fields. You don’t know that when you first come. You have to start reviewing your dreams.”
Having come from the States, where the estate agent does everything for the buyer, the couple found their experience of the Spanish system just the opposite. “Here the estate agents represent the sellers, not the buyers,” said Robles. “They get part of the profit from selling a house. You have to work out how much to offer for the house yourself.”
Another problem they encountered was the ‘English’ factor. “If they saw Peter, they assumed he was here on a 15-day vacation and wanted something that was rustic,” said Robles. “I could tell that either it wasn’t truly rustic or that it was overpriced.”
Many house sales are done privately, through word of mouth, because of the high commissions traditionally charged by estate agents. On a house-hunting trip to Mieres in the Garrotxa, Adela and Peter were introduced to the local clockmaker, a man who brokers deals between locals and outsiders. Through him they offered €270,000 for a house that eventually sold for €300,000 but had been advertised by an estate agent for €420,000.
Buyers need to be prepared for a tough negotiation process. According to Mark Stucklin, Spanish sellers can be some of the hardest to negotiate with, as they stick determinedly to the price they want, holding on until they get it no matter how long that may take. Once the negotations are complete and an offer has been accepted, the buyer signs a contract to formalise the agreement and pays a deposit (senyal) to reserve the property.
At this stage it is worthwhile finding an independent and trustworthy lawyer to act as a guide through the buying process. A lawyer can check that the property you want to buy has no outstanding debts and that all local taxes and payments are up-to-date. This is very important because, as Xavi Collell pointed out, “If you buy something with debts, these go with the house—not with the people.”
Next it is necessary to arrange a mortgage. Xavi Collell recommends using a bank with overseas branches such as BBVA, Santander or La Caixa as they are more understanding of the needs of foreign clients. All of these banks have websites in English with details about the different types of mortgages they offer.
Completion of a house sale takes place when the public deeds are signed in front of a notary and the outstanding payment is made to the vendor. After this the property transfer taxes have to be paid and the title deeds inscribed in the local land registry—something that is usually done by the lawyer or, if the buyer has taken out a mortgage, the lender’s gestor. The Catastro (regional land registry that is part of the Spanish Ministry of the Treasury; this is concerned with the physical nature of a property including its boundaries, whereas the local registry focuses more on ownership) also has to be informed about the change of ownership and the town hall, both necessary for the correct payment of municipal rates.
Having finally taken possession of their new house, however, the buyer may still face some surprises. “In Britain anything fixed belongs to the house,” said Peter. “Not here. You walk in and they have stripped out the light fittings.”
And although for many people this stage marks the end of a long process, for those buying old properties needing renovation it is often just the start.
“Our problems came afterwards,” said Dutchman Gijsbert Huijink, who bought a ‘ruin’ near Banyoles. “Because of changes in the law a few years ago it is still very unclear what exactly you can or can’t do. We work with a very experienced and very good architect who is from here and well connected. She is not sure what she can do. We have already had to make three sets of plans. It costs money, it delays things and it’s one of the reasons people are very hesitant to go into rural property.”
Although the whole process may seem daunting, Mark Stucklin said that ultimately, it has its rewards. “It can be very satisfying, very rewarding, especially as a place to live,” he said. “It’s a very beautiful part of the world with a good culture, society and climate. If it works it’s really fabulous. But it will only work if you go through the process very carefully and meticulously and have realistic expectations. Don’t get carried away by the pursuit of the dream.”
The cost of buying property...
Before— When deciding how much to offer on a property, allow for an extra 10-12 percent on top of the price to cover legal fees and taxes:
- Transfer tax (ITP) of seven percent on a re-sale property, or for a new build, VAT (IVA) of seven percent plus stamp duty (IAJD) of one percent
- Notary fees for the drawing up of the property and mortgage deeds
- Property registry fees to have the title (and mortgage) inscribed in the property register
- Lawyer’s fees: between one and 1.5 percent of the property price plus VAT
- Mortgage costs: property valuation, mortgage arrangement fee, administration fee and building insurance
After—Once the purchase is made, don’t forget that there are various taxes and other costs to be paid on a regular basis:
- Local rates (IBI) of between €200-500 a year, collected by the local authority
- Wealth tax (Patrimoni) based on the value of your property, collected by the regional government
- Community fees (quota) if your property is part of a community of owners.
- Insurance (assegurança)
- Utilities: water, gas, electricity and a telephone line
Learn the lingo: House buying vocab
estate agent—immobiliari
mortgage—hipoteca
interest rate—tipus d’interès
public deeds—escriptura
title deeds—escriptura de propietat
lawyer—advocat
notary—notari
buyer—comprador
seller—venedor
land registry—catastre
down payment—senyal, pagament inicial
bank guarantee—fiança
guarantee often requested by bank to approve mortgage application—aval
property transfer tax—impostos de transmissions patrimonials
stamp duty—impost d’actes jurídics documentats
yearly property tax—impost sobre béns immobles
capital gains tax—impost sobre el patrimoni
free of debts—lliure de càrreges
offer—oferta
bank document certifying exact mortgage conditions—oferta vinculant
land/property registry—registre de la propietat
loan repayment insurance—assegurança d’amortització de prestació
independent valuation of property—taxació
Finally, don’t forget...
= It is very important to get independent legal advice before signing or paying anything. Ask friends to recommend local lawyers
= use books such as Buying a home in Spain by David Hampshire, for in-depth information about the
different steps involved
= before buying in a particular area, try renting first to find out how it really feels to live there. Seeing a place on weekend visits during the height of summer won’t give you a true impression of residing somewhere all year round
= particular issues that need to be checked; make sure extensions or additional structures (eg. swimming
pools) have appropriate planning permission; if it is a new house, ensure it was built according to the original plan (plan parcial), which can be seen in the local urban development office; beach-front properties need special permits