What are my first steps?
It is essential to have it clear what taxes you need to pay when buying a property in Spain. Also what documentation you will need in order to protect your interest.
We recommend working with one real estate company while looking for your home on Costa del Sol. Considering agencies collaborate efficiently between each other it could save you a lot of hassle. They will book your appointments for the different properties you want to view. One agency can focus on your specific needs and show you all properties that you see online. You agent can also suggest other proposals based on their relationships with partners and developers. Real estate companies do not charge commission from the buyer on Costa del Sol.
As Costa del Sol offers 150 km of coastline between the mountains and the sea there is a large variety of areas to choose from. Having clarity on the location of your property is an essential first step of the process. Do you prefer to be walking distance to amenities or panoramic views are more important for you? Find your preferred location on our Discover Costa del Sol page.
Your real estate agent will advice you on the average prices in the area you have chosen. They will help you select the best fit between what you are looking for and how much you wish to spend. When buying a resale property it is important to know that usually prices are negotiable. For best results we advice you to keep the negotialtions reasonable and according to the current supply and demand on the market. You might be able to achieve up to 5% discount of the asking price for example. The prices of new properties are non-negotiable, they are fixed and featured in official price lists by the developer.
In many cases we imagine our property perfectly and ideally we want it to have everything we ever dreamt of. However if we are on budget we need to understand that there will always be some level of compromise. For example if your top 3 priorities are sea views, central location and top floor apartment then you will pay premium for those features in certain areas compared to others. As a general rule of thumb new properties on higher floors, with panoramic views, close to amenities or the beach in established areas, part of well looked after complexes have the highest prices. Naturally if your budget is fixed then a compromise might be necessary on one or more of those features. For example changing the area and proximity to the beach could give you a better price for the same property quality if not better. Clarity is a key.
Let your agent set up your schedule. They know the area best and will organize all viewings with ease without wasting your time with double viewings or properties that have not been updated on property portals. They will check all fees and make sure what you view fits your top criteria. View as many properties as needed in order to feel comfortable with your decision. It is a big step and rushing through the process could affect your choice. Considering that in mind if you have decided on your property it is advisable to proceed with the reservation deposit as quickly as possible in order to take it off the market.
The reservation deposit is usually between 6.000EUR and 10.000EUR and is paid to your lawyers account. As soon as the lawyer receives the funds he sends a receipt to the vendor and starts the process of due diligence where all necessary legal checks are being done such as is there any debt, unpaid taxes, mortgages or issues with the property. At this stage the deposit is refundable. As soon as this is cleared and all documentation is in order your lawyer will proceed to signing a private purchase contract (PPC).
At this stage usually 30% of the property price is being transferred to the seller and a purchase contract is being signed defining the terms of the sale and the dates for transferring the property in the notary. This amount will be non-refundable and binds you to continue with the property purchase process.
The buyer has the right to choose a notary office to complete the purchase and transfer the property. The notary prepares the title deed and the sale is completed after paying the rest of amount of the price that is due usually with a bank check.
Purchase costs when buying a property on Costa del Sol
There are different property taxes when buying a property in Spain depending on whether you are a resident or non-resident. Also depends if the property is newly built or another person has already owned it, a resale.
- VAT (IVA) – 10%;
- Stamp duty (Legal documentation tax) – 1.5% of the purchase tax;
- Notary fee charged to prepare the title deed depending on the complexity of the document – between 0.5% and 1%;
- Land registry fee officially records the ownership of the property- between 0.5% and 1%;
Total: between 12.5% and 13.5%
- Transfer tax (Impuesto de Transmisiones Patrimoniales/ITP in Spanish) depending on the price of the property:
- Up to 400.000EUR – 8%;
- Between 400.000EUR and 700.000EUR – 9%;
- Above 700.000EUR – 10%;
- Currently it is 7% for all transactions. This will be valid till the end of 2021;
- Stamp duty (Legal documentation tax) – 1.5% of the purchase tax;
- Notary fee charged to prepare the title deed depending on the complexity of the document – between 0.5% and 1%.
Total between: 8.5% and 11%.
Other costs for both new and resale properties
Aside of the property purchase taxes set by the Spanish government there could be additional fees for you to consider.
Using a service of a lawyer is highly recommended when buying a property on Costa del Sol. Especially if you are a non resident and a first time buyer in Spain. The lawyer will help you with the entire documentation from setting up a NIE number on your behalf to representing you at the notary. The lawyer´s fees vary starting from 1%.
If you’re transferring money to Spain from your bank account in your home country, you may incur fees on the transaction. This happens particularly if you’re transferring from a different currency to euros. Using the services of a specialist currency exchange broker when buying a property can reduce bank charges.
Banks also charge for issuing the banker’s draft used to make the payment for the property. This draft is needed when you sign the title deed at the Notary. Check with your bank before you order a banker’s draft to avoid surprises.
The mortgage fee depends on the type of the mortgage and its amount. You can expect around 1% bank fee.
If you are purchasing with a mortgage you will have to pay for the property valuation. This could cost is usually between 300EUR and 500 EUR.
When purchasing a home or an investment property in Spain it is important to keep in mind the yearly costs. These will be regular payments for the maintenance. Most of the properties on the Costa del Sol are part of closed gated complexes. As a result the law obligates you to pay monthly community fees aside of the standard property taxes.
A local tax applies to the ownership of property in Spain. You will need to pay it irrespective of whether as an owner you are a resident or not. It calculates on the basis of the catastral value set by the town hall. It is an administrative value that is usually lower than the market value. The tax rate goes from 0.4% – 1.1%.
The law obliges owners of a property that is part of any building or residential complex to pay community fees. They will vary depending on the size of gardens, facilities, number of lifts, if there is private security, etc. Community fees normally range between 100 and 500 Euros per month.
Water bills arrive monthly and the amount is according to the consumption. Water bills can range between 50 and 150EUR a month. Electricity is paid once every two months and can range between 100EUR and 350EUR depending on the consumption and size of the property.
Your property insurance will be for contents and damage by fire and water etc. It is mandatory that in communal buildings owners have an insurance.
If you won´t be using the property all year around it is recommended that you install a security alarm system. Depending on the size of the property the prices can start from 50EUR/month.
There is an annual income tax for non-residents who own a property in Spain. It varies according to whether the property is being rented out or not:
- Rented out – if non-residents receive an income in exchange for rent, they must declare this income and pay taxes on it. In many cases non-residents pay a flat rate of 25% of the gross income they earn from their property in Spain.
- Not rented out – non-resident property owners who do not rent out their property and who do not have any other source of income in Spain pay income tax based on the value of their property. The tax rate is fixed as 25% of 2% of the catastral value of the property.