Spanish Homeownership
In Spain, the majority of people (around 80%) own their own homes, and many of them do so without a mortgage.
Read More: buy house in spain
During the world financial crisis and the subsequent collapse of the real estate market, Spain suffered greatly. Although there was a 30% decline in house values, the market has stabilized in recent years.
Although the COVID-19 epidemic had an impact on the market in 2020, official records indicate that average prices in Spain increased during the second quarter of the year. Prices have been growing continuously since 2016. Year-over-year, sale prices rose by 2.1%, while the cost of new construction rose by 4.2% and that of used houses by 1.8%.
Naturally, there have been a lot fewer sales of homes. According to official data, foreign purchasers buy between 18,000 and 25,000 Spanish residences every quarter. But in 2020’s second quarter, that number dropped below 10,000.
It is too early to tell what the entire economic impact of COVID-19 will be on the Spanish real estate market. Property analysts forecast a short-term decline in home prices of between five and ten percent.
Is it better to rent or purchase real estate in Spain?
The Spanish real estate market is full of peculiarities, so it’s wise to shop around before making a purchase. When purchasing real estate in Spain, there are a few things to consider, such as property scams, the high capital gains tax, and real estate market swings.
It can be dangerous to purchase in Spain right now due to the additional uncertainty brought on by COVID-19. The rental market in the nation is likewise unstable.
Prior to the pandemic, local governments sought to enact stricter regulations on the purchase of vacation rentals as rent in sought-after locations for investors rose sharply.
The 17 areas that make up Spain have the authority to impose regulations on foreign purchasers of rental properties. The most restrictive laws are found in Madrid, where new regulations limit stays to five days, and the Balearic Islands, where buy-to-let license applications are exclusively open to Spanish citizens.
Considering Spain’s high capital gains tax, which may outweigh the short-term benefits of owning, renting in Spain could be a better choice if you want to remain for a shorter period of time.
Can foreigners purchase real estate in Spain?
Purchasing a vacation rental may be more difficult than it used to be, but Spain welcomes international buyers, which reduces the likelihood of typical mistakes being made when purchasing a house.
The procedures for a foreigner purchasing real estate in Spain are rather simple. You’ll need a financial number before making a purchase, and you may get one by presenting your passport to a police station. For Spanish or EU nationals, this is usually handled the same day; for others, it could take several weeks.
The real estate market and pricing in Spain
It is only feasible to provide a broad overview of the state of the market because the complete effect of COVID-19 on Spanish real estate prices is still unknown.
Fourteen of Spain’s seventeen autonomous regions have average property prices per square meter according to pre-pandemic data from the Global Property Guide.
The average price of a home in a large city increased by 5% to €1,649 per square meter based on data from the third quarter of 2019, while houses in the Balearic and Canary Islands experienced an 11% increase to €1,604 per square meter.
The priciest shopping destinations in Spain include Madrid, Barcelona, and San Sebastian. The price per square meter in all three districts varied from €3,000 to €3,600.
Spain’s most costly land purchase occurred in Madrid, where a square meter cost €338. The top five destinations were Valencia (€158), Andalucia (€171), Catalunya (€184), and the Canary Islands (€245). The lowest costs may be found in Castilla y Leon, where the average cost of a square meter of land is €66.
The price of purchasing real estate in Spain
The costs associated with purchasing a home in Spain differ from region to region and are frequently negotiable; for instance, attorneys’ and estate agents’ fees are not set in stone. Most of the costs, which typically include the following, are the buyer’s responsibility:
Property transfer tax: 10% (VAT or IVA) on new properties, 6%–10% on existing properties
Land registration fees, title deed taxes, and notary expenses: 1-2.5%
Legal fees: 1-2 percent (VAT included)
Getting finance to buy a home in Spain
While it is feasible to get financing to buy a property, some foreign buyers choose to purchase without a mortgage. Mortgages are provided by Spanish and foreign banks; select banks additionally provide exclusive offers to foreign nationals residing in particular nations.
If you’re an international buyer, you could have to pay a larger deposit as you can only borrow at a lower loan-to-value (LTV) rate than Spanish citizens. Living in Spain allows you to borrow up to 80% of the assessed value of the property; but, depending on the kind of mortgage, non-residents may only be able to borrow between 60 and 70 percent LTV.
Lenders for mortgages won’t finish an arrangement unless you have a piece of real estate. It’s crucial to add a provision in the purchase agreement for the house that lets you back out if you are unable to obtain a mortgage.
In Spain, when a property is sold, any debt associated with it is passed on to the new owner. This implies that it is vitally crucial to make sure that the property is free of obligations, or if it is, that the conditions of the contract cover it.