Advice re. buying property in Spain
Murcia Golf Properties can assist throughout the whole buying process and with all aspects of the procedure. We are all owners of property on the resorts ourselves and we are very aware of the needs and requirements of our clients. We have included below some useful information to explain the process:
Legal Advice
We have good contacts with all the major banks in the area and can put our clients in touch with the relevant contacts to arrange any finance and insurance required. Generally Spanish banks will lend up to 70% of purchase price on private resales and up to 90% on bank-owned stock.
Spanish mortgages are generally based on the Euribor rate plus a percentage. This can range from Euribor plus 1 - 1.75%. The rate is reviewed annually and based on Euribor at that time, then set for the following year. Sometimes interest-only is offered for up to 2 years but the banks usually prefer repayment mortgages.
Spanish mortgages can cost 1% to set up but there are also registration fees and taxes to consider and these could amount to 2-3% of the loan. It is worth checking whether it is more efficient for you to borrow the funds in your home country.
Furniture and Fittings
We offer a full after sales service which includes arranging for the installation of furniture - lighting - air conditioning - improvements etc etc. After a number of years in the area we have established good links with a number of suppliers. See our FURNITURE PAGE for more info.
Small Works and Alterations
We know a number of trusted builders, painters, joiners and other tradesmen who can carry out small building works or alterations on your new property. This could include an internal re-paint, extra storage, new patios, fencing etc
Swimming Pools and Jacuzzis
We recommend a trusted local supplier for our client's pool and jacuzzi installations. Our suppliers have been working in the area for a number of years - they know the resorts and local planning rules and regulations and offer the most efficient and cost effective solutions. They are able to offer any design of pool and can offer a host of extras including heating, covers and jacuzzis.
Buying Process and Costs Involved
Buying property in Spain is fairly straight-forward. Generally these days clients buy either private resales or properties from one of the banks on established resorts.
if you are buying a resale - once we agree the price you will sign a Reservation Agreement and pay a non-refundable deposit of 5,000€. The property is then removed from the market for 30 days to allow time for your lawyer to check the paperwork and for you to get finance arranged. All properties are sold with full legal permissions and free of all debts.
If you decide to buy a property from one of the banks that we work for - a deposit of 3,000€ or 10% will be requested (depending on which bank owns the property). This deposit is refundable only if the bank decline the mortgage application. Usually bank prices are non-negotiable but sometimes the properties can be sold at lower prices than quoted - we can advise on this.
Purchase Procedure
We recommend good local independent lawyers who charge fees of around 1,000€ plus IVA. We recommend that clients grant their lawyers a POWER OF ATTORNEY to act for them in the purchase/sale. This means that you do not have to fly back to Spain to sign documents or appear at the notary on completion. PoA costs around 150€ per person.
All buyers need NIE numbers (a tax code required for property ownership)These must be applied for in person at Cartagena or Murcia and this can be arranged during your inspection visit if you do not have time to fly back to Murcia. NIE applications cost around 80€ per person.
Purchase Costs
You will be required to pay 7% purchase tax on top of the price agreed (please read the MMV section below). In addition there are Notary charges and land registry fees which will be around 1,500€. As a general guide add 7% to the price agreed plus about 3,000€ for Notary and legal fees. Utility connection will cost 2-400€ as well.
Minimum Market Values
Throughout the 1990s and early 2000 many house sale transactions in Spain were completed with a large cash element. Often a figure far less than the real selling price was entered on the Escritura to save both parties taxes. To ensure that the local governenment received a fair tax element on house sales in the region MMV was introduced. These days house transactions cannot be done in 'cash' but the old MMV system is still employed.
MMV is the government's way of calculating the value of properties in the region. It is calculated using a complex series of parameters including living area, terrace area etc, which results in a figure which the regional government consider be a fair valuation. In the past this figure was generally less than the true market value, so nobody really worried about it.
However, in recent times prices have dropped by around 50% and now many of the properties being sold are completing at figures lower than the MMV. This has created an issue where the regional government can issue an invoice for transaction tax on the MMV rather than the actual sale price. So for example if a buyer purchases at €100,000 he must pay 7% transaction tax - €7,000. if the MMV is €200,000 the regional government could send an invoice for the balance of €7,000.
They have up to 4 years from completion to issue the charge. An extra tax levy can be appealed and many appeals are successful, but it cannot be guaranteed to be successful.
There is a difference between resales and new-build properties in this regard. On a new build purchase (direct from the developer) a buyer pays 8% VAT to the national government. This element is not affected by the MMV which is a local issue. The buyer also pays 1% stamp duty, which is paid to the regional government and is therefore affected by the MMV. On a resale (which includes properties purchased from the banks as they are technically resales) a buyer pays 7% transaction tax to the regional government, which is affected by MMV.
The system is outdated and the valuations do not reflect the current true market value, but for now this is how the tax is calculated. A good local solicitor will always explain the tax implications and any good estate agent should know how it works. In our experience most agents do not tell their clients about this issue, perhaps because they do not know how it works. We believe that our clients should have all the information they need to make a considered decision. If you would like to discuss this or ask any other questions concerning buying a property in Spain do not hesitate to contact us.
Wills
We advise all our clients to make a Spanish will. To avoid any future problems with succession matters as the law in Spain is slightly different to UK if you wish to leave assets to a third party and not children or parents.
On-going cost of ownership
Property ownership in Spain has associated costs which include the community fee - a fee paid to the urbanisation to cover the general running of the resort. On our resorts these generally range from 80-180€ per month depending on the property type and size.
Council tax (IBI) is charged annually and can cost between 250-400€ per year on average. If you are non-resident there is an additional tax of a similar amount annually.
Property insurance is likely to cost between 300-400€ per year and you may want to employ a keyholder to look after the property in your absence. Keyholders generally charge 300€ per year.
We hope that the above information is of use, however please do not hesitate to contact us of you would like to discuss any aspect of buying in Spain.
