Despite this favorable state of affairs, planning a purchase should be approached with the utmost seriousness, having assessed in a timely manner the pros and cons of purchasing real estate in Spain, so that unexpected problems can be avoided in the future.
Purpose of acquisition: what does buying real estate in Spain provide?
First of all, the future buyer must have a clear idea of the purpose for which he intends to purchase an apartment or house in Spain. The range of options is wide – from the desire to retire in a house by the sea to receiving income from rentals.
One of the goals is to obtain a residence permit. It should be taken into account that the purchase of real estate in Spain worth up to 500,000 euros does not become the basis for obtaining a Spanish residence permit, but it is one of the requirements that must be met to obtain a residence without the right to work. Thus, an applicant wishing to obtain a residence permit must not only own a home, but also demonstrate his economic viability, as well as justify the reasons why he seeks to move to Spain.
Buyers of real estate worth 500,000 euros and above are entitled to the so-called “golden visa” of an investor – a document that provides its owner with a number of serious opportunities: a simplified procedure for obtaining a residence permit, no time restrictions for the period of stay in Spain, etc.
Advantages of buying property in Spain
The advantages of buying real estate in Spain are the simplicity of the transaction process and the absence of any obstacles in this process for foreigners. Any foreign citizen has the right to buy a property he likes in Spain, both residential and commercial. If there are not enough own funds, a foreigner can apply for a loan from a Spanish bank. The amount of financing in this case can be 50–60% of the cost of the object.
The level of prices on the housing market should also be considered one of the advantages of buying real estate in Spain: prices continue to remain affordable compared to average European prices in recent years, both for new and secondary properties. You can find out about the cost of real estate in Barcelona, one of the most investment-attractive cities in Spain, here.
Pros and cons of purchasing real estate in Spain
Buying a home in Spain has not only advantages, but also some disadvantages, however, competent planning and professional management of the transaction help to reduce the latter to a minimum.
Disadvantages of buying property in Spain
- Ongoing ownership and maintenance costs. These are utility costs, condominium fees (gastos de comunidad), annual property taxes, garbage collection fees, insurance and alarm fees (the last two items are optional, but contribute to the peace and security of the owner). Therefore, the purchase of housing in Spain must be accompanied by an accurate forecast of upcoming maintenance and utility costs, so that the purchased property, at a minimum, preserves the investment, and at best, generates income. You can find out in detail about the maintenance of real estate in Spain from our article.
For example, when renting. On average, the profitability of the rental market in Spain is estimated at 6-7% per year. However, in reality, this figure may tend to 0, if we take into account the totality of taxes, maintenance costs, coupled with the location of the property and the level of demand for rental.
- Tax on income of non-residents. Spanish law considers the ownership of real estate by a non-resident owner to be income, even if the property did not actually generate a cent of income. This means that the non-resident owner is required to pay tax both in the case of renting out real estate and in the case of using it exclusively for his own needs. The tax amount is not so high as to have a significant impact on the budget, but to calculate and submit returns it is necessary to involve a specialist – an accountant or lawyer.
- Bureaucracy of Spanish banks. To purchase real estate in Spain, you must open an account with a Spanish bank, since the purchase and sale transaction is carried out through the bank, and taxes and expenses are tied to the buyer’s account. Spanish banks require non-residents to annually submit documents confirming their income – certificates from work and 2-personal income tax, apostilled and translated into Spanish. Failure to submit documents on time may result in account blocking with all the ensuing consequences.
Advantages of buying property in Spain
- Possibility of obtaining a residence permit in Spain.
- A good level of profitability in case of investment in tourist real estate, approximately 6–7% per annum. In this case, we are talking about tourist real estate – objects not only on the first line of the sea in resort villages, but in large cities – traditional centers of tourism.
- Liquidity. Real estate in Spain has been and remains a liquid asset. If you can find a property at a price below the market price (intended for renovation or sold by a bank), then, if necessary, you can sell it quickly and at a profit.
- Simplicity of the purchase and sale transaction. In addition to the loyal attitude towards foreigners, it should be noted that it is possible to make a purchase by proxy – a convenient option for those who do not want to miss out on a good property, but do not have the opportunity to personally attend the signing of documents.
- Having your own home by the sea (if the purchase of real estate in Spain is made for yourself and your family) allows you to come to Spain with your children, parents or friends at any convenient time. The high demand for tourist accommodation in case of rental requires planning the trip in advance, ideally at least six months in advance.
Thus, we can conclude that the pros and cons of buying property in Spain are quite obvious. Investors planning to use real estate in Spain for profit should be guided by economic considerations when choosing them.
Buyers choosing housing for themselves are more closely tied to the needs of the family: they take into account the convenience of living with children, the proximity of educational and medical institutions, the safety of the area, the ethnic composition of neighbors, etc.