From stability to boom, and since 2007 the gradual collapse; and yet buyers are still coming to Spain. Charged by the economic boom of the mid 1990s throughout the Eurozone, Spain's property market still attracts foreign buyers and investors (over 25% of all Spanish property sales recorded in 2011 were by foreign investors). The Spanish Costa's remain in the top 5 destinations for European holidaymakers, and more, Spain is still in the top 20 for World vacations. As prices appear to be steadying in the second hand market then interested purchasers and investors are returning to levels not seen since 2003. Many economies within Europe seemingly 'recovering' – although none spectacularly, this upturn appears to be enough to prompt buyers to think about investment in Spain again. Especially now that the world economic crisis has indicated that apart from property there are very few 'traditional' investments today which are perceived as 'safe'; and (again) Spanish property is perceived, particularly by those from other Eurozone countries, to be the safest investment they could make right now. True, in some sectors and regions of the Spanish property market prices have dropped; but then these were properties that were previously and ambitiously over-valued.
Over the last years I have seen clients buying for all kinds of motive; nevertheless they all have one thing in common a real affection for the Costa Tropical and its interior – much of which is explored in the Costa Tropical pages on this website. So if you're still not sure if this is the area you want buy your property then have a look at the rich variety that we have to offer.
Generally customers are looking for an affordable second or holiday home first and foremost, however many others are investigating the Costa Tropical for re-location to a new way of life, or to buy to let, or to plan for retirement and/or protect against inheritance, or who simply invest in the property market buying off-plan in the hope that they can sell quickly before the building completes. All these reasons and more require thoughtful consideration – as many financial, stock and property advisors say - shares like investments can as easily go down as up. So too, for that matter, world bank interest rates.
Therefore let me offer you a simple series of prompts before you consider your purchase. What is important is that you see yourself, or your family, in either one or more group; that is the only decision to make at this stage. Here the idea is to let you take control of your purchasing process and not simply be led on by soft soap sellers…
BUYING A HOLIDAY PROPERTY
Is it for you, your family and friends?
Then consider - How will you furnish the property? How will you charge your visitors? Who will clean and maintain the property? Who can you trust with keys locally? You love the area, do they? What facilities are around for all family interests? Who to call when the water or electricity is not working? Who can help with reforms and minor repairs?
Is it for you and letting via a third party (eg; ownersdirect or specialist holiday letting agency websites like Bueno Property Services of Salobreña)?
Then consider - How will you furnish the property? How will your visitors be charged? Cost of a cleaning and maintenance contract for the property? Accounts and taxable income management – how, and who. will do this for you? Supply local information and property specific information for your tenants? Are there procedures for out of normal hour’s arrivals?
BUYING A RE-LOCATION PROPERTY
First try to list all the things you want your property to have in Spain against what you have in your present home? (But please remember that houses with gardens are few and far between in Andalucian towns and villages – you need to look at country properties or villas with land not terraces.) With the list in place now start to search for properties and areas of Spain that suit your budget.
Then consider – Removal transport costs versus buying new in Spain? Education and amenities available for children and young adults in the area? Spanish language; how much do I need to learn? The local community and its international contingent; who can help – town hall, tourist department, local bars and foreigner resident clubs? The properties distance from town, school, shops, amenities, services, airports, etc? Health - private health insurance versus access to national health facilities for you and your children? Employment – self employment in Spain as a Spanish resident? Paying income tax in Spain? Help, I think I need a gestor (pronounced “hestor”)? See What help do I need section for more details
BUYING A RETIREMENT PROPERTY
Preparing for the golden years of leisure in a warm climate, where there is an established community of foreigners, and that is just a short air journey from your siblings is probably one of the most popular reasons for buying property here in Spain. Today many clients in their late 50s who have adult children think very carefully about the impact of inheritance tax on their Spanish property. To this end there has been a growing number who look at buying the property not just in their own right but often will include their adult children in the deal; making them joint participants at the start.
Therefore it is important that from the start of the buying process that all members are joint participants in the Spanish bank account and, more important, that all are named in the property title deed. That way each surviving family member is only subject to a portion of the inherited property than to the full property.
Too often I have seen couples in their late 50s and beyond buying a property that does not best suit either their physical reality or, forgive the expression, their faculty. Falling in love with the dream of a country house with acres of land only to be forced to sell at a loss 2 years later, when one or other becomes incapacitated to water the land, climb the terraces, and even make the twice daily trek down to the town to shop or make the doctors appointment. While they say "age is ugly" - it does not have to be dreadful.
So what else should you consider –
Living in the sun in the winter months and returning to the home country in summer? How to accommodate friends, family and guests in your new home? What is the access to shops, hospitals, pharmacists, language schools, golf, sports halls, tennis, and other activities? At a certain age our ability to take on new life changing experiences becomes tougher, so check that there are sufficient activities in the area to help you assimilate easily? Check too that there are support services to help you when you need – not just your nearest Consulate – but that you have friends around who speak your language and yet are able to translate for you too, who can give help and advise when you need and can assist when life throws you an excitement! Most town halls offer a foreign residents department; and this can often be a great start to enjoying your new life abroad.
BUYING FOR INVESTMENT
There are three approaches to consider here – re-form/re-sell, off-plan and buy to let.
Re-form/re-sell - Until a couple of years ago, it was the fashion, to buy "cheap" property in Spain as an investment. Many customers were buying low cost village houses, renovating them, and then re-selling to move capital and make a quick profit. This movement not only included the popular ruined village houses of typical white washed pueblos but incorporated tired frontline apartments, rustic cortijos and worn out villas of the 1960s with fantastic sea view positions but desperately in need of a shake up. However in the last 2 years Spain, and in particular Andalucia, has found itself more compliant with EU standards and regulations for building, installations and utilities. Thus the trend to move such properties easily in today’s market is a little more difficult. For example Spanish lawyers aware of these changes will now ask that the vendor will need to supply the utility contract (electricity or water) in their name and not that of a previous owner; that all licenses from the town hall were approved, acknowledged, and paid for when any works were done; that the size and use of the property fits with what is registered with both offices of the land registry and the cadastre; and further, that a property extension or re-built property has a 10 year builder guarantee. All of these items and more are now summary to mortgage approval by Spanish banks and financial lending institutions. See Case Study One which explores some of these issues in more detail.
Off-plan – is quite simply; contractually signing an intention to purchase a property that is as yet un-built and offers a lead time of between 2, 3 or more years before completion and final take up. Your initial obligation is, in most cases, to make secure and guaranteed payments to a developer or promoter to cover up to 20% of the cost of the property. Usually the rest is in part guaranteed by mortgage from a bank or finance company. When the property market is buoyant then it is quite easy to sell such a contract on to another person for a small profit – however when the market is low then you as the initial contracted owner will be challenged to purchase once the property complies with all the Spanish legal rules for exchange. (see licencia de primera ocupacion in Glossary section)
Off-plans can be a risky business if you are not in the position to complete on the property or to match the final re-mortgage payments. Markets rise and fall; so if you are thinking of this kind of investment you should also be in position to accept the option mortgage and look at rental investment; or at worse be prepared to accept that you can loose the money invested.
Buy to let – is a trend that has only had a brief existence in some European countries and yet offers the owner a way of spreading and protecting capital without the impact and risk of fluctuating bank interest rates. It seems a method of investing capital in property rather than exposing that capital to stock investment portfolios within the shares market. While this is a very brief and simple explanation it is none the less a guide to make clear why those buying with a mortgage should be that more prudent. A more detailed explanation of the Spanish mortgage system can be seen here.
People always need a good property at a good price; and when markets become saturated with the same or similar property then letting incomes potential can fall. I have always said to those looking for buy to let properties and who are unable to put down the full capital investment and need to mortgage – "Sorry, but no." Here on Spain's Costa Tropical, in a year, you can safely anticipate from your investment approximately 60% occupancy from the high season holiday market; or partial re-payment (approx 70-80% of mortgage costs) from long term lets. Nevertheless while these incomes contribute to the cost s of the property they very rarely cover all the outlay; but they do help to protect your initial capital investment and reduce your risk.
Finally before setting your budget to buy a property here in Spain’s Costa Tropical you should also allow for the costs, the taxes and the highs and lows of the currency rates. A prudent rule of thumb would be to add say 10% to 12% to the purchase price (depending on the purchase price scale) in order to cover transmission taxes, legal and registration costs; and say an additional 1% increment above or below to allow for currency fluctuations from the day you agree to purchase to the day of completion which can be between a couple of weeks to a couple of months.