Building Wealth Through Property

Spanish Favourites!

Whether you like sipping Pina Colada by the pool, a relaxed round of golf among the swaying palms on some of the finest courses in Europe, or you just like watching your money grow – Compass Point has something for you.

Please click on the relevant page to view the listing of the great opportunities we have for you there, or read on for an outlook for investment in Spain and information on some of the key topics you will need to consider.

Resorts:
• Costa Del Sol
• Costa de Almeria
• Costa Blanca
• Golf Resorts

Where should I Buy?

For those who like a more mature market presented by the Costa del Sol, we offer some of the few remaining really excellent off-plan opportunities, as well as re-sale properties sourced through our local specialist partners. On the Costa Blanca – many people’s favourite – we are able to offer a wide range of off-plan and re-sale opportunities to match all investors. For those that like less developed areas, Spain’s hidden secret of the Costa Almeria – Mainlan Europe’s sunniest spot – presents some real opportunities.

To see a map of Spain or search for particular locations, click here

Property Demand

Demand for property on the Spanish Costas shows no sign of slowing – and the Costas are still the most popular holiday centres in Europe! With an average of 300 days sun a year, great beaches, golf, water-sports, classic culture and beautiful countryside, many of us dream of our next return to our favourite Costa! Indeed, more than 0.3 million Britons – and 0.8 million Europeans – are expected to buy property in Spain in the next 3 years!

Property Purchase

Whether you are buying to live or to rent, the demand for property on the Costas remains strong and combined rental and capital appreciation of over 12%pa for the last decade has ensured that Spain features in The Economist’s top four places in the world to invest. There has never been a better time to invest – with prices increasing by up to 20% a year, investors are reaping the rewards. Forecasts for 2005 – 2006 remain very healthy with an estimated increase of 15–18% throughout Spain. So, the Costas can offer you the perfect investment whether you want to sell before completion or take advantage of a buoyant rentals market and enjoy your holiday home while it’s making money for you.

We set out below a brief guide to key elements of property purchase in Spain.

Buying Property in Spain

As arrangements for property purchase in Spain are subject to changes, all information in presented here is for guidance only.

Whether you are buying off-plan or a re-sale property, you need to work out your budget and set the limit of your purchasing power – don’t consider properties out your price range. You should be in a position to complete the purchase before you make an offer – you need to be certain that you can raise the necessary finances.

As with property anywhere, remember – location, location, location!! Compass Point sources properties that are likely to be easily rentable and are expected to appreciate well – and we seek to give you the best advice based on your requirements and budget.

When you have identified the property you wish to purchase, you will need to pay a deposit of £2,000 to take the property off the market. Your deposit will be refunded if there are any problems with the property or developer.

Legal Advice

It is well worthwhile using good professionals to support you in Spain - if the processes and paperwork are all correctly undertaken, buying property in Spain is normally trouble free. We suggest you use a Lawyer who is familiar with Spanish law to handle the purchase and to ensure your interests are protected – we can recommend good English-speaking Lawyers if you wish.

If you do not wish to come to Spain to sign the deeds, you can sign a 'Poder', or Power of Attorney, to empower your Lawyer to sign contractual documents, and make legal submissions, on your behalf. A Poder can be executed while you are in Spain or through a Lawyer in the UK – many Spanish Lawyers will have a UK associate office who will do this.

Your Lawyer should check the sale & purchase contract to confirm all is correct. The freehold title deeds (the Escritura) are presented before the Notary, showing ownership of the property. Three days before the new deeds are signed, a 'Nota Simple' must be requested by the Notary, who checks that there are no debts and witnesses the signing of the new deeds by both the Vendor and Buyer.

The Notary makes sure that the seller is legally entitled to sell and, once the relevant taxes are paid, he will register the change of ownership in the local land registry office (which is then registered at the central registry of foreign investments in Madrid).

Spanish inheritance laws are different from those in the UK. So it is generally recommended that you instruct your Lawyer to draw up a Spanish Will, covering the succession rights to your property.

Mortgages

Mortgages are available up to 70% of the value of the property in Spain, subject to your status, although some deals offer a second mortgage from the developer to make purchase even easier. The interest rate for a Euro mortgage is currently around 4.5%pa variable and the term can be up to 20 years. A valuation Fee is payable for valuation of the property the Lender's Valuation Expert. This is normally quite quick in Spain – mortgages can be organized in as little as two weeks. There are normally extra conveyancing charges if a mortgage is arranged, as this involves two ‘escrituras’ – you should check the costs thoroughly before committing.

Purchase Expenses

You need to allow about 9-10% of the purchase price on both new and re-sale property to cover:

• Registry search fees (to check legality and for debts)
• 7% purchase tax (VAT or ‘IVA’) on new properties and 7% transfer tax on second-hand properties.
• Lawyers’ fees – normally about 1%. The fee should also cover arranging to connect up services (water, rates, etc.) in your name plus any help you need – residence, etc.
• Notary’s fee & Property Registration Fees – normally 1-2%. The Notary is an independent professional whose job is to see that all contracts and deeds are correctly executed and also arranges a search before the deeds are signed.
• Local Taxes, Electricity and Water meters on new property.

Running a Property in Spain

You may intend to rent out, or live in the property you purchase – or perhaps both. Compass Point provides outline rental projections for the off-plan properties we offer but does not arrange rentals. We do recommend that you contact appropriate rental agents in the area in which you are buying, to ensure that you understand the rent you can expect and all the expenses you will need to meet (such as letting agents’ fees, management fees, maintenance costs and annual taxes).

Under Spanish law, all new properties must be guaranteed for 10 years, so you should have recourse, through your Lawyer, for any defects in the constructed building.

You will need to obtain a fiscal number (NIE) from the local tax administration office and to make periodic payments in respect of your property. Your Lawyer will usually be willing to look after these but you can appoint a Gestor (fiscal representative) to make the payments and take care of the paper-work. Local rates are paid to the town hall (Ayuntamiento).

Non-residents will need to pay an annual wealth tax, the Patrimonio (at 0.2% of the registered value of the property), as well as the Impuesto De La Renta (approximately 0.5% of the property value), an annual tax on the estimated value of the property, whether or not it is rented out.

If you purchase a property in a complex or apartment block, you will be required to join the residents’ association which administers maintenance of the areas of common ownership (gardens, hallways, lifts, swimming pools, exterior lighting, etc). The annual budget for these costs is usually divided between all the owners according to the size of their properties. All owners have a vote to agree the budget at the annual general meeting.

On re-sale of a property, Plus Valia tax is payable on the value of the land on which the property is situated and varies between locations. This tax is usually paid by the purchaser. Much as in the UK (but at different rates), Capital gains tax is payable by the seller once the property has been registered – the amount varies on the period for which the property has been held. It is possible to sell before registration of an off-plan property without being liable for capital gains tax (although any profit is likely to be taxable as income). A Double-taxation treaty with the UK operates and we would strongly recommend that you consult a tax adviser about buying and selling your property.