Costs of Buying Property in Spain

While property in Spain is affordable by international standards, and certainly compared to the UK, there are additional costs of buying property in Spain that you’ll need to budget for.

Some of these additional costs are unavoidable, such as taxes and service fees, but others can be managed, if not avoided, by being aware of alternative options available to you.

As a general rule of thumb, you should budget for an extra 10% to 15% for buying costs on top of the final purchase price on your property.

Spanish property purchase costs breakdown

These property transaction costs are unavoidable, although the rates that you pay can vary by property type and location. Careful selection of the right property in the right location, while also being a property you’d like to own, can help to minimise how much you’ll pay.

Estate agent fees

These are usually paid by the seller of the property. However, in a small minority of cases agents do split the cost, on the request of the seller. As a buyer, you could simply regard this as part of the selling price within negotiations.

Tax: ITP or IVA

This applies when buying a resale (second-hand) property. It is the largest single expense, at between 6% and 10% of the property’s value, depending on the region of Spain. Of the most popular areas for international buyers, the Canary Islands has ITP rates of 6.5%, Andalusia and the Balearics charge 8% up to €400,000 and then it increases as the property price rises to a maximum of 10%. Valencia (which covers the Costa Blanca) charges 10%.

If buying a brand-new residential property from a developer you pay VAT, known as IVA in Spain, of 10%. This is paid instead of ITP. If paying in stages for an off-plan property, the tax is added at each stage, rather than in one lump sum at the end.

Stamp duty (AJD)

This is a smaller tax than in the UK, and is levied on the creation of the deed of sale and mortgage deed by the notary. It is usually paid by the buyer and also varies according to the region but between 1% and 1.5% of the price. Andalusia and the Balearics charge 1.2%, Valencia 1.5% and in the Canary Islands just 0.75%.

Legal and notary fees

Normal legal fees are around 1 to 2% of the property price.

The fees of the notary are set by the state and are generally between €600 and €1,200, depending on the price of the property. In total, with land registry fees, they generally make up another 0.1% to 2% of costs to buying a property in Spain.

 

Property valuation costs

A property valuation, or survey, will give you an accurate estimate of the property’s market value. This will be helpful when negotiating a fair price and, if applicable, securing a mortgage.

In Spain, the cost of a property valuation is generally between €200 to €600, depending on the property’s size and location. This valuation is carried out by an independent professional or company, and it’s often required by lenders before approving a mortgage.

A survey is optional in Spain, so this cost may not be needed. Bear in mind, though, that having a survey may give you an edge in price negotiations, so the survey may pay for itself.

Currency costs and risk

When budgeting for the costs of buying property in Spain, bear in mind the currency transaction. The headline exchange rate you will see on the news or on rate trackers on the internet will be at the “interbank rate”. This rate is not available to the general public.

Using a high street bank for your property transaction is likely to prove expensive and quite possibly offer poor service and value for money. Using a specialist currency (FX) company will likely result in lower transfer costs.

There are two reasons for that. The first is that with a currency provider you will receive a rate as close to the interbank rate as possible, usually within 2%, and usually with no fees or commission charge.

Secondly, there are products and services that banks do not offer that specialist currency providers do, especially for large transactions such as property purchases.

At Property Guides we recommend Smart Currency Exchange. Smart Currency can protect your budget from “currency risk”, which occurs when you agree to but a property at one exchange rate, but complete months later. In that time the exchange rate will move, perhaps drastically, meaning that while the price in euros for the property is the same, the price in your local currency will change. It can cost thousands more.

Fortunately, this eventually is easily solved with a “forward contract” that fixes your exchange rate for the period of the buying process. It offers peace of mind that you will be still be able to afford the property with your budget when the time to complete finally comes.

Also bear in mind that all costs linked to the property price in euros will also increase if the currency rate goes against you. It’s simply not worth the gamble.

 

Bank charges and mortgage fees

Bank charges and mortgage fees can add up. For a mortgage, this may be rolled up into the mortgage, but either way is likely to add around 1-2% of the loan amount.

There may also be the mortgage opening commission, which can range between 0.5% and 2% of the capital loaned. Remember, these costs can often be negotiated with the bank, so don’t hesitate to discuss these terms.

Utility connection fees

At some point towards the end of the buying process you’ll need to set up your utilities. These include water, electricity and possibly gas, but also the telephone and broadband. If these utilities are already connected, you’ll only need to change the contracts into your name, usually at a minimal cost.

Shopping around for alternative suppliers may lead to cheaper services and connection fees.

Managing the costs for buying in Spain

Taxes and legal fees are directly governed by the price of the property. Reducing the purchase price through negotiation or careful selection will reduce the associated buying costs. There are large variations in ITP tax, for example. Buying in the Canary Islands is already 4% or so cheaper than the Balearic Islands when it comes to ITP. Choosing a different location can help to reduce the overall buying costs, helping your total budget to go a little further.

The type of property that you choose can also affect your cost of buying a property in Spain. If you put your efforts into looking for fixer-uppers or properties that appear to be under market value – the “buying the worst house in the best street” approach – then taxes and fees that are linked to the purchase price will also be lower. However, you will need to carefully weigh up the additional costs of renovations or repairs.

Depending on the state of the market you can try to knock some money off the asking price simply by negotiating. It’s perfectly normal to offer below the asking price, especially if it is clear that the property has been on the market for a while. Costs calculated as a percentage of the purchase price will naturally lessen with a lower purchase price.

Negotiation requires some solid preparation. You should be armed with a list of similar properties recently sold in the area and their selling price, and a survey may also help you to negotiate a better price. It’s hard for a vendor or their estate agent to argue with prima facie evidence of current prices and the reasonableness of your offer.