Save Money When Buying in Spain

Whatever your reason for buying a property in Spain, as a dream holiday home, a permanent residence or as an investment, you probably have a budget in mind that you want to use as economically as possible. But in an unfamiliar market, language, currency and legal system it’s easy to pay more than you need for your property. Here we offer some tips and tricks for paying a fair price and saving money.

Taxes, notary and legal fees

The professional fees associated with the act of buying a property are simply unavoidable. These generally amount to an extra 10 to 15% on the purchase price for Spanish property. You can, however, influence what you’ll pay by understanding how they are levied.

The main buying cost is property transfer tax (ITP) of 6% to 10% (or VAT for new builds). It is possible to save on ITP depending on the location of where you’re buying the property as not all regions charge the same ITP rate. Choosing a location for your property in an area with a lower ITP rate will potentially save you money on ITP, but you’ll need to balance the location, its amenities, and the type of property available against the cost saving you’ll make.

You will pay your lawyer around 1 to 2% of the property price in fees. Shop around for legal services and choose a lawyer that provides a balance of a good rate and a quality service. By all means ask for references or recommendations from friends and contacts, or your property agent. Remember that, unless you speak Spanish very well, you will need a lawyer who can speak English. At Your Overseas Home you can see a list of recommended, English-speaking lawyers for property transactions in Spain.

The notary, land registration and title deed tax add another 1 to 2.5%, but these are set by the state and offer little or no scope for saving beyond reducing the price of the property.

Savings on Spanish property

Buying a lower priced property will obviously save you money on the property purchase and the fees and taxes linked to its price.

Cheaper property options include park homes and cave homes. Buying off-plan can be cheaper if you buy at the start of the development when the builder wants to raise cash, but you will be waiting for some time before you’ll be able to use your property. The same goes for fixer-uppers, where you can save money by balancing a lower initial price plus renovation costs against a higher initial purchase price.

What can you bear to live without or doesn’t bother you? For example, if you don’t really need the beach nearby you can make huge savings by buying a little inland. If retiring to Spain full time you may not need to be as close to an airport as holiday home owners or investors.

These are all conversations you can have with your estate agent before you start looking.

Negotiation strategies for property prices

When you find a property you like enough to buy, there are ways that you can save on the price. Haggling over prices doesn’t come naturally for many of us. However, given the amounts of money involved in a property purchase it might be worth shelving any reserve and giving it a go.

It always helps to negotiate from a position of knowledge, so that your offers and counteroffers are backed by evidence.

As a buyer you can gain an advantage by understanding the true market value of the property.

There are plenty of broad-brush records of prices in each province or region of Spain, from property portals, regional governments and organisations such as Spain’s surveyors at TINSA.

But gaining a detailed knowledge of local prices is easy in the digital age. Given that on most portals you can filter properties by number of bedrooms, bathrooms and other features, it is easy to compare prices of similar properties to the one you want to buy. Look at properties in areas that Spanish people are likely to buy in to ensure you’re not paying a premium as an international buyer. Remember, though, that some areas are highly desirable for international buyers because of local amenities or proximity to transport, tourist attractions and beaches. These features will come at a premium.

Don’t just glance at prices online, be thorough. You could be savings thousands on your purchase so putting in a little work is worth it. Create a spreadsheet, document what you’re seeing, and use this as evidence if you think it’s clear that the property is overpriced.

Unfortunately, it is not as easy in Spain as in the UK to look up prices of properties that have already sold. However, you can check the cadastral value in the registro de propriedad. The cadastral value is the value used to calculate the tax due on the property. Although this is not the actual value, but a percentage, it can offer clues.

You should also ask around. The estate agent may not be the most impartial judge as they make their fees from a percentage of the selling price, so try some other property professionals such as surveyors and property lawyers.

You can also look for the wider picture of the market. Is it a buyer’s or seller’s market? Use any objective data available, including sales volumes and time to sell, to build your understanding of the market. In a buyer’s market you’re in a stronger position, so knowing the wider picture can give you the confidence to negotiate.

Armed with this knowledge a buyer can more easily ascertain if a price is fair, or if a vendor is being optimistic. There can be a tendency in some markets to overprice for foreign buyers.

Timing considerations for property purchases

There is little objective evidence to indicate that certain times of the year are cheaper to buy than others, but common sense suggests that holiday homes will be cheaper at the end of the season. Investors will be saddled with running costs for several months without income and may be looking to sell quickly.

Then again, properties popular for retirees may be cheaper in the spring, as British retirees sell up and come home after the winter. Knowing your vendor and their motivation to sell is helpful in negotiations.

November to January offers more room for negotiation, with less competition among buyers. Sellers who have listed during this time may be more motivated to sell quickly and, therefore, may be more willing to negotiate on price.

Currency transfers

Currencies fluctuate daily in value against each other. The price that you agreed on with the vendor will stay the same throughout the buying process, but the amount that you’ll pay in your local currency will fluctuate, sometimes dramatically. World events, trade, and politics can all affect the exchange rate from your local currency to euros.

Your bank is unlikely to have the same sophisticated financial products for transferring large sums of money as a currency transfer specialist. A forward contract will enable you to lock in an exchange rate, so that you’ll know exactly what you’re paying. It’s true that the currency rate could move in your favour, but is it worth the gamble? If it doesn’t, and if you can no longer afford the property, then the money you’ve spent on viewing trips, surveys and other costs will be wasted if the deal falls through. You can save money by using the right transfer product.