As with any new purchase, it is crucial to be aware upfront of all that the process entails.

Primarily, be clear about the additional costs of buying a new home in Spain, as this will affect the budget that you have to work with.

As well as the agreed purchase price of the property, one must consider the property taxes and administration costs involved.

Property taxes, unavoidable and paid to the government are applicable as follows:

In Spain, a resale or second-hand property is taxed to the buyer on an incremental scale. In other words, the following amounts will be taxed

Up to 400,000 euro is 8% tax

From 400,000 to 700,000 euro is 9% tax

Above 701,000 euro and above is taxed as 10%

However, in Andalucia we have been given a tax break on property purchase which was brought in by the Junta de Andalucia in April 2021 to help stimulate the resale property market, but has been extended into 2022. For this time being, resale properties are taxed at a flat rate of 7% whatever their agreed final price, which is a very encouraging move for buyers.

Property tax on new build properties has always been at 10%. This tax remains the same and has not changed. However, the stamp duty levied against new build property did get altered.

Andalucia lowers Stamp Duty 

Stamp duty only applies to off-the-plan property (new build). Andalucia also approved to slash Stamp Duty from 1.5% to 1.2%. That’s a 20% tax saving. Whilst Stamp Duty doesn’t impact on resale property, it does affect off-plan. Anyone buying new-build property in Andalucia in 2021 (or 2022) will make considerable tax savings with this new tax change.

Costs of buying a property in Spain

And so simplified, the additional costs that must be considered at the time of writing are:

• Property transfer tax: 7% (existing properties) / VAT (or IVA) at 10% (new properties)
• Notary costs, title deed tax, and land registration fee: 1–2.5%
• Legal fees: 1–2% (including VAT)

The seller usually pays the estate agent fees in Spain. Estate agents usually charge their fees as a percentage, typically around 3% to 5% of the final sale price.

SURVEY

Make an offer –  negotiating the property price.

process starts. At this stage of the procedure, you should do the following:
Contract a lawyer – do this before you pay a deposit or sign any legally binding paperwork on the property. Instruct your lawyer to carry out basic legal checks on the property.

Sign the pre-purchase contract – this document secures the property for you and outlines the terms and conditions the transaction including the deadline for purchase. The contract is signed by the buyer and the seller (or their representatives) and the buyer usually pays 10% of the purchase price on signing. If the house is being sold with fixtures and fittings and/or furniture, the contract should have an inventory attached, which is signed by both parties.

Mortgage application – if you need a mortgage to buy the property, now is the time to start the application process. Ask your bank how long the application will take to approve and make sure the pre-purchase contract factors this timeline into the purchase.

Legalities on the house – meanwhile, your lawyer will carry out a comprehensive checklist on the property to make sure it’s 100% legal. These checks include:

• Property register checks – to ensure the property description and legal owner match and to find out if there are any charges or encumbrances.
• Planning checks – to ensure the property was built with the appropriate building licence and planning permissions. Or in the case of an off-plan property, to make sure the developer has all paperwork in order.
• Tax checks – to ensure the current owners are up-to-date on payment of all taxes related to the property.
• Community checks – to ensure the property is up-to-date with payments to the community of owners.

Final steps

Sometime after you sign the pre-purchase contract – usually between two to eight weeks – it’s time to complete.

Sign the deeds – both parties sign the title deeds in the presence of a Notary Public. Your lawyer should check the deeds and make sure everything is in order as well as provide you with a verbal translation of their contents.

Payment – in tandem with signing the deeds, you make final payment for the property. The usual method of payment is through a banker’s draft.

Key handover – once the title deeds have been signed and final payment made you receive the keys to your new home.

Registration – your lawyer or real estate agent will take care of registering the property in your name at the nearest Property Registry (Registro de la Propiedad).

Payment of taxes – your lawyer or real estate agent will also pay the appropriate taxes and fees on your behalf.

Utility supplies – your lawyer or real estate agent will arrange for the connection of utility supplies or the transfer of utility contracts to your name. They will also set up direct debit with your bank so that bills are paid automatically.