As we all know, the current economic situation in Europe, and the special vulnerability of the Spanish economic and housing market, make Spain a country with appealing potential for foreign investors wishing to acquire real estate here.
Climate, way of living, beaches, but above all affordable prices for those originating from abroad, encourage other European citizens to makes plans for their future here. At a time when accessing credit has become extremely complicated for Spanish nationals, the difficulties for foreigners in buying property in Spain are far fewer.
The fall in private housing prices in Spain (13.7% in 2012 and 6.3% in 2013), has put investment in Spain on a silver platter for foreigners and more and more of them are buying real estate here. Housing sales to foreigners in Spain increased in 28.4% in 2012 and 9.8% in 2013.
Brits, Russians, French, Norwegians, Belgians, Germans and Italians are, in this order, those showing the highest interest in buying in Spain at the moment, especially along the costal areas. But we mustn’t forget the Chinese community, who are mainly purchasing apartments in the bigger cities (Madrid, Barcelona, etc.).
The “red tape” you have to cut through to buy a house in Spain
The procedure for acquiring property in Spain for non-resident foreigners is quite straight forward. The only real requirement is that you are in possession of a NIE number (Identification Number for Foreigners). It is a personal and exclusive identification number which is essential for carrying out any kind of financial transaction in Spain, from opening a bank account to buying a house.
You will be able to apply to the Spanish Police Authority for your NIE number, just so long as you establish the reason for you application. This application can be made both from Spain as well as from abroad.
After applying for and obtaining your NIE number you can proceed to the purchase of your house. It is not a requirement that you have a Spanish bank account, although it is strongly advisable. All taxes and expenses involved in the purchase of property (VAT in cases of new constructions, Transfer Tax in cases of second hand properties, notary fees, management and registration, as well as Property Tax and Rubbish Collection Tax) must be paid in Spain and having a Spanish bank account will expedite the process.
Moreover, you may or may not know that we have Non-Resident Income Tax which taxes income received in Spanish territory by natural and legal persons not resident in Spain, unless they pay regular Income Tax in Spain. It is considered that someone is habitually resident in Spain when they spend 183 days or more a year here. In this case you will have to file Income Tax instead of Non-Resident Income Tax, but I will discuss this particular in more detail in future articles.
Financing your house purchase in Spain
Spanish banking institutions offer financing to non-resident foreigners in Spain without any problem. Furthermore, there are mortgages designed exclusively for them.
However, foreigners can also have access to the same mortgages as are offered to Spanish nationals. The terms of these mortgages are the same for foreigners as for Spanish nationals. Naturally, the bank will take into account the job security and credit history of the applicant.
Another attractive prospect for non-resident foreigners who wish to acquire a property in Spain, not to reside in but to lease, are the properties taken over by the banking institutions in Spain due to the hard financial times of the country. These properties are being offered to buyers at highly discounted rates, especially in the costal areas.
Additionally, these properties owned by financial entities, as well as enjoying extremely competitive prices, are accompanied by very favourable mortgage terms.
All of the procedures outlined in this article, while simple for us professionals familiar with the process and the system, can become complicated and time-consuming for foreigners who are unfamiliar with both the language and the legal and administrative procedures. This is why we always recommend that you seek professional advice before embarking on the journey of buying your dream house in Spain.
Gabriella Mary Trussler
4408 Ilustre Colegio de Abogados de Almería