Thu. Jun 20th, 2024

Spain’s Homeownership Rate

Spain has a high percentage of homeownership—about 80% of people live there, and many of them do so without a mortgage.

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Spain was severely hit by the world financial crisis and the subsequent collapse of the real estate market. Although the market has stabilized over the past several years, house values have nevertheless decreased by as much as 30%.

While the COVID-19 pandemic impacted the Spanish market in 2020, official data indicates that average prices increased in the second quarter of the year. Prices in Spain have been growing continuously since 2016. Year-over-year growth in sale prices was 2.1%, while prices for newly constructed homes rose by 4.2% and those of pre-owned homes by 1.8%.

It makes sense that there have been fewer sales of homes. International buyers buy between 18,000 and 25,000 residences in Spain every quarter, according to government figures. However, that number dropped below 10,000 in the second quarter of 2020.

It is too early to tell how COVID-19 will affect the Spanish real estate market in terms of economic impacts. Experts in real estate forecast that short-term property prices may decline by 5–10%.

In Spain, should you rent or purchase real estate?

With all the peculiarities of the Spanish real estate market, it is wise to shop around before making a purchase. When purchasing real estate in Spain, there are a few things to keep in mind, such as real estate frauds, hefty capital gains taxes, and market swings.

Purchasing in Spain at this time might be dangerous due to the additional uncertainty brought on by COVID-19. The rental market in the nation is similarly dynamic.

Prior to the pandemic, local governments were considering enacting more stringent regulations pertaining to the purchase of vacation rentals, following a notable spike in rent in regions that attracted the attention of investors.

Each of Spain’s 17 regions is able to impose regulations on the purchase of properties by foreigners for rental income. The Balearic Islands and Madrid have the strictest regulations, with buy-to-let permits available exclusively to Spanish citizens and new restrictions limiting stays to five days.

When you take into account Spain’s high capital gains tax, which might cancel out any short-term advantages of owning, renting in Spain can be a better choice if you’re thinking about a shorter stay.

Is real estate in Spain available to foreigners?

Purchasing a vacation rental may be more complicated than in the past, but Spain welcomes international buyers and reduces the likelihood of typical mistakes in house purchase.

It’s not too difficult for foreigners to purchase real estate in Spain. Obtaining a financial number prior to making a purchase can be accomplished by going to a police station with your passport. For inhabitants of Spain or the EU, this is usually done the same day; for other individuals, it could take a few weeks.

The Spanish real estate industry and pricing

Only a broad picture of the state of the market can be provided because the entire impact of COVID-19 on Spanish real estate prices is still unknown.

Pre-pandemic data from the Global Property Guide revealed that 14 of Spain’s 17 autonomous regions had average property prices per square meter.

According to data from the third quarter of 2019, the average price of a home in a large city increased by 5% to reach €1,649 per square meter, while that of a property on the Balearic and Canary Islands increased by 11% to reach €1,604 per square meter.

San Sebastian, Barcelona, and Madrid are the priciest locations to shop in Spain. Each square meter was priced between €3,000 and €3,600 in all three districts.

At €338 per square meter, Madrid was the most costly area in Spain to purchase land. Ranking first, Andalucia (€171), Valencia (€158), Catalunya (€184), and the Canary Islands (€245) completed the top five. With average land costs of €66 per square meter, Castilla y Leon is the most affordable location to buy.

What it costs to purchase a home in Spain

There are no set costs for attorneys or real estate brokers, for example, and costs associated with purchasing a house in Spain vary from region to region and are negotiable. Most costs are the buyer’s responsibility and are typically as follows:

Property transfer tax: 10% for new properties, 6%–10% for existing properties, and 10% for VAT (or IVA).

1.–2.5% for notary fees, title deed taxes, and land registration fees

1-2% for legal expenses (VAT included)

Affording to buy a home in Spain

While some foreign buyers choose to purchase without a mortgage, financing is an option for house purchasers. International and Spanish banks both provide mortgages; some even provide special offers to foreign nationals residing in particular nations.

You could discover that, as an international buyer, you can only borrow at a lower loan-to-value (LTV) rate than Spanish citizens, necessitating a larger down payment. While non-residents may only be able to borrow between 60 and 70 percent LTV, depending on the kind of mortgage, Spanish citizens are normally allowed to borrow up to 80% of the property’s assessed value.

A mortgage deal cannot be finalized by a mortgage lender unless you have a piece of real estate. Make sure the purchase agreement for the home contains a provision allowing you to back out in the event that you are unable to obtain a mortgage.

When a property is sold in Spain, any outstanding debt associated with it is passed on to the new owner. This implies that it is crucial to confirm that the property is free of debts or, if it is, that any obligations associated with it are satisfied by the terms of the agreement.