Essential Costs to Consider When Buying a Property in Spain
Buying a property in Spain, particularly in sought-after locations like the Costa del Sol, is a fantastic investment opportunity, whether you’re purchasing a holiday home, a permanent residence, or an investment property. However, many people tend to forget that the purchase price isn’t the only cost you need to consider when it comes to buying property here. In this guide, we’ll explore all the additional expenses you should factor in when buying property in Spain, ensuring that you’re fully prepared for the buying process and can make an informed decision.
- Property Taxes: The Primary Costs
Whether you’re purchasing a new build or a resale property, there are different taxes you need to budget for. Here’s a breakdown of what to expect:
Transfer Tax (ITP): For resale properties, the most significant tax you’ll encounter is the Transfer Tax, known as ITP. In Andalucía, which includes the Costa del Sol, this tax typically ranges from 7-10% of the property’s purchase price. The percentage varies depending on the property’s value, with higher-value properties incurring a lower tax rate.
VAT (IVA) and Stamp Duty (AJD): If you’re buying a newly built property, you’ll be subject to VAT (IVA) instead of ITP, set at 10% of the purchase price. Additionally, you will need to pay Stamp Duty (AJD), which is typically around 1.5% in Andalucía.
- Legal and Professional Fees
When purchasing property in Spain, you’ll need to enlist the help of several professionals to ensure the process runs smoothly. Here are the main fees to keep in mind:
Notary Fees: A notary’s involvement is mandatory for all property transactions in Spain. Notaries play an essential role in verifying the contract and ensuring all documentation is in order. The fee for this service usually falls between 0.5% and 1% of the property’s value.
Land Registry Fees: After signing the contract with the notary, you’ll need to register the property in your name at the Land Registry. These fees also range from 0.5% to 1% of the property’s value. This is an important step, as it ensures your ownership is legally recorded.
Legal Fees: Hiring a lawyer is not a legal requirement in Spain, but it is highly recommended. A lawyer will handle all legal aspects of the purchase, including due diligence, ensuring there are no outstanding debts or legal issues attached to the property. Legal fees generally account for 1-1.5% of the property’s value. At Winkworth, we believe that having a reliable legal expert on hand is a smart investment to avoid any potential complications down the road.
- Mortgage-Related Costs (If Applicable)
If you’re financing your property purchase with a mortgage, there are additional costs associated with obtaining and securing your loan:
Valuation Fee (Tasación): Before a bank can approve your mortgage, they require a valuation of the property to determine its worth. This typically costs between €300 and €500, depending on the property’s location and size.
Mortgage Arrangement Fee: Spanish banks often charge a mortgage arrangement fee, which is usually around 1% of the loan amount. This fee covers the bank’s administrative work in setting up the mortgage. It’s important to factor this into your budget, as it can add a substantial amount to your overall costs.
Notary and Registration Fees for Mortgage: If you’re taking out a mortgage, additional fees for registering the mortgage at the Land Registry apply. These typically range from 1-2% of the mortgage value.
- Community and Maintenance Fees
When buying property that’s based within a residential community, such as an apartment or a villa within an urbanisation, more often than not, there will be some ongoing costs that come with property ownership:
Community Fees: In many apartment complexes and urbanisations on the Costa del Sol, owners are required to pay community fees which cover maintenance of common areas like gardens, pools, security, lifts and other facilities. These fees can vary significantly based on the services provided and the size of the development. It’s important to inquire about these costs in advance to understand how they will impact your monthly expenses.
Maintenance Costs: If you purchase a standalone villa, particularly one with a private garden or pool, you’ll need to budget for maintenance costs. This could include garden care, pool cleaning, and general upkeep of the property, ensuring it remains in good condition year-round.
- Other Costs to Consider
Beyond the initial purchase price and taxes, there are other costs that prospective buyers should keep in mind:
Insurance: Home insurance is highly recommended for all property owners. Depending on the coverage and provider, insurance costs can vary, but it is important to budget for this essential protection.
Utility Set-Up Fees: When moving into your new home, you’ll need to set up utilities such as water, electricity, and internet. Although these are generally not high costs, they are worth factoring into your budget as initial setup fees can apply.
Furniture and Renovation Costs: If you’re buying an unfurnished property or plan to make renovations, it’s important to account for these additional expenses. Furnishing a home or carrying out even minor renovations can significantly increase your total expenditure, so it’s best to reserve a budget for this ahead of time.
Non-Resident Taxes: Depending on how you use your property, you may be required to pay ongoing taxes each year, particularly if you don’t plan on living in the property on a full-time basis.
If you’re a non-resident, even if the property remains empty all year, you’ll need to pay an Imputed Income tax each year to the Spanish tax authorities. If you plan on renting out the property (full-time or part-time), you’ll need to pay Rental Income Tax based on the income you earn from it.
Let Winkworth Help You
The Costa del Sol is a fantastic destination for property buyers, however, understanding all the costs associated with purchasing a property in Spain is essential for making an informed decision. From taxes and legal fees to mortgage and community costs, being prepared for these additional expenses will help you budget effectively and ensure a smooth buying process.
At Winkworth Spain, we provide expert guidance and support to make your property purchase as seamless as possible. With years of experience in the Costa del Sol property market, our team offers a wealth of local knowledge that helps you get the most for your money. Whether you’re looking for a holiday home, a permanent residence, or an investment property, we’re here to help you every step of the way.
If you’re considering buying property in Spain, contact Winkworth Spain today for personalised assistance and start your journey towards finding your dream home on the Costa del Sol.