Anyone comparing a new build against a resale on the Costa del Sol will usually start with the same question: which one is cheaper?
Unfortunately, if you’re looking for a straightforward answer, no real estate agent will be able to tell you. However, what we can do is break it all down and give you the facts about each one, so you can decide for yourself.
To Pay VAT or Not?
If you’re thinking about buying a resale property on the Costa del Sol, you’ll pay something called the Impuesto de Transmisiones Patrimoniales (ITP) – transfer tax – at a flat rate of 7%. If you buy off plan or a new build, instead of ITP, you’ll pay VAT (IVA) at 10%, plus Actos Jurídicos Documentados (AJD), a stamp duty of 1.2%. That’s around 11.2% combined.
For a €400,000 property, the ITP would put you at about €28,000, versus a new build property’s IVA and AJD for €44,800. Quite a difference in tax alone.
Costs That Apply Either Way
There are some costs that you can’t escape, regardless of the type of property you’re looking at. These are:
- Notary fees: around 0.5–1% of the purchase price
- Land registry fees: roughly 0.5–1%
- Independent legal fees: around 1% plus IVA
- Gestoría: this is optional, but it will be around €100
- Mortgage costs (if applicable): an arrangement fee plus a valuation fee, generally around 1% of the valuation itself
Where New Builds Cost More
New builds are generally priced higher per square metre than a resale in the same area, though this isn’t always the case, and a resale in a particularly sought-after spot can still outprice a new development elsewhere on the coast. Part of the reason why they’re more expensive is that a developer’s price reflects today’s construction and land costs, while a resale reflects what the market will pay for a property that was built years or decades ago at a lower cost.
New builds also have to meet Spain’s current-day building codes, which means higher insulation standards and modern, energy-efficient systems, which is why new builds tend to carry better energy ratings than older resales.
If you’re buying off-plan, the payments are usually staged across the building period rather than paid in one go on completion. It’s highly recommended that you confirm that the developer provides a bank guarantee on those staged payments. This protects your money if the development is delayed or, in the worst case scenario, doesn’t complete at all.
Before competion, buyers will be given the chance to inspect the finished property and put together their snagging list. Many buyers will bring their own independent professional to do this, particularly if it needs to be signed off in Spanish. Your lawyer can actually hold back part of the final payment until the agreed snags are fixed, but only if the inspection happens before competion.
Under the 1999 Building Act in Spain, structural defects with new build properties are covered for 10 years, defects affecting habitability for 3 years, and snagging-type issues for 1 year. A resale buyer has no equivalent, unless they conduct their own independent survey beforehand.
Where Resale Can Cost More Long-Term
At this stage, whilst all the signs might point to resale being the best option, there are still a handful of cons to buying a resale property as well.
With a resale property, there’s no 10-year structural warranty to protect you, so if something isn’t discovered via an independent survey beforehand, you could be left with an unexpected surprise.
The costs won’t tend to show up early on with a resale either, so if the property needs renovation or repair work, that won’t be reflected in the asking price. Older properties tend not to be as efficient as a modern property as they tend to have weaker energy ratings, meaning higher running costs over time for heating and cooling the property.
Timings to Consider
Resale properties are often move-in ready with no build delay, but with a new build/off-plan property, you’ll typically be looking at 12-24 months from purchase to completion.
Whilst it might not sound like a big deal, currency exchange rates have the potential to move significantly over a year or two, and cash flow needs to be planned well in advance.
So, Which One Costs Less?
Unfortunately, there isn’t a straightforward answer, as it all depends on the specific property, how you’re financing it and what matters most to you. A resale often costs less upfront but may need work later down the line; a new build costs more at completion but comes with guarantees and modern specification that can offset over that time.
If you’re weighing up whether to buy a property on the Costa del Sol, whether it’s a new build or a resale, we’d love to see how we can help. Get in touch with the Winkworth team in Guadalmina today.
