Why and how to invest in Spain?

In terms of real estate investment, Spain is one of the most popular destinations in Europe. Following the 2008 financial crisis, real estate prices fell, making this destination particularly accessible to people wishing to invest. Now, after several years of stabilization, Spanish property prices are going up. It is therefore the ideal time to invest in Spain. Little review of the elements to know before you start.

The Spanish property market

Ten years after the economic crisis, and despite an increase currently observed, property prices in Spain are still widely accessible. In addition, the Spanish State lowered the VAT by 4 points, in a desire to facilitate economic exchanges and to attract more investors in the real estate sector. As a result, many foreigners buy real estate in Spain every year. In 2018, more than 105,000 foreign buyers invested in stone, three times more than a decade ago.

The health of the sector is forecast to continue. The year 2020 should therefore be, like 2018 and 2019, a good vintage for investing. In recent years, there has indeed been strong growth in the Spanish property market, whether rental or sale, and all sectors (residential, commercial, offices, etc.) are affected. Particularly low interest rates and still low real estate prices (outside major cities such as Madrid or Barcelona) complete this idyllic picture.

In the coming years, we should witness a continuation of this real estate growth, both in volume and in value, and this especially in the coastal cities (Malaga, Alicante, Valencia ...). So it's a good time to invest.

Spanish property taxation

Before investing in Spain, it is better to learn about the taxation in force. Note that Spanish property taxation depends on several criteria: nature of the property purchased (new / old), location, amount of the transaction.

If you buy a new property, you will have to familiarize yourself with two separate taxes: IVA (local VAT), the rate of which is 10% on a new property (with the exception of the Canaries which apply a rate of 6 , 5%) and the AJD, which constitutes the tax on documented legal acts. The latter varies according to the place of purchase, the rates being different in each autonomous community. It is, for example, 1.2% in the Balearic Islands, 0.4% in the Canaries, and 1.5% in Catalonia and Andalusia.

If you choose to acquire an old property (more than 80% of transactions in 2019), however, the rules differ. You will not pay VAT, but you will be liable for ITP (Impuesto de Transmisiones Patrimoniales, or tax on the transfer of property in French). This tax is managed independently by each community, but it varies from 4 to 10% on the value of the property.

Once you become a homeowner, you will be liable for several taxes. The common tax for all owners is the IBI (Impuesto sobre Bienes Immuebles), which is equivalent to French property tax and rarely exceeds 2,000 euros per year. Finally, if you have a heritage of at least 700,000 euros in Spain (1 million if the acquired property serves as your main residence), you will have to pay another common tax: the Heritage Tax. Advantageously, several communities nevertheless practice a tax reduction.

Where to invest?

We have seen that property investment in Spain is particularly advantageous. There remains an important question: in which part of Spain to invest? Know that the best deals are concluded in tourist regions, which are particularly concentrated on the Mediterranean coast. For example, Catalonia, which has areas particularly popular with tourists (especially French): Costa Brava and Barcelona. Or Andalusia or the Balearic Islands, where Ibiza, to name but one, is still popular. Frequented by many tourists, these regions offer dynamism and particularly interesting real estate opportunities.

For example, the price per square meter is between 2,100 and 2,400 € on the Costa Brava. These prices, much more attractive than those of the French real estate market, make it possible to acquire a quality property without having to sacrifice yourself financially. The particularly dynamic coastal areas also offer a high quality of life. Sun, beaches, pleasant temperatures ... There is no shortage of advantages.

In addition, Spain is a leading tourist destination, with frequentation increasing. In 2017, it was the second most visited country in the world, after France.

Investing on the Costa Brava not only allows you to acquire an interesting property at prices lower than those on the French market, but also to benefit from an impeccable quality of life, whether you decide to make your property your main residence or a simple rental investment.

A profitable operation from all points of view ...

How to invest in Spain

As we have seen, the property situation in Spain is particularly favorable. Widely affordable prices, low interest rates, profitable investment possibilities ... All the lights are green to invest.

Have you decided to buy in Spain? Be aware that buying property on site is not particularly complicated, but it is better to be accompanied in the process in order to be well informed and to better secure your future investment.

A profitable investment requires knowing the real estate market, but also the differences in the rules and culture of the country. In Spain, for example, the role of the notary is different (and less important) than that which he holds in France. These small cultural differences, if they are not insurmountable, must be known to avoid unpleasant surprises.

In order to secure your investment and ensure a perfectly peaceful purchasing process, it is advisable to seek the help of dedicated professionals. Knowing the rules and subtleties of Spanish real estate and the related legal framework, they will help you make your purchase in the best conditions.