Spain Real Estate: A Guide to Property Investment
A Thriving Market
Spain’s real estate market is one of the most dynamic in Western Europe, attracting investors with its diverse locations, natural beauty, and potential for long-term returns. If you are looking to invest in Spain as part of the Spain Residence by Investment Program, here is everything you need to know about acquiring property and how it is linked to obtaining residency.
Despite recent price hikes, Spain’s average real estate prices are still well below the peak levels seen in 2007, with some regions experiencing prices 50% lower than before the property bubble burst. This, coupled with a recovering economy, presents a favorable opportunity for property investments.
Real Estate Investment and Holding Period
Minimum Investment: EUR 500,000
Type of Ownership: Full ownership of the property
Holding Period: The property must be maintained throughout the period of the residency to renew the residence permit.
Key Investment Details: Spain offers an array of properties across its 17 autonomous regions. From coastal villas in the Mediterranean to apartments in bustling Madrid, or even charming homes in the green north or ski resorts in the Pyrenees, investors can find real estate options that match their lifestyle and investment goals.
Key Steps for Buyers:
Before purchasing property in Spain, consider these important recommendations:
Foreign Ownership: There are no restrictions on foreign nationals purchasing property in Spain. Foreign investors only need to obtain a local tax identification number and open a Spanish bank account to complete transactions.
Property Purchase Process: Acquiring property must be done through a Spanish public notary, either in person or via a power of attorney. Investors may also purchase property through a holding company, though this may incur additional costs for companies registered in tax havens.
Bank Account Requirement: A Spanish bank account is necessary to pay for the property, as payments are made via bank cheques. The account is also useful for settling property-related taxes and expenses, and it can facilitate the process of obtaining a mortgage-backed loan, which can cover up to 50% of the property's value.
Real Estate Transactions in Spain Come with Various Taxes and Fees:
Property Transfer Tax: Ranges from 6% to 10% depending on the region.
Legal Fees: Typically around EUR 2,000 for drafting the purchase deeds.
Notary Fees: Approximately EUR 2,000
Property Registry Fees: Around EUR 1,000 for registering the new ownership.
Rental Income and Returns:
Rental Income: The average gross rental yield for residential properties in spain ranges from 3% to 5%. For properties rented out to tourists under short-term contracts, this can rise to 7-9%, provided the necessary tourist license is obtained.
Taxation on Rental Income:
EU, Iceland, and Norway Residents: 19% on rental income.
Other non-residents; 24% on rental income.
EU residents can deduct property-related expenses, but this does not apply to non-EU residents.
If there is a double taxation agreement between Spain and the investor's home country, taxes paid in Spain can be deducted in the home country.
Other Taxes and Charges
Additional Tax for Non-Residents: Non-resident property owners who do not rent out their properties may be subject to a tax based on a fictitious rental value of the property (ranging from 1.1% to 2% of the cadastral value, depending on the location). For companies domiciled in tax havens, this is set at 3%.
Buying Property in Spain
Spain’s real estate market offers significant opportunities for foreign investors, driven by affordable prices, robust rental demand, and lifestyle benefits. Whether you're seeking high rental yields, long-term appreciation, or residency benefits through the Golden Visa, Spain provides a versatile and attractive investment landscape.
Contact us
Messina Madrid Global assists international clients in obtaining residence and citizenship under the respective programs. Contact us to arrange an initial private consultation.
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