Many people in the UK are drawn to the spanish coast every year to escape the "fantastic" British weather and to enjoy the lower cost of living.

A growing number of UK residents have been taking the next step and are buying property in Spain.  There are now more than 150,000 UK citizens currently living there and that figure is growing. 

In particular there has been a flood of interest amongst expatriates in property investment in Spain’s coastal regions.

There are any number of companies offering to advise foreigners on buying property in Spain most claiming to take the confusion out of purchasing property overseas. 

In reality buying property in Spain is similar to buying property in the UK. Local property and taxation laws are important consideration in any purchase and it is always important for any property buyer to do their homework carefully.  Here are a few things to consider when buying in spain as a foreigner:

 Financing your property

Mortgage for overseas properties such as in Spain are usually similar to the UK. You might find that a large UK financial institution might well operate in both markets.  UK citizens can usually borrow up to 75 per cent or more of the purchase price of a property. 

Besides the property price it is important to read over contracts to identify any additional fees.

The mortgage market in Spain, like across most of Europe, currently has more liquidity than the UK. 

Bear in mind that any income generated from the property is not considered by the lender when first financing the mortgage. This is one of the reasons why Spain’s mortgage market remains so healthy.  

People considering buying an overseas property should also consider taking out another mortgage on their UK home and use the funds to buy the overseas property.  This is one of the most popular methods of finding the finance and can greatly reduce costs and paperwork.  There is also the advantage of having support from the Financial Services Authority in the UK.  But note that the Financial Services Authority does not regulate overseas mortgages

How to buy in Spain?

It is very important to find a reputable estate agent, as they will be doing most of the searching for you and have an idea of the properties available that fit your criteria.

Finding the right agent can be as important as finding a property.

But be a little careful when choosing your Spanish estate agent. Spain’s real estate industry is de-regulated which gives anyone the right to set up an estate agency business.  This has led to a number of questionable companies sprouting up to take advantage of demand for Spanish property; however these are definitely in the minority with Spain still having many reputable companies operating in the property market.

Having a Spanish-speaking lawyer is also very important. Just make sure they are independent regardless of what your real estate agent suggests. The lawyer will ensure that you get what you pay for, and resolve any issues and conflicts that arise during the purchasing process.  The lawyer can also help to resolve any conflicts about genuine ownership.  Genuine ownership is one issue that should not be overlooked.   Here’s some good information on how to buy in Spain

Investing in Property in Spain

Is there any money to be made from Spain’s property market? There is no question that demand from overseas investors is strong, and for a long time the ease of getting a mortgage in Spain and a strong economy pushed up prices.  But supply has now outstripped demand and housing prices have fallen.  The question is whether this is a correction after years of growth, or is it something more worrying?

What certainly hasn’t helped is the rash of prosecutions of local authority big wigs for fraud. The age old trick of taking fat back handers from property developers to wave through the planning consents was rife during the property boom.

Sadly it is not only the fat mayors, caught red handed, who have suffered. There have been some terrible instances of expatriates having their beautiful homes destroyed within a few hours by bulldozers, on the basis that planning consent was given fraudulently.

Added to this are the nasty stories of Spanish local councils using their powers take over land that people had paid for and assumed was rightly theirs: imagine the horror of being told the council is going to build a road or even a sewage farm through your garden… These situations are peculiar to each area. Your Spanish property lawyer and estate agent should be able to ensure this does not happen to you. But make sure you ask them about it. And get it in writing. As you would anywhere.

Despite the recent slowdown there is still demand for property in Spain; it seems now to be focused on selective areas, with coastal regions performing better than the rest of Spain.  

Part of the reason for this is the continuing strong demand from overseas buyers.  Having the right property at the right location will always be a strong investment.  Short-term rental prices in resort towns should also be supported with steady demand from tourists.

But as with other parts of Europe, properties in new developments, that may have been bought "off plan" – ie even before the property was built, when it was only a twinkle in the property developers sales presentation – seem to have fallen in value much faster than traditional properties.

This is probably due to them being low quality ie in not so good locations and so on. Up market developments don’t seem to have been affected.

There are other issues to bear in mind such as exchange rates and taxes.

Currency exchange rates not only affect purchase prices, they also affect your eventual return on the property investment.  It is no good having the property’s value increase only to have all the gains wiped away by currency weakness. This will also influence any rental income received on the property.

Any income or capital gains made in Spain will be taxed under Spanish taxation laws.  The income will also be taxed in the UK; however credits are given for the tax paid in Spain.     

In conclusion, UK residents can find great reward buying property in Spain, and the lifestyle change alone can be the greatest benefit.  Just as in the UK, Spain is not immune from any slowdown in global economic growth, and this will affect prices. But finding the right property and doing your homework should make it a rewarding experience.

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