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AMERICANS IN SPAIN

Navigating Spain’s real estate market: A guide for American homebuyers

There are some key matters US nationals looking to buy a Spanish home should consider, from legal complexities, to tax, property inspections and the role of buyer's agents. This quick guide by an international lawyer in Spain has you covered.

Published: 26 July 2024 11:29 CEST
Navigating Spain's real estate market: A guide for American homebuyers
A riverside view of Seville's Triana neighbourhood. More and more Americans are buying property in Spain. Photo: Taisia Karaseva/Unsplash

Buying a residential property in Spain can be an exciting yet complex endeavour, especially for American buyers unfamiliar with the intricacies of the Spanish real estate system.

With varying regulations at the state, regional, and local levels, it is crucial to be well-informed and well-prepared.

In this article, Maryem Essadik, immigration lawyer and head of English-speaking international law firm Marfour, offers US nationals a breakdown of the key considerations when buying a Spanish property.

Legal Complexities

Spain’s legal framework for real estate transactions is multifaceted, involving regulations that differ significantly between the national, regional, and local levels. Therefore, engaging specialized real estate lawyers is highly advisable.

1. State, Regional, and Local Regulations: The Spanish legal system is characterized by its decentralized nature. Each autonomous community in Spain can have distinct laws affecting real estates and property transactions. For example, while some regions may establish restrictions for renting out properties (ie. Limitations or prohibitions on carrying out short-rental activities, limitations on long-term rental prices etc.), others might have significantly varying taxes and fees associated with property purchases, and others can also count with a singular regional Civil Code that regulates in a particular manner important aspects such as the initial down payment contract (“Arras” in Spanish) when buying a property. Municipal regulations can also considerably impact property use and renovations.

READ ALSO: Which cities in Spain have new restrictions on tourist rentals?

2. Legal Representation: A lawyer with expertise in Spanish real estate law can navigate these complexities, ensuring compliance with all applicable regulations. They can conduct due diligence, verify property titles, and check for any encumbrances or legal issues that could affect the purchase. Legal representation is not just a formality but a necessity in Spain to avoid potential pitfalls.

READ ALSO: What’s the difference between a gestor, a lawyer and a notary in Spain?

3. Immigration legal advice: In connection with the property you want to buy in Spain you should receive the proper immigration law advice. Nationality and Immigration regulations in Spain are a complex but at the same time exciting field to navigate to find the best solution that will be matching your concrete case and circumstances (i.e: Digital Nomad Visas, Non Lucrative visas etc.)

LISTED: The visa options Americans can apply for to live in Spain

Fiscal Considerations

Taxation is another critical area that requires careful attention. Spain’s tax system includes various taxes that can impact the overall cost and benefits of owning a property.

1. Tax Residency: Determining your tax residency status is essential as it influences the taxes you are liable to pay. If you spend more than 183 days in Spain in a calendar year, you are considered a tax resident. You can also qualify as tax resident in Spain if having in this country the centre of your economic interests. Tax residents are subject to Spanish income tax on their worldwide income, while non-residents are taxed only on income generated in Spain.

READ ALSO: Do I have to pay tax twice if I’m an American living in Spain?

2. Income Tax and Wealth Tax: Spain imposes income tax (IRPF) and wealth tax (Impuesto sobre el Patrimonio) differently across its autonomous communities. The rates and allowances can vary, so understanding the specific regulations in the region where you plan to buy is crucial. For instance, some regions might have higher exemptions for wealth tax, impacting the overall cost of owning high-value properties.

3. Rental Income: If you plan to rent out your property, you need to be aware of the taxation rules on rental income. US tax residents are currently taxed for their rental incomes in Spain at a 24 percent flat rate on rental income (not being allowed to deduct any expense), whereas Spanish tax residents include rental income in their general taxable income (with different expenses being tax deductible), which could be taxed at progressive rates. Counting with the appropriate assistance of tax lawyers specialized in American clients and with a full knowledge of the US-Spain Tax Treaty can considerably help you to improve your tax bill.

READ ALSO: What the new Spain-US social security deal means for Americans

4. Special Tax Expats Regime: Implemented at the time that David Beckham joined Real Madrid (and known because of that as “Beckham Regime”), that regime may allow you enjoying the pros of being a tax resident in Spain, by living in this country exceeding 183 days per year, but taking advantage of a 24% flat rate and only making taxable in Spain labour incomes together with other incomes generated in Spain but not being taxable in Spain those sourced abroad. This tax regime has a maximum total 6 years duration and those who are eligible for it they also avoid filing Wealth Tax in Spain for their worldwide wealth.

To properly apply for it, it is always recommendable carrying out a previous tax planning and analysis with specialized Tax Lawyers before buying your property and moving to Spain.

READ MORE: 

Property Inspections

A thorough technical inspection by a qualified architect is advisable to ensure the property meets all regulatory standards and is free from structural defects.

1. Construction Defects: Architects can identify potential issues such as structural integrity, water damage, and compliance with building codes. This is especially important for older properties or those that have undergone renovations.

2. Urban Planning Compliance: The inspection should also verify that the property complies with local urban planning regulations. Non-compliance can result in significant fines or even demolition orders.

READ ALSO: Do I need planning permission in Spain and how do I apply for it?

Buyer’s Agents

Unlike real estate agents who typically represent the seller and defend his interests, buyer’s agents work in the interest of the buyer, offering numerous advantages.

1. Local Market Knowledge: Buyer’s agents are well-versed in the local market conditions and can provide valuable insights into different neighbourhoods, school districts, community amenities etc. This knowledge helps in identifying properties that best match your preferences and needs.

2. Fair Pricing: Buyer’s agents can help negotiate better prices. They are familiar with the local market rates and can prevent the common practice of overpricing properties for foreign buyers.

3. Due Diligence: By conducting thorough market analyses and property evaluations, buyer’s agents can ensure that you make an informed decision. They also handle the negotiation process, striving to secure the best possible deal on your behalf.

READ ALSO:

Financial Advice

Securing favourable financial terms can result in substantial savings, making it essential to seek expert financial advice.

1. Currency Exchange: For American buyers, currency exchange rates can significantly impact the cost of purchasing a property. Working with a reputable currency exchange provider can help you get the best rates, reducing overall expenses.

2. Mortgage Conditions: Comparing mortgage conditions from different lenders is crucial. Spanish banks offer various mortgage products, and an independent financial advisor can help you find the most favourable terms, considering interest rates, repayment periods, and other conditions.

READ ALSO: What non-residents should now about getting a mortgage in Spain

Conclusion

Buying a residential property in Spain involves navigating a complex legal and fiscal landscape.

By engaging specialized lawyers, conducting thorough property inspections, utilizing the services of buyer’s agents, and counting with expert financial advice, American buyers can mitigate risks and make informed decisions.

With careful planning and the right support, purchasing a home in Spain can be a rewarding investment and a gateway to enjoying the country’s rich culture and beautiful landscapes.

This article was written by Maryem Essadik, immigration lawyer and head of English-speaking international law firm in Madrid Marfour (Contact: +34 698 917 840, [email protected]).

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PROPERTY

The ‘Vienna project’ and €400 rents in big cities: Spain eyes social housing targets

Spain is currently facing a severe housing crisis with millions across the country not able to access appropriate accommodation due to a lack of social housing and soaring rents. Here's what the government plans to do about it.

Published: 26 July 2024 10:06 CEST
The 'Vienna project' and €400 rents in big cities: Spain eyes social housing targets

Spain has a housing crisis, and it’s not just the hundred of thousands of renters struggling to find a well-priced flat who are affected.

Official statistics show that the rate of homelessness in Spain has risen by 24 percent since 2012 to 28,000 people.

A recent Bank of Spain report also revealed that around 45 percent of people living in rented accommodation are at risk of poverty or social exclusion, the highest proportion in Europe.

More than 60 percent of 18 to 34-year-olds still live at home with their parents, the fastest rising rate of young to do so in Europe between 2008 and 2022.

Keeping in mind that there are half a million new homes in Spain that have never been lived in and countless derelict and abandoned homes that add up to a total of 3.8 million empty properties in the country, it may seem hard to believe that what Spain needs to do is build more housing units.

But it does, in particular social housing.

According to figures from Spain’s Land and Housing Observatory, in 2020 just 2.5 percent of total constructions in Spain were for social housing. 

Reports from the Bank of Spain show that Spain’s current social housing stock is even lower – just 1.5 percent of all homes compared to a European average of nine percent.

Spain is one of a small handful of EU countries that have surprisingly low social housing provisions. Spain ranks 18th in the EU overall and is joined at the bottom of the table by countries such as Romania (1.5 percent), Estonia (1.7 percent), Croatia (1.8 percent) and Portugal (2 percent).

For decades now, Vienna, the Austrian capital, has increased its stock of price-controlled social housing and has stood out for its housing policy. By increasing social housing and limiting rent, the value of housing has also been limited and prices have been regulated.

Spain has begun to look towards the Viennese model in order to tackle its housing crisis.

READ ALSO: Why Spain is looking to Vienna to fix its housing crisis

On July 24th, the Spanish government gave the go-ahead to a plan to allocate 50,000 Sareb homes to bolster its dwindling social housing stock. 

Sareb, also known as Spain’s ‘bad bank’, was created eleven years ago to buy real estate assets from banks that went bankrupt during the 2008 financial crisis, and it has been state-run since 2022.

Spain’s Minister of Economy, Commerce and Business, Carlos Cuerpo also announced that Sareb’s board of directors had approved the so-called ‘Vienna Project’, “which will allow the construction of some 10,600 homes for affordable rental.”

“We are talking about more than 130 plots of land that will allow the construction of some 10,600 affordable rental homes,” he explained in an interview on RNE.

This ‘Vienna Project’ is part of the objective already announced by the Minister of Housing Isabel Rodríguez of building more than 180,000 state-owned homes for affordable rental.

Cuerpo hopes these homes will become available in the next two to two and a half years.

In addition to this project, the Spanish government’s junior coalition partner have been trying to come up with their own solutions to the problem.

Sumar’s economic spokesperson, Carlos Martín, recently proposed the construction of 500,000 public homes with a rent of €400 per month in ‘stressed’ rental areas, more than double the amount of housing units set by their Socialist partners.

“They should be built on public land and be financed by EU soft loans,” Martín argued, arguing that Spain’s public-private housing model had “failed” and that “private real estate companies should be excluded from the project”, as “millions” of social housing units in the country had already ended up in the hands of the “speculative market”.

‘Stressed’ rental areas are defined as those that exceed the Consumer Price Index (CPI) of their respective province by five points and where families dedicate more than 30 percent of their salary to paying the rent. 

Martín believes that putting empty homes back on the market should be the first step, followed by step two – build a staggering 500,000 public housing units.

Whether or not this proposal will be approved is yet to be seen; the half a million figure certainly seems fairly unattainable in the short term, especially in a country famed for its painfully slow bureaucracy and construction work.

Other actions that Spain has taken to try and solve its housing crisis include scrapping its golden visa, whereby non-EU nationals can gain residency by buying a property worth at least €500,000.

Some see this is a political move, as these wealthy foreign buyers do not represent enough of a high number to warp the housing market.

Many cities and regions have also introduced measures to try and curb the proliferation of tourist rentals, which are more widely blamed for reducing the number of rental properties available, as landlords opt for more remunerative Airbnbs than long-term rentals.

Proposed measures include putting a stop to the issuance of tourist licences, slapping VAT on landlords’ profits, giving communities of owners the power to decide whether to allow holiday lets in their buildings, and in the case of Barcelona – eliminating them entirely within the next four years.

The hope is that fewer tourist rentals will put many more properties back on the market for locals and will also help to regulate rental prices.

READ MORE: Why controlling Spain’s Airbnbs may not lower rents

Numerous protests against mass tourism have been held across Spain in recent months, with residents’ main gripes being the impact the industry is having on housing prices and the ensuing gentrification, rather than tourists themselves.

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