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PROPERTY

Moving to Spain: Should I rent or buy on the Costa del Sol?

Whether you’re a frequent visitor to the Costa del Sol or are thinking of moving to the area, you need to decide whether to rent or buy a property.

Published: 21 December 2020 12:42 CET
Moving to Spain: Should I rent or buy on the Costa del Sol?
Photo: AFP

Both options come with advantages and disadvantages. And of course, the ultimate decision will depend on your personal circumstances, finances and medium-term plans.

In this article Celeste Alonso, manager of The Property Agent and an expert on real estate on the Costa del Sol, explores the pros and cons of renting or buying real estate on the Costa del Sol and then crunches the numbers.

The advantages of buying property on the Costa del Sol

If you plan to visit several times a year or make the Costa del Sol your permanent home, buying property makes a good option for the following reasons:

Stable and convenient

Owning the property you live in adds stability to your situation. And if it’s a holiday home, you can leave your stuff in it from one visit to the next.

Financial profit

Buying a home should reap you rewards in the medium to long term because the underlying trend in property prices is always up. But to make a profit, you need to sell at the right time.

Personalisation

You can do what you like in your own home to adapt and furnish it to exactly what you want. If you’re buying off plan on the Costa del Sol, you can even customise the property at construction stage to suit you.

Leverage

When mortgage interest rates are low (as they are now) Check this article  you can get much more for your money when you buy.

Haven in the sun

And last but definitely not least, you own a home in a place with 320 days of sunshine a year!


Photo by Ivana Cajina on Unsplash

The disadvantages of buying real estate on the Costa del Sol

But it isn’t all about benefits – buying property does have its drawbacks too. They include:

High initial costs

Buying a home in Andalucia involves taxes and fees on top of the purchase price. And they’re expensive – budget for between 10 percent and 12 percent extra.

The counterbalance? Think of your purchase as a long-term investment so you have time to recoup buying costs.

Location inflexibility

You may discover you don’t like the location you’ve bought in.

The counterbalance? Research the area carefully before you buy and use an agent with specialised local knowledge.

READ ALSO:

Costs are all yours

Owning a home inevitably involves maintenance and upkeep that can be costly. And those costs are all yours.

The counterbalance? Buy a new-build property on the Costa del Sol.

The advantages of renting real estate on the Costa del Sol

If you’re not sure where to buy or confident that you’re going to stay on the Costa del Sol, renting a property offers a good temporary solution because:

Low initial costs

You only need one to two month’s rent plus the deposit and your initial costs are covered.

Flexibility

You have no tie to the rental property because you can leave with a month’s notice.

Did you know? The cheapest townhouse and villa rentals on the western Costa del Sol start at €900 a month.

The disadvantages of renting a property on the Costa del Sol

On the other hand, rentals have the following cons:

Uncertainty

Living in the property depends on a contract and the landlord might not renew it.

The counterbalance? Look at rent-to-buy options.

Zero wealth creation

Your monthly rent goes into the landlord’s bank account and adds nothing to your personal wealth.

The counterbalance? Make renting a temporary solution and plan to buy within 3 to 6 months.

Did you know? The most expensive villa rentals on the western Costa del Sol reach up to €16,000 a month.

How much does it cost to buy real estate on the Costa del Sol?

While renting offers a good temporary option, the balance ultimately tips in favour of buying. To give you an idea of what you can buy, we’ve sourced the cheapest and most expensive properties on the market right now.

The cheapest property

This comes as a very pleasant surprise – 2 bedrooms and 2 bathrooms over a spacious 74 square metre apartment plus sweeping sea views and designated parking space. All within a 10-minute drive of Estepona and Sotogrande. Yours for just €97,500. Find out more

The most expensive property

At the other end of the spectrum, this golf-front villa takes premium living on the Costa del Sol to new heights. Six bedrooms and seven bathrooms spread spaciously over 1,351 square metres. And you’ll also enjoy breathtaking sea views, marble floors, Mediterranean gardens and a pool. Plus all the extras available to residents at Finca Cortesín. Yours for €11,000,0000. Find out more

This article has been written by Celeste Alonso, who runs The Property Agent specializing in real estate on the Costa del Sol. If you are looking for property on the Costa del Sol contact her for HERE. 

READ MORE: 

 

Member comments

  1. Having owned property in France and not being a full time resident there I would add squatters to the list of disadvantages. We were relatively lucky as neighbours informed us quickly and the police acted. I would never buy another property in France or Spain without being a full time resident

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For members

PENSIONS

What Brits should know about SIPP and QROPS pensions if moving to Spain

This Q&A offers some key information on SIPP and QROPS pension plans for British pensioners thinking of retiring in Spain, to help them decide which option is better for them.

Published: 9 May 2024 09:39 CEST
What Brits should know about SIPP and QROPS pensions if moving to Spain

Q: What are SIPPs?

A: SIPP stands for Self-Invested Personal Pension and is a UK-based pension plan. If you open an international SIPP then you can draw from this while you’re living in Spain.

Q: What is QROPS?

A: QROPS stands for Qualifying Recognised Overseas Pension Scheme. It allows you to transfer your UK pension out of the country. They are outside the UK tax regime, but must be inside the European Economic Area (EEA) if you want to avoid charges from HMRC. They also need to have similar rules and regulations to a UK-registered pension plan. Many QROPs from those wishing to retire to somewhere in Europe are transferred to Malta. As there is a dual tax treaty between Spain and Malta you will not be subject to Maltese tax when you draw your pension from there.

Q: What do I need to consider when opening a SIPP?

A: If you choose to open a SIPP, as it is self-invested, you will be responsible for managing it and making all the investment decisions. It is therefore best for those who already have some knowledge of investing or those who have the time and who are willing to put the work in to learn. It does, however, mean that you also have greater control and flexibility over your finances. You can choose to have the SIPP managed by a professional advisor, but of course this is an extra expense. Your SIPP could also be potentially subject to UK tax laws. 

Q: What do I need to consider when opening QROPs?

A: This is best for those wishing to cut all ties with the UK and permanently retire to Spain for the rest of their lives. You could lose UK domicile if you choose to do this and don’t have any other assets there, but it could mean you could also avoid UK inheritance tax. It’s also ideal if you wish your family also live outside of the UK

Q: I intend to return to live in the UK at some point in the future, which is best for me?

A: As SIPPs are UK-based, if you plan on returning there to live at some point during your retirement, that option is best. If you have QROPS, you could be subject to a large tax payment if you want to transfer it back to the UK.

READ ALSO: Six factors British people need to consider before retiring to Spain

Q: Which option will be cheaper for me?

A: SIPPs are generally cheaper than QROPs as you are managing it and investing yourself. If you choose someone else to manage it for you, however, this may not be the case.

Q: Will my SIPP be subject to tax in Spain?

A: Yes, if you are resident in Spain then you must follow Spanish tax regulations meaning that any withdrawals from SIPPs will be subject to income tax here. Pensions in Spain are subject to progressive tax rates ranging from 19 to 47 percent.  While SIPPs are also subject to UK tax rules, due to the double tax treaty between Spain and UK, you will not be taxed twice.

Q: Will my QROPS my subject to tax in Spain?

A: Yes, again if you’re resident in Spain you will be taxed on pension income. You must report income from a QROPS on your annual tax return. If you’re already a Spanish tax resident when you move your pension, it’s important to be aware that you’ll pay Spanish income tax on the whole value of the fund, therefore it’s much better to move it beforehand and then make your permanent move to Spain. 

Q: I want my pension to be paid in Euros to avoid exchange fees, which option will be best for me?

A: If you want to be paid in Euros, then QROPS will be the best as you will have completely transferred it out of the UK and into the EEA. This means that when you draw your pension, it will be paid out to you directly in Euros.

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