The current housing market in the UK is extremely strong and many home owners are finding that they have a large amount of equity in their property, and are choosing to invest it in one of the most comfortable and profitable regions of Europe - southern Spain.

So, why not make the most of your equity and invest in a property in Spain? New developments in Spain are being constructed constantly, the reason being that they sell quickly (in most cases through off-plan investment schemes). You can purchase them for 75% of the market value and then find that their value has gone up by 20% in the first year. If you are not planning to live in them all year round, you are unlikely to have a problem renting them out.

There is so much property in Spain, so choosing your dream Spanish property can be a very daunting task. With such a reliable climate, affordable housing, health care, leisure, cultural activities and airports, it is no wonder that Spain has become so popular for buying a property.

Property development in Spain has also become extremely competitive due to the increase in demand for off-plan investment. Off-plan investment in Spain is generally a surefire way of optimising returns on investment in Spanish property. The Costa del Sol and Costa Blanca have a lot to offer on this kind of investment.

To make purchasing a property in Spain easier, it is always useful to decide before you start, in what area you want to look, and within that area, which part you would most like to make a property purchase i.e. you may like the idea of buying a property in Marbella and particularly like the Golden Mile as an area within the town. It is always useful to look at different types of properties in different areas so that you can get a really good idea of what you can get for your money. Once you have done this, your judgement will be a lot more insightful when making an offer.

There are many reputable estate agents in Spain, and of course, there are a lot of sharks as well! Recommendations are always useful when making the decision as to which real estate agency to approach, especially when the recommendation has come from a resident or a lawyer.

A good real estate agency in Spain should have a wide portfolio of resale and new developments, and show interest in what the customer wants instead of the customer having to choose what the agency has on their books. A commendable agent will have good market knowledge on many areas and property types and will match your requirements to the best of their ability. And once you have made your Spanish property purchase, the service should not stop there as they should stretch to help you settle into your new home by informing you of local services and amenities, as well as advising you where to go for specific furnishing requirements.

1. An established estate agent with experience of the market.

2. A lawyer who is familiar with Spanish law.

Over the last few years more people have been attracted to making the move and moving to the coast either as a permanent resident, a residential tourist or to work.

What investment options are available?

There are 3 standard off-plan investment routes followed by our clients according to which type of return they are looking for:

          - Short-term/quick return

          - Medium-term/longer-term investment

          - Buy-to-let (maximum rental return)

However, it is important to stress that having committed to one route; it is not set in stone and can be changed at any stage of the process. (i.e. a short-term investor could decide to hold on to the property and turn it into a buy-to-let and vice versa).

We recommend that you take advice regarding tax implications from a professional tax/financial consultant.

Estate Agents

Once you have decided to make a purchase the first step is to choose an estate agent who has knowledge of the appropriate property market in Spain and experience within the area of your choice.

When the property is established (i.e. second home, investment property or permanent home), the agent will be able to guide you to the correct choice for your budget, quality, area and purpose.

An experienced and professional estate agency in Spain will match you with an agent who has expert knowledge of your chosen areas, speaks the same language and who is able to recommend tried and tested supplementary services, such as lawyers, financial advice and currency exchange.

An experienced estate agent will also be able to supply you with details of the extra costs involved of purchasing property in Spain. It is expected that taxes and charges will be liable, however, they may be different from your current local and national taxes and it important to be aware of the projected annual costs, such as; Community Fees, Property Income and Wealth Tax, Annual Real Estate Tax (IBI) and utility bills etc. It is advisable to seek legal advice to ensure that all of the charges are apparent.

Legal Advice

Choosing the right lawyer is essential in order avoid any unnecessary problems and is your guarantee that the correct Spanish legal procedure is adhered to. If you do not have your own lawyer, there are many excellent English speaking lawyers in Spain, who will be able to assist you and protect your interests throughout every step of the buying process.

The lawyer will make sure that the property is registered in the vendor''''s name; it is free from charges, debts or other liabilities (as any debt on the property will be passed on to the new owner).

Although, your estate agent is instrumental in organizing the fine details of your property purchase, it is your lawyer who will liaise with the vendor to negotiate the completion date, form of payment etc. and will ensure that the timetable of events is adhered to.

After you have put down your initial reservation fee, this is the stage that your lawyer will take over the procedure. The lawyers will draw up a private purchase contract and it is customary to pay a 10 per cent deposit on the total cost of the property which is non refundable if the purchaser decides against the transaction. However, should the vendor fail to fulfil their obligations, the deposit is refundable and the contract will be void and damages could be liable. Before the exchange of contracts, the lawyer will complete the necessary searches on the property.

On the completion date the lawyer will go to the Notary Public and sign the deed and pay the final payment of the purchase price. At this stage the property will belong to the purchaser and the keys will be handed over, completing the transaction.

The Notary Public will forward details of the title deed to the land registry to inform them of the new owner and to prevent the property being sold twice and at this stage taxes will be payable.

Taxes Payable

          - Re-sale properties - transfer tax (ITP) at 7%

          - New properties - VAT (IVA) at 7% and stamp duty of 1% (VAT (or IVA in Spain) increases to 16% if purchasing plots of land, commercial premises or garage spaces).

          - Plusvalía - tax levied by local the town hall is based on:

                      Area where the property is located

                      Surface area of the land

                      Date of the previous title deed

          - Lawyers fees - between 1 % & 2% of the purchase price plus VAT (IVA) at 16%.

Fees Payable

          - Notary Public - charges calculated on a fixed scale ranging from:

                      €340 for a property price of € 120.202

                      €601 for a property price of € 601.012

          - Land Registry - approximately 40% of notary charges

Tax Issues When Investing In Spain

There is a 7% tax on resale and new properties. For staged payments on a project build, the tax is paid on each staged payment.

Liability to Yearly Taxes due to the Ownership of Real Estate in Spain

As a non-resident owner of property in Spain, you are liable for Spanish taxes. Taxes are classed as either Municipal or State.

Municipal Taxes include:

Tax for the collection of rubbish (Recogida Domiciliaria de Basura). This is often included in your Community Fees. 

Municipal taxes are paid annually to the Town Hall. These vary depending on the area in which you purchase your property. 

Each Town Hall has its own period for voluntary payment, favouring prompt payers with certain discounts

State Taxes include:

Wealth Tax - This is paid annually on the 31st of December and is calculated by percentage value of the property.

Property value is taken as the highest of the following:

          Purchase Price

          Cadastral Value

          Value checked by the taxation authorities.

Income Tax for Residents

This is calculated according to two criteria:

          - If the property is used only by its owner

          - If the property is rented to a third party

In the first case, the income on which the tax is applied is a legal income and is presumed to have been yielded to the benefit to the owner of the property. This is calculated at 2% of the cadastral value of the property. The tax paid is 25% of this amount.

Property Types in Spain

Apartment - all on one floor in a building with at least 3 floors

Townhouse - terraced house with at least 2 floors (does not have to be in the town)

Chalet - detached or semi-detached property

Villa - detached or semi-detached property, generally in own grounds with own swimming pool

Duplex - apartment spanning 2 floors in a building of at least 3 storeys

Penthouse - apartment or duplex on the top floor of an apartment building

What is a Gestor and do I need one?

A Gestor is specifically a Spanish phenomenon and is essentially an agent (fiscal representative) who will deal with all the necessary bureaucracy associated with living in Spain for a reasonable fee. The Gestor is not a lawyer, but has knowledge of the procedures, taxes and fees payable and can save you the time and frustration of dealing with potentially complicated systems, and just as importantly, ensuring that no fines are incurred for non-payment of taxes that you were not aware of.

What is a Spanish Notary Public?

Although the Spanish Notary Public (notario) is a lawyer, their job is strictly to witness the signing of the title deeds and to ensure that all liable taxes are paid on the completion of the transaction. Any legal advice required by the vendor or purchaser must be obtained from a separate lawyer.

Notaries are paid both the vendor and purchaser. They are charged on a sliding scale set by the Spanish government, which vary depending on the property price and the amount of work in preparing the documents.

Prior to preparing the deed of sale (escritura), the notario makes sure the property and price are correct and will also advise of any taxes, which are due on the property.

When the deed of sale is signed both parties should be present and if not, a nominated power of attorney (Poder Especial) to represent them and will be witnessed by the Notario (of course this will incur and additional cost of 40€ to 100€!).

Having signed the deed of sale and the purchase price has been handed to the vendor, the proof of payment is noted in the Escritura which is then registered with the local property register. Non-residents will need to relinquish 5% of the purchase price to be paid as Capital Gains Tax.

Having purchased your property you will be liable for the following basic expenses:

          - Community fees. Charged for the upkeep of the community grounds, communal areas, facilities and security should this be a service on your           particular urbanization.

          - Rates

          - Rubbish collection

          - Income

          - Wealth Tax. Approximately, 1.5% of the purchase price per year.

          - Water

          - Electricity (Spanish homes do not have piped gas and if required is purchased in bottles)

          - Insurance

How do I arrange to retire in Spain?

Retiring to an EEC country does not necessarily have to be a daunting prospect and the way to avoid any of the common pitfalls is thorough research BEFORE you go. The most important step is to find out the legalities and your financial feasibility of settling in a foreign country (even in Europe).

Useful Addresses for Over 50''''''''s Retiring to Spain

Age Concern Information Line

Freepost (SWB 30375),

Ashburton,

Devon TQ13 7ZZ.

Tel: 0800 00 99 66

Fax: 020 8765 7211

Web: www.ageconcern.org.uk

The Association of Retired and Persons Over 50 (ARP/O50)

Greencoat House,

Francis St,

London SW1P 1DZ.

Tel: 020 7828 0500

Fax: 020 7233 7132

E-mail: info@arp.org.uk

Web: www.arp.org.uk

Inland Revenue

International Branch,

Benton Park View,

Newcastle-upon-Tyne NE98 1BA.

Tel: 0845 9154811/ Overseas: 00 44 (0) 191 225 4811/ Fax. 0845 9153232

Overseas:00 44 (0)191 225 3232

Web: www.inlandrevenue.gov.uk/international/index.php

For details of UK Income Tax whilst abroad contact:

Inland Revenue

Centre for Non Residents

St John''''''''s House

Merton Rd, Bootle,

Merseyside L69 9BB.

Financial Intermediaries and Claims Office:

Tel: UK 0845 0700040

Abroad +00 44 (0)151 210 2222

National insurance contributions

Inland Revenue,

National Insurance Contributions Office,

International Services,

Longbenton,

Newcastle upon Tyne, NE98 1ZZ.

International Services Helpline:

Tel: UK 084591 54811 / Abroad +00 44 (0)191 225 4811

Fax: UK 084591 50067 / Abroad +00 44 (0)191 225 0067

Email: internationalservices.ir.sbg@ir.gsi.gov.uk

Retirement Pension Forecasting and Advice Unit (RPFA)

Department for Work and Pensions,

Newcastle-upon-Tyne, NE98 1BA.

Tel: +00 44 (0) 191 218 7585

Fax: +00 44 (0) 191 218 7293

Web: www.dwp.gov.uk/lifeevent/penret/index.php

Do I need to apply for residency ?

When moving to another country it is important to make sure that all paper work is in order and that you have researched all aspects of living overseas including financial, social and cultural. Here is a brief checklist of points to consider before becoming a resident (ex-patriot) in another country.

          - Ensure your passport is valid until you next indent to return to the UK.

          - The law in Spain specifies that a person who has been present in Spain for six months must either leave or apply for a residence permit (residencia).         However, since 14th February 2003, it is no longer necessary for EEC citizens to apply for residencia, unless you open a business, to obtain credit etc. However, this ruling does NOT apply to pensioners. It is necessary for pensioners retiring to Spain to apply for residencia.

          - If you intend to have any financial dealings, apply for an NIE (foreigner''''''''s identification and social security number) at the police station. This is will be needed to set up a bank account and also when you start a job.

          -  Set up a current account in plenty of time. The bank will issue cards with your account details on, which you can present to your employer and other official bodies

          - Arrange adequate insurance.