Cost of Buying Property in Spain: Everything Expats Need to Know
Spain is an amazing country to buy property in. With so many incredible cities, rural villages, and coastal towns, it’s no wonder that tens of thousands of foreigners buy property in the country each year. Large parts of Spain tend to be financially more rewarding than other EU countries, which is another big drive for many.
However, there are a few costs involved in buying property in Spain. Some of them may be similar to your home of residence, but others can vary quite a lot.
Anyone wanting to buy a holiday home in Spain must be aware of all the costs involved so that they can budget accordingly.
Here’s everything expats need to know.
11 Costs Involved in Buying Property in Spain
While finances are an essential part of buying property in Spain, there are also lots of bureaucratic things that potential buyers need to be aware of. One of the most important, and something we recommend doing before you even start to look for property, is getting a NIE (Número de Identificación de Extranjero). You’ll need this for setting up a Spanish bank account, making an offer on a property and utility direct debits.
#1. The Property Value
Of course, the largest cost involved in buying property is the cost of the land or property. In 2023, the average property price in Spain was around €3,000 per square metre. Some areas, such as Barcelona and Madrid are much more expensive than others and, like in most countries, you’re likely to pay more in cities than you are in more rural areas.
#2. Reservation Fee
Once you’ve completed your Spanish property search and you wish to make an offer on your dream home, you’ll need to sign a reservation contract and pay the reservation fee. The contract clearly states the agreed-upon price for the property and the condition that it will be sold in. The buyer is required to pay an amount (usually between €1,000 and €6,000) to secure the bid whilst the Arras Contract is drawn up. If, for any reason, the deal falls through during this time, the money is returned to the buyer.
If the purchase goes ahead, this sum can either be returned to the buyer or taken off the total amount of the property.
#3. 10% of Purchase Sum
When you sign the Arras Contract (Contrato de Arras), you’ll be asked to transfer 10% of the purchase sum, including the reservation fee. There are different ways of doing this and it’s not uncommon in Spain to transfer the money directly to the seller once the contract is signed. However, we would always recommend transferring this money to a safeguarded account.
Once you’ve transferred the amount, you’re committed to buying the property or you’ll lose the 10% you’ve paid. Likewise, however, the seller is committed to selling the property to you, or they’ll have to pay you 20% back.
#4. Notary Fee
Whether you need to organise a mortgage or not, you’ll set a date with the sellers and the notary to sign the deed and pay the remaining 90%. Notary fees range between 0.01% and 2% of the property purchase price and are almost always the responsibility of the buyer. Fees may vary depending on factors such as if there’s a mortgage involved or not.
#5. Property Transfer Tax
If you’re buying a property on the secondary market (i.e. not a new build), you’ll need to pay property transfer tax. This is typically up to 10% but it does depend on a couple of factors such as location, outbuildings (like garages) and the size of the property.
For new properties, 10% VAT is applicable instead.
#6. Real Estate Agency Fees
Different agents charge different amounts, although it’s usually somewhere between 3% and 10% of the final sale price. In most cases, the seller pays this fee, although it’s not uncommon for the buyer to pay it. So, make sure you ask in advance and add this to your overall budget if necessary.
7. Property Registry Fee
Registering the property is the responsibility of the buyer. Again, how much it costs will depend on several factors, including the property value and location. Generally speaking, you can expect to pay between €500 and €1,000.
#8. Local Property Tax (IBI)
Property tax is paid annually in Spain and the amount you’ll pay depends on the tax value of your property. It’s set up as a direct debit and the date it will be paid depends on the location of your property.
#9. Non-Resident Income Tax (IRNR)
If you’re a non-resident of Spain (meaning you spend less than 183 days in the country and your main home address is in another country), you’ll need to pay non-resident income tax. To do this, you’ll have to fill out form 210 IRNR before the 31st of December each year. How much you’ll need to pay depends on the value of your property but, in Spain, the taxable amount is usually 1.1% of the entire value of the property.
For those living inside the European Economic Area, it’s 19% of this 1.1% and for those outside it, it’s 24%.
One of the biggest differences for Brits buying property in Spain after Brexit is that they’ll now have to pay 24% non-resident income tax, rather than 19%.
Non-residents renting out their property will also have to fill in the same form (210) to report the rental income they received for that year. It will need to be completed by the 20th of January of the following year. Some rental expenses can be added to the tax return and, again, it’s 19% for EU/EEA citizens and 24% for others.
#10. Rubbish Collection Fee
All property owners in Spain need to pay a rubbish collection fee. Depending on where your property is, you’ll pay between 1-4 times per year and it’s usually set up as a direct debit.
#11. Capital Gains Tax
OK, so this isn’t quite a cost for buying property in Spain but it’s still an important part of budgeting. When you sell your property down the line, you’ll need to pay tax on the profit. The purchase price and any renovations that have been registered with the local tax office will not be taxed. EU and EEA residents will pay 19% and others will pay 24%.
In some instances, you can reinvest the gains into a new property and not pay the gains tax.
Choose Bueno to Help with Your Property Banking Needs
Opening up a Bueno current account can help you make the most of your finances and your Spanish property. You’ll be able to handle all your property management needs and have access to personal consultants who speak over 8 languages. By having a Bueno current account, you can save significantly on your property bills, tax returns and banking costs in Spain!