The last few years have seen the Spanish property market experiencing something of a boom time, with both foreign and local buyers looking to snap up prime properties.  While Spain has a fully developed property market, there are massive regional variations which can often give the wrong impression to those not doing their homework. Expats wanting to live in Spain need to do their research.

The internet and a more professional approach to buying abroad has alerted many to the potential pitfalls of buying overseas property, resulting in foreign investors taking more time to evaluate and make offers.  This more conservative approach has led to a cooling of the market, together with the fact that other areas of Europe now offer potentially better value than Spain (after the recent boom years). 

Contents: Property Market Performance in Spain | Property Costs in Spain

Spanish Property Market Performance

The Spanish market has been very volatile over the last decade, with 1996 and 1997 property price rises in the low single digits, while 2002-004 saw price inflation between 17% and 18% per annum - a trend which could not continue for ever.  The increase in property prices fell to 9% in 2006, with many observers expecting a further slowing of the rate of growth in 2007.

The market is also experiencing something of a reality check with local estate agents commenting that many sellers have yet to realign their sale prices with the recent market consolidation.  There are however signs that the news is slowly filtering through, with average sale times extended someway from the earlier boom times.

 An interesting trend has also appeared with English speaking buyers ignoring the central and northern property markets, which actually showed the most growth last year.  The worst performing area was the southern region of Spain which has predominately been a hive of activity for UK buyers.  

Longer term the Spanish property market is still very attractive, although this current period of consolidation offers a chance for prices to take a breather.  

Property Costs in Spain

As with any property market, there are particular cost factors which need to be taken into account - with Spain no different.  Not all property markets are the same, and costs can vary wildly!

Taxes

There are a variety of taxes payable when purchasing Spanish property, although they depend on what type of property you are buying.  If you are buying a resale property from a private individual then you will be liable to pay transfer at.  However, if you are buying a new property you will be liabile to VAT as well as stamp duty.  While there are some region variations to the tax charges, they general level off at between 7% and 8% of the purchase price - far higher than places such as the UK.

It also goes without saying that when buying property abroad you need to employ the services of a local lawyer, ensuring that you abide by local laws and pay the relevant taxes.  There have been many cases of buyers acquiring property only to find that the correct paperwork has not been completed - resulting in potential expensive and often long drawn out investigations by the authorities.  

There are also arrangement costs of 1% for each Spanish mortgage which needs to be factored in to your calculations.  It is essential that you respect local laws and procedures, as many have learnt in the past!