Questions about buying a property in Spain

Expat Ben · #1 (**permalink**) 19th October 2009, 11:51 AM

Hi again.

I understand that in Spain if you purchase a NEW property then you must pay IVA (VAT); but does the buyer need to pay IVA on a property that is second hand ?

I've seen property prices drop significantly in parts of the Costa del Sol, but the bank will only offer mortgages up to a maximum of 80% of the value of the property; either the valuation of the owner or the bank; whichever is lower.

So if a property has reduced in price by say 25% in the last 2 years, would the bank still only loan a maximum of 80% of the value as I've also come across properties being advertised as having 100% finance available ?

Is it also true that land is cheaper to buy in the South of Spain and that the prices of the properties are being fixed by the banks not the owners ?

Ben

jojo · #2 (**permalink**) 19th October 2009, 12:02 PM

I think you have to pay IVA on a second hand property at a reduced rate, not sure what that is tho! I do know that whatever price you buy a property for in Spain you will pay at least 10% more in fees! Mortgages are extremely difficult to obtain in Spain at the mo, they are reluctant to give self certification mortgages or to give mortgages on anyone who has been here less that 2 years, but I'm sure if you hunt around, they could be found. But 100% on anything when prices here are still apparently falling would be near impossible to get IMO

Jo xxx

Xose · #3 (**permalink**) 19th October 2009, 12:34 PM

Quote:

Originally Posted by Expat Ben

Hi again.

I understand that in Spain if you purchase a NEW property then you must pay IVA (VAT); but does the buyer need to pay IVA on a property that is second hand ?

I've seen property prices drop significantly in parts of the Costa del Sol, but the bank will only offer mortgages up to a maximum of 80% of the value of the property; either the valuation of the owner or the bank; whichever is lower.

So if a property has reduced in price by say 25% in the last 2 years, would the bank still only loan a maximum of 80% of the value as I've also come across properties being advertised as having 100% finance available ?

Is it also true that land is cheaper to buy in the South of Spain and that the prices of the properties are being fixed by the banks not the owners ?

Ben

Hi Ben,
The Impuesto de Transferencia is not VAT, but I believe it's 7% in any case, just like the VAT in a new property (and 8% from next June I believe)

You can reckon on 10%-11% of purchase price for the taxes, notario and the like.

The Tax is worked out by Hacienda on the value it is Escriturado for. Hardly ever the same as the Market value. As a guide, I would say that a 380K or so house would be Escriturada for about 250K or so. This will be similar to the valor catastral and on which rates and the like are based. Usually, if Hacienda's tables don't agree with what it's registered for, they send on a little present after the initial payment of the Tax - a top up to meet their table of values for that property in that area.... at which point you pay the diff between that already paid and what they say you should have paid.

As for the banks setting prices - well, twas ever thus in any country. If you need a mortgage, then their valuation (about 350€ or more) will dictate what they'll loan. This is nothing to do with what the property is on the market for as the vendor will decide what they will and what they won't let it go for. The fact that the bank will only loan 80% (70% for non residents was the guideline from Banco de Espana when I last looked for someone) is an additional headache as once again, this takes you even further from what the seller is willing to accept.

I remember this when the guy buying my house in the UK in 1992, argued that the bank had valued it at 20% below what I was asking. I told him that I was not willing to argue the bank's market risk assesment process with him and that the estate agents valuation stood. He ended up paying what I was asking (very close in fact) as I don't think he understod that Bank valuations in the negative credit housing market we were in had nothing to do with market value as at that precise moment. Obviously I was lucky he could go ahead with a less % mortgage than he was obviously hoping for.

All of the property valuations, as in any market, have a finite time value and what the market's done in the last two years is of little interest to the bank who will want to value now for a now mortgage (though as stated, their valuation will reflect current market trends V. the risk they are willing to take.... and of 80% MAX. mind you, you could find that if your finances are good and demonstrable, they will be happy to give you a 20% of the value personal loan - at a much higher percentage of course.

Xose

grahunt · #4 (**permalink**) 20th October 2009, 09:57 AM

Tax is currently 7% on all transactions new or second hand (I think some autonomous communities still have 6% for new but in most it is definitely 7%) It is going up next July to 8% so that is something to bear in mind. Also VAT on all other costs goes up to 18% from 16% so if you see a bargain get it before July 2010.

Oh and banks will finance at 100% but only on their own repos. They want them off the books. Most banks are fiancing at 70-75% max of value on others' properties.

Expat Ben · #5 (**permalink**) 20th October 2009, 11:35 AM

[QUOTE=grahunt;198785]Tax is currently 7% on all transactions new or second hand (I think some autonomous communities still have 6% for new but in most it is definitely 7%) It is going up next July to 8% so that is something to bear in mind. Also VAT on all other costs goes up to 18% from 16% so if you see a bargain get it before July 2010.

Thank you and to the person that sent me a pm on this subject

Oh and banks will finance at 100% but only on their own repos. They want them off the books. Most banks are fiancing at 70-75% max of value on others' properties.

How or where do I find the info on properties the banks want to off-load or sell on with 100% finance, please ?

Suenneil · #6 (**permalink**) 20th October 2009, 11:42 AM

[quote=Expat Ben;198847]

Quote:

Originally Posted by grahunt

Tax is currently 7% on all transactions new or second hand (I think some autonomous communities still have 6% for new but in most it is definitely 7%) It is going up next July to 8% so that is something to bear in mind. Also VAT on all other costs goes up to 18% from 16% so if you see a bargain get it before July 2010.

Thank you and to the person that sent me a pm on this subject

Oh and banks will finance at 100% but only on their own repos. They want them off the books. Most banks are fiancing at 70-75% max of value on others' properties.

How or where do I find the info on properties the banks want to off-load or sell on with 100% finance, please ?

Hi Ben

Some of the banks have set up their own websites for to advertise such properties, and are even putting up advertising boards "for sale" boards, but they are usually under a different name to the actual bank.... unfortunately my Oh did tell me the name of one on Saturday as we drove past but I cant remember the bloomin name .... Ill see if I can find out for you.

Sue

Expat Ben · #7 (**permalink**) 21st October 2009, 01:56 PM

[quote=Suenneil;198853]

Quote:

Originally Posted by Expat Ben

Hi Ben

Some of the banks have set up their own websites for to advertise such properties,

Sue

Thank you Miss Neil.

Ben

mrypg9 · #8 (**permalink**) 21st October 2009, 03:50 PM

100% mortgages are a very bad thing, IMHO. If banks and other mortgage lenders had stayed with the old practice of lending 75% of the valuation we may have seen fewer repossessions. I've heard of lenders who give 150% mortgages and even higher....
In these days of devalued property assets, it's not safe to lend such a percentage or indeed to borrow.
That's just my general opinion and I'm sure Ben is well aware of all the risks and indeed benefits involved.

grahunt · #9 (**permalink**) 21st October 2009, 09:47 PM

If you get a good deal on price from the bank and they finance 100% then there is little risk as long as you can afford the repayments even if interest rates go up. However don't expect too many good bank repos without having an enchufe. I have just written a blog post about this and have PM'd you with the url to have a look

Parker · #10 (**permalink**) 22nd October 2009, 08:41 AM

MANY QUESTIONS.THINGS IN SPAIN AND EVERYWHERE IN EUROPE ARE TRICKIER. ASK HOW WILL THE DEAL ON A PROPERTY BE ESTABLISHED IF YOU CAN'T BE PRESENT THERE ALL THE TIME.ASK WHAT KIND OF DOCUMENTS THEY WILL NEED FROM A DIFFERENT COUNTRY TO AUTHENTICATE EVERYTHING.ASK HOW LONG WILL IT TAKE TO COMPLETE AND FINALIZE THE DEAL USUALLY. IF YOU ARE PLANNING TO BUILD OR RENOVATE THE PROPERTY IT TAKES FOR EVER TO GET A LICENSE FOR THAT SO MY ADVISE IS TO BUY A READ-TO-MOVE-IN PROPERTY. ALSO YOU NEED TO FIND OUT MORE ABOUT THE AREA YOU WANT TO BUY AND OBTAIN FROM THE ESTATE AGENTS ALL THE LOCAL IMPORTANT NUMBERS FOR PLUMBERS,PAINTERS, ELECTRICIANS JUST IN CASE. ALSO IN SOME COUNTRIES YOU NEED TO PAY TAX FOR PROPERTY AND MAINTENANCE. JUST GO IN THE AGENT'S OFFICE AND TELL ME YOU ARE BUYING PROPERTY AND WHAT DO THEY NEED FORM YOU AND WHAT DO YOU NEED TO KNOW ABOUT IT IF THEY ARE NOT HELPFUL JUST GET A LAWYER. YOU CAN FIND A CHEAP ONE(THEY ARE EVERYWHERE) AND THE LAWYER WILL EXPLAIN TO YOU ALL THE LEGAL BITS.

HOPE I HELPED (snip)