Costs of buying a property
What expenses should I consider before buying a home on the Costa del Sol?.
- As a general rule, it is correct to estimate that, as a whole, the sum of the taxes and expenses associated with the purchase can increase the net price of the property by 10-15%.
- Ownership of a property in Spain entails a number of costs for the owner.
- These are summarised in the Property Tax (IBI), the Municipal Rubbish Tax, the Community Expenses, and the Supplies contracted in the property (electricity, gas, water, telephone, others) and pending invoicing until the day on which the public deed of sale is signed in favour of the new owner.
- In the event that these costs cannot be accurately calculated at that date, the buyer or his legal representative may withhold from the final payment an amount to cover them.
Property Tax (Impuesto sobre Bienes Inmuebles or IBI.
This is a property tax levied by the local council and is currently a percentage of the cadastral value. It can vary depending on the municipality where the property is located. As a reference, the applicable rates range between 0.3% and 1.3% of the cadastral value of the property. It is a charge equivalent to council tax in the UK. Before signing the purchase of the property, you must obtain from the seller a copy of the last I.B.I. receipt paid. Here you can check the value and the exact amount of the tax.
The Spanish Ministry of Public Works also recommends that purchasers of new homes obtain from the developer a Certificate from the Mercantile Register with the registration details, registered office and tax identification number to confirm its status as a legal company.
In the case of resale properties, the authorities suggest that buyers request up to date property tax (IBI) receipts and (if applicable) a certificate from the Community of Owners confirming that there are no outstanding community fees. In addition, official confirmation should also be obtained that the property is not subject to any rental contract.
Municipal Rubbish Tax (Tasa Municipal de Basura).
It shall be paid to the local authorities in an amount to be stipulated by them. The annual cost can range from 60 € to 300 € depending on the area and size of the property
Community Administration Expenses (Gastos de Comunidad).
These fees will be paid to the Community of Owners for the services and maintenance of the common areas when the property is located in an urban community or condominium. At the signing of the deed of sale at the notary’s office, these fees must be up to date and the owner must provide a certificate issued by the community of owners, stamped and signed by the administrator. The cost of this certificate will be paid by the owner. The cost range is very wide, from 100 € per month for a small apartment with no common areas or services, to even more than 600 € per month in communities and luxury properties.
As established in Article 1455 of the Spanish Civil Code, the seller pays the expenses for the execution of the deeds, and the first copy and other expenses after the sale will be paid by the buyer, unless otherwise agreed between the parties. The rates are fixed by law, depending on the number of deeds and pages of the minutes, and the final cost ranges between 0.2% and 0.5% of the price of the property.
Property Registry (Registro de la Propiedad).
Once the payment has been made, the purchase contract has been signed before a notary and all taxes have been paid, the property must be registered in the name of the new owner in the Land Registry, so that the Public Administration can keep the corresponding registry. Its cost is determined by Law, and depends on the price of the property. This expense is paid by the buyer, and represents between 0.10% and 0.25% of the amount of the property.
Legal fees (Honorarios legales, abogado).
They vary depending on the complexity of the transaction, although the usual fee is 1.0% of the amount of the property, excluding taxes and expenses.
Mortgage Expenses (Hipoteca).
The new mortgage law establishes that the borrower will only have to pay the cost of the mortgage appraisal, while the notary, registry and AJD fees are paid by the bank. What you will naturally have to pay is the financial cost of the loan, which includes an opening and cancellation commission, and the commercial margin (between 1.5% and 3%), added to the reference interest rate, which is usually the 12-month Euribor.
Power of Attorney (Poder Notarial).
It is usual to delegate your lawyer to represent you in the signing and processing of documents and contracts during the process. In addition to avoiding unnecessary trips, the process will be more agile. The cost of a power of attorney is around 250 €.
Foreigners’ Identification Number (NIE).
The first step to start residing legally is to obtain the NIE. The foreigner’s identity number is the basic document you will need to identify yourself in the country. This identification document is issued by the General Directorate of the Police and is essential to carry out any type of bureaucratic or legal procedure, such as buying a house, buying a car, setting up your company or getting your residence permit and being able to file your income tax return and communications addressed to the Tax Authorities.
It is very important to start the procedure with enough time in advance to be able to carry out the necessary steps to buy a property in Spain, since its issuance can take up to 30 days. The fees are approximately 25 € for the first issue.
*Legal Note. The legal, tax and financial legislation and regulations applicable to real estate investment are subject to frequent changes, and their scope and impact vary according to the personal circumstances and assets of each investor, and the characteristics of each type of transaction. This document does not constitute an investment recommendation on any asset, nor does it have any contractual effect. Contact Surinvest for a global and detailed analysis of your real estate investment project, adapted to your asset profile and the type of transaction in each case.