Do you catch yourself daydreaming of living in a new country? Are you ready to take the leap to relocate or purchase a second home abroad? More and more people are choosing to make this investment in their lives. In 2019, the global real estate market saw a 51% growth in foreign buyers. Spain listed as one of the countries leading the way. From legal hoops to jump through, to costs, and even finding the property itself, there is no doubt that buying a property in a new country feels like a daunting task. If you are considering taking the steps towards buying property abroad. Or are simply curious about the process, here are some things to keep in mind to help you ensure as smooth of a process as possible.
Choosing the Right Location
You can’t buy a property abroad without knowing where you’re going to live. Buying a property is a big financial commitment so the first step to take is to choose your location and to choose it wisely. Here are some of the most important factors to consider while choosing the right location for you:
- Weather and climate
- Natural surroundings
- Local population size
- Transportation access
- Availability of expat communities
Details like these are important to keep in mind while you decide where to make your purchase. Even on a small island like Mallorca, you can experience a large range of options. There is the grand Serra de Tramuntana to the west, filled with quaint mountain and coastal villages. On the southern parts of the island, you can find the international city of Palma, home to a busy central airport, and more bustling beach towns along the coast. The sunny campo is dotted with many small peaceful villages, with some only accessible by car. The north of the island is home to a rocky coast carved by the wind and fit with many beaches and caves that beckon you to explore.
If you have the privilege of traveling, pay a visit to the locations you are considering. Take some time to explore the area to see if it feels like the right place to call home.
Finding Your Perfect Property
Once you’ve picked your location, you can begin reaching out to real estate agencies in the area. When purchasing property in a new country, finding a trusted agent can be essential in providing you with the best information as well as protection while navigating the home-buying process. Local agents, especially in Mallorca, have lots of foreign clientele so they typically speak more than one language, provide you with a wealth of knowledge about the area, and can bring you to many places you may have missed if searching on your own. When choosing your dream home, there are quite a few things to consider:
- Size – How many bedrooms and bathrooms do you need? Do you require a garden or can you feel content with a balcony?
- Amenities – Are you looking for a house with a pool? Would you like a game room for the kids?
- Renovations – Would you like a house that is move-in ready or are you willing to wait for a home that needs a little TLC in order to make it perfect for you?
- Amount of use – Is the property going to be your main home or a vacation home? Will you rent the house out when it’s not in use?
Navigating the Legal Steps
Sorting out the legalities of purchasing a property abroad can be one of the most confusing and complex tasks for buyers. Every country has different sets of laws for foreigners to follow, and many times the laws can be specified according to your home country. The more you can understand about the country you’ll be buying in, the less of a headache you’ll have while going through the process. You can do research online, visit government websites of the country you’re looking to move to, and possibly hire an experienced attorney to assist you in navigating the intricate legal details.
Before buying a property in Mallorca, one thing you might be keen to know is that Spain places no restrictions on foreign property buyers. You will need to obtain a foreigner’s identification number, or NIE, to make your purchase. The country encourages foreign investment and grants residency visas to buyers. All the more reason to make your dream purchase here!
Costs of Purchasing Property Abroad
Beyond the obvious cost of buying the property itself, there will be an additional set of fees to pay. In Spain, costs can vary across different areas. As a buyer, you will more than likely be responsible for the following:
- Existing property occupancy tax – Previously occupied properties have a transfer tax rate ranging from 6-10%, with the exact rate determined by the autonomous community.
- First-time occupancy tax – VAT, the first-time property transfer tax (known as IVA in Mallorca) applies to both residences as well as commercial properties and land. The current VAT rate is 10% on new residencies and 21% on commercial properties and land.
- Notary fees – This cost is dependent upon the purchase price and can range from 0.5-1% of the said price.
- Land registry fees – Another cost dependent on the purchase price, you should plan to calculate a fee of about 1% of the price though it can potentially be lower based on the region.
- Legal fees – As previously mentioned, it is highly recommended to hire a lawyer to assist with navigating the buying process. Lawyers typically charge 1% of the purchase price, but can also bill you up to 1.5% of the purchase price so consider this upfront while choosing your solicitor.
- Agency fees – As a seller typically hires a real estate agency to sell their property, these fees are generally covered by the seller in Spain unless the buyer contracts an agency on their own.
There are a few additional fees added to the total bill which you can read more about in a previous blog post.
The Property-Buying Process
You’ve chosen your perfect location, found the home, brushed up on all of the local laws, have your finances in order, and now you’re ready to buy. What steps come next so you can finally call this dream property your own? First, you’ll need to make an offer to the seller. Once the seller accepts your offer, both you and the seller will need to sign a preliminary contract and you will put down a deposit, which is generally 10% of the purchase price. Following this step, you can then negotiate any mortgage needs followed by a contract of sale. All other fees are due at the time of this final signing. Once all of these steps are done, you can finally get the keys and start a new and exciting chapter of your life abroad!