The pitfalls of buying property in Spain

The attraction of buying property in Spain is undeniable. With its dazzling landscapes, rich cultural heritage, and sensational Mediterranean lifestyle. However, beneath the surface of this dream lies an array of potential pitfalls that, if navigated incorrectly, could turn your Spanish property purchase into a costly nightmare.

From legal complexities and unforeseen costs to fluctuating market conditions and cultural differences, these risks can seem daunting. But don’t worry, this guide will provide you with the knowledge and tools to avoid the potential hazards when buying property in Spain. 

We will explore the critical aspects of the buying process, from due diligence and legal requirements to working with reputable professionals, this guide will ensure your journey to Spanish property ownership is a secure and rewarding experience.

Table of contents:

Don’t rush the process of buying a house in Spain

One of the most common pitfalls of buying property in Spain is making a rash decision when it comes to the property. Understandably, not everyone may have the budget to keep flying to and from Spain to view properties, but some buyers choose to purchase properties without even viewing them in person. We advise you to take your time, make the most of each visit by viewing other properties, and take help from experts where you can. It’s also a good idea to contact an estate agent beforehand to schedule viewings before planning your trip.

Legal complexities when buying a Spanish property

When you buy a Spanish property, the most immediate issue will likely be legalities. Spain has a very unique legal system and navigating their property laws alone can be challenging. We have a free downloadable guide on this page entitled Buying property in Spain if you’d like to learn more about the legal side of things. However, we do suggest you get in touch with our local experts to help guide you through the process.

Protect yourself from currency exchange fluctuations 

If you’re thinking of buying property in Spain as a non-resident, you may need to convert your currency into Euros. It goes without saying that exchange rates often fluctuate, which could affect the final cost of your property.

If you’re sending money to Spain to buy a house, it’s good if the euro is not very strong. But if you’re selling your Spanish property and bringing the money back, a strong euro is better.

The exchange rate might only be a few cents different, but when you're transferring a lot of money, even a small change matters.

In 2023, the GBP/EUR rate varied from €1.11 to €1.17. That’s a €24,000 difference on a £400,000 transfer to Spain.

The risk is, that the currency market fluctuates all the time, and it’s hard to know when is the best time to transfer your money.

EasyFX has special tools to help mitigate this risk. We can protect you from losing money if the exchange rate changes. Talk to one of our experts to find out how you can get the best rate when buying a property in Spain.

Spanish property hidden costs

Aside from the property’s purchase price, there will be additional costs such as property taxes, registration fees, and notary fees. Make sure you include these expenses in the final cost of your property to reduce the risk of going over budget and putting yourself under financial strain. We advise you to ensure you have a comprehensive, and clearly broken down, budget and a thorough understanding of all associated costs.

Spanish property tax

To provide a brief overview of Spanish property taxes we should explain that the main taxes are IBI (an annual property tax paid to the local council), Transfer Tax (which is the tax on the transfer of property ownership), VAT (tax on the value added to new properties, the VAT rate is currently 10% in Spain) and AJD (which is the tax on legal documents e.g. property deeds and mortgages).

Usually, the IBI tax rate goes up a bit each year. Remember this when planning your budget for buying a property in Spain. The 10% VAT rate is likely to remain the same until 2024, but the government might change the tax system, so keep an eye on updates before you buy. 

Transfer Tax will mostly remain the same. In April 2023, the tax on main homes in Valencia dropped from 10% to 7%, and for second homes, it went up from 10% to 11%. Any changes should be small. 

AJD tax varies by region in Spain, so research the rates where you’re thinking of buying.

Using local Spanish estate agents

When you are looking for local estate agents in Spain, it is important to do your research to avoid any potential pitfalls. Spanish property is in high demand from a range of buyers from many different nationalities. Because such a wide array of buyers have displayed an interest in buying property in Spain, it is unsurprising that many vendors will want to get the best possible price for the property you want to buy. 

Make sure you choose a local real estate agent, with a good reputation and experience with international buyers.

But here’s where things differ from the UK real estate scene - unlike the UK, most agents in Spain use the MLS system and, therefore have access to thousands of properties via other agents. This means that, in Spain, you have the advantage of exploring a vast pool of properties through your chosen agent.

You should also be wary of any Spanish estate agent who displays their API or GIPE professional associations. Although these are legitimate associations, they mean very little in terms of ensuring consumer safety and satisfaction. Again, do your research, and don’t be scared to speak to several real estate agents, before choosing who you want to guide you through the process.

If you want to learn more, feel free to reach out to our team or you can read our blog about choosing a real estate agent in Spain. We’re here to provide you with all the information you need to make an informed decision.

Using UK estate agents for Spanish property

Using an agent from the UK could also present itself as a pitfall as they won’t have the inside knowledge that a local would have, and many UK estate agents charge high fees when dealing with property abroad. You must work with the best advisors in this situation so you can get expert support from people in the local area.

We have extensive experience across Spain. No matter where your property is located, you’ll get expert advice from local experts on the ground. We advise you to speak with our team of local experts before making the decision to use a UK-based estate agent.

What is happening to the Spanish property market?

The Spanish property market has come under pressure because of higher interest rates and lending rules, which could make property prices stall this year. But don’t worry, it’s unlikely to crash like it did during the financial crisis. In fact, it’s still expected to do better than the eurozone average, thanks to strong demand.

As with any property market, Spain’s values can go up and down. To stay on the safe side, do your homework on the local market, think about the region’s long-term potential, and chat with local experts who can tell you how stable things are in the part of Spain you’re eyeing for your property purchase. If you need more advice, just reach out to one of our experts.

Foreign exchange and its significance

When it comes to buying a property in Spain, one of the most critical factors to consider is foreign exchange. It’s a component that’s often overlooked but should genuinely be factored in from the very outset of your purchase journey. We recommend engaging with a specialist during the property viewing stage for a compelling reason; when you’re buying in a different currency than that of what you hold, you become exposed to the unpredictable nature of currency fluctuations.

If you’re interested in exploring how our team can support you with foreign exchange, we invite you to get in touch.

Seek professional help to avoid the pitfalls of buying a Spanish property

Buying property is a big financial commitment. To avoid the pitfalls of buying property in Spain, you must grasp all the ins and outs, especially the legal side of things. 

Alongside a real estate agent for market insights, having a legal expert by your side for contracts and sales terms is smart. A lawyer ensures you sign the right papers, which can be vital if Spanish isn't your strong suit. 

Many Spanish lawyers cater to expats buying property and speak English. They untangle the bureaucratic web in Spanish house purchases.

If you have any questions about EasyFX or any services featured, please contact our friendly team by telephone on 020 7959 6995 or by completing our contact form. We're here to make the process as smooth and favourable as possible for you.