What kind of mortgage can I expect to get as a Spanish non-resident?
Mortgages in Spain are granted as a percentage of the valuation or purchase price of the property; whichever is the lower of the two. Maximum loan values are 70% with most lenders limiting this to 60% for non-tax paying residents of Spain, or applicants living outside of the EU. Maximum mortgage terms range from between 20 to 30 years.
Typically, banks offer flexible rate mortgages (tracker mortgages), based on Euribor (Euro Interbank Offered Rate) plus a percentage, which varies by lender but is typically 1.25% to 2%. However, if the Euribor rate increases, the interest to be paid also increases and vice versa.
Villa Contact works closely with a number of mortgage brokers who can help you secure the right type of financing to suit your needs.
Are there any legal pitfalls buyers need to be aware of?
Yes! In fact, there are many, Due diligence is a key element of any property acquisition process and we strongly advise that a good local and independent lawyer is commissioned to carry out the necessary checks, including – but not limited to – the following:
• Obtain confirmation that the vendor owns the full title to the property and can legally sell it
• Check for any pre-emption rights and tenants in occupation
• Check the property is free of debts, charges, liens and embargoes
• Check the cadastral record and deed to verify description and dimensions of the property
• Check payments of local taxes (IBI) are up to date
• Check the property has the relevant licences for living purposes
• Check any extensions or renovation works comply with the applicable legal and planning regulations
• Ensure you are dealing with an established agency with a physical presence on the island
What taxes and additional costs are related to buying property in Ibiza?
There are various costs and taxes over and above the property price that buyers in Spain must pay. Property can be subject to either VAT, stamp duty or transfer tax.
The tax levied on the acquisition of a resale property from a private individual (i.e. a registered property) is the property transfer tax ITP (Impuesto Transmisiones Patrimoniales), similar to the UK Stamp Duty Land Tax. ITP in the Balearics is levied at a percentage of the purchase price and depends on this sliding scale: Up to €400,000 (8%), over €400,000 (9%), over €600,000 (10%).
IVA (Impuesto sobre el Valor Añadido), the Spanish equivalent of VAT, applies in most other cases.
Other costs to bear in mind are notary fees, land registry fees, legal fees, banking costs attributable to transferring the requisite funds for purchase, mortgage costs and agency fees if applicable.
Is there capital gains liability for non-residents looking to sell their property?
Spanish non-residents pay income tax at a fixed rate of 21% on any capital gains. For EU residents, such gains would be taxable in their home country, but as a consequence of the double tax treaty signed by Spain, tax liabilities may be credited against tax due in the home country.
What is the market standard with agency fees and who pays them?
In Ibiza fees vary between 5% to 6% and are payable by the seller, unless otherwise agreed.
How much can I expect to pay for a 4-bedroom villa with some land and a pool?
Prices vary considerably from property to property and much depends on the location, size, design and quality of construction. Ibiza’s stringent building laws and limited supply of properties, coupled with its recent international acclaim, have helped property prices to remain buoyant and well above the prices seen on the mainland. Don’t expect to get much change from 800,000€ and if you are holding out for a high quality property the price range is nearer to 1.3 million.
What kind of rental yield can one expect to earn from a 4-bedroom property rented out during the summer months?
Rental yields during the summer can achieve around 5% to 7%.
Is it easy to build a new house in Ibiza, and how long does it normally take?
First you need to decide whether you are willing to buy a plot of land without a licence – starting price approximately 300,000€ for a non urban plot of 15,000m2 where one can build a house of up to 500m2 – and apply for a licence with an architect of your choice. This process can take as long as two years for the licence to be approved, should there be no hiccups along the way. And there can be hiccups!
The alternative is to buy a plot with an existing building licence where you can commence building works as soon as you can deploy a construction tea – starting price approximately 600,000€ for a non-urban plot of 15,000m2 with mediocre views. The timeframe to build once the licence has been granted is usually between 12 and 18 months.
It is advisable to do your research on the architects, builders and contractors you plan to use and make sure you are confident with the construction team you are moving forward with.
We are thinking of relocating the family to Ibiza. What are the schools like and is it a good place for kids?
Ibiza is a wonderful place for families – surrounded by nature and boasting a fascinating multi-cultural community, the quality of life here is truly second to none. Growing up in the great outdoors is an amazing experience for children, and there are a plethora of activities for parents with young kids on offer, all year round.
Schools in Ibiza too, are international and highly recommended. Morna College, set just outside of Santa Gertrudis, is the preferred school of many British expats, as lessons (in English) follow the UK National curriculum. For those seeking a high-level Spanish experience for their children, Escuela Mestral school in Can Misses is extremely popular, while the College Français d’Ibiza is a French-speaking alternative set on the outskirts of San Jose.