Gecko Towers
A ‘Wealth Warning’! ….This is a breakdown of the costs of buying in the Marbella region of Southern Spain – but specifically excluded are the actual cost of the property itself – and is in relation to the “typical” purchase. It is intended as a rough guide only and is no substitute for proper independent professional advice that is based on the property being purchased and your personal circumstances. It is illustrative of the elements that constitute the costs of buying a property in Marbella but there are variables depending on how you fund your purchase and how you chose to own your property. Simply, this is not a one size fits all solution. Also excluded are any application costs for securing Residency that an owner may be advised to take, particularly following the expiry of the Brexit Withdrawal Agreement.
If you have stayed with me during the previous five Guides in our Series, thank you. The feedback that we are receiving is that our Series is an invaluable resource for those keen to consider a life on the Costa del Sol, or, at least, more quality vacation time with your own clothes hung in your own wardrobe!
There is no way to sugar-pill this post – nor make the contents either particularly thrilling. They are what they are! However, if you are interested to dramatically improve your lifestyle by owning a property in Marbella on the Costa del Sol, they are part of the price you’ll be required to pay.
I want to explore the sometimes thorny question of Property Buying Costs and Taxes. They are unavoidable and need to be carefully calculated. Your Abogado, in my experience, will prepare a schedule for you, so you can plan to ensure that you have sufficient funds in your account, as required.
A simple, rule of thumb calculation, is if you are buying a “resale” or second hand property, without the assistance of a mortgage, you should budget to have around an additional 10% (calculated by reference to the agreed purchase price). If you are buying the same property with mortgage funding you should expect to have an additional 12% (calculated on the same basis) available for your purchase.
The Costs
Once the price of a chosen property has been agreed upon it is usual that a reservation deposit is requested. This will be deducted from the purchase price at completion. Usually set at around €6,000, it will need to be lodged with the developer’s sales agent for an new build or the seller if it’s a pre-existing or resale property. This deposit is often non-refundable and its effect is to reduce time-wasters who are unable to complete their purchase.
The Buyer will usually responsible for the following.
Taxes: These depend on the property being purchased:
A. For newly built property the following are to be expected:
IVA – (Value Added Tax) which is levied on a newly developed property and charged at 10% calculated on the agreed purchase price plus Stamp Duty (Impuesto Actos Juridicos Documentados) at 1.2% for new properties purchase price.
B. For pre-existing property – often described as a second-hand property or a resale – the Transfer Tax (ITP) , as from December 31st 2021 – has been fixed at 7% plus Stamp Duty at 1.2% is due.
C. A category of purchase does exist that can see a material reduction in the applicable rate of ITP. An investor purchaser whose sole aim is to refurbish the property, but neither to take up residence nor place it on the rental market, an ITP rate of 2% plus Stamp Duty may be obtainable.
D. For the purchase of Plots, these are treated differently and will require more detailed consideration.
Fees:
• Notary Public Fees. Scale of fees dependent on the price of the property – circa €800 for a €500,000-€700,000 sample property – but higher if the agreed purchase price is higher.
• Property Registration Fees – Land registry. Around 40% of the Notary’s charges. (circa €600 for our sample property).
Legal Fees: 1% of the agreed purchase price plus IVA at 21%.
Plus: A further fee may be applied depending upon the precise dealings your Abogado has in relation to your mortgage needs and the financing of your purchase. Agreed fees for processing the NIE application, often circa €200 plus IVA, per party comprising the Buyer.
At this stage it is also considered prudent to conclude and register a formal Spanish Will resulting from your ownership or co-ownership of a property in Marbella as this should simplify matters later.
Mortgage:
Following the usual hurdles for the approval of mortgage funding the Costs will include, in addition to your Abogados’ fees, mentioned above.
• It is likely that an up to date Bank Valuation will be required: Bank Valuation Fee – a percentage of the valuation for smaller properties usually in the region of €1000 plus IVA.
• Mortgage arrangement fee: Charged on a developer mortgage or regular bank mortgage at usually 0.5% to 1% of the approved and drawn down mortgage funds.
Plus Stamp Duty calculated on 1.5% of the mortgage advance, Notary Public Fees and Land Registry fees for the registration on the Land Registry against the property registered in your name.
Additional Costs:
Connection costs: Water, telephone and electricity. (circa €700)
• Law Agent fees for dealing with the registration of the documents such as the Sale/Purchase Deed (the Compraventa) and Mortgage Deed (circa €500 per document).
• If a seller asks you to cover a tax known as “Plus Valia Tax” this should be resisted as it should be paid by the seller.
Other ongoing annual property costs:
• Impuesto Sobre Bienes Inmuebles or “IBI” are local Town Hall charges and effectively an annual real estate tax. This is similar to local authority “rates” in England
• Community fee charges. These charges will be set and levied by the legally defined Community where the property is located often referred to as an Urbanisation. Your Abogado should investigate to see if any Community Fees due from your property are outstanding, so you should be clear on annual expectations – which may change as a result of the voting from the Community at an Annual General Meeting or similar.
• Basura – Rubbish Collection tax. An annual tax is payable by all property owners to the local Town Hall. This is set by the Town Hall and is calculated on the basis of the properties Catastral Value as periodically updated.
• Insurance – Most lenders will only release the funds to complete the purchase when evidence is given that an insurance policy against fire, water damage etc is in place with their interests noted on it.
• Income tax which is payable annually. It is based on the Catastral Value of your property – often very different to the sales price – and income – either notional or actual – derived from the property such as from renting.
If you are uber-wealthy you may also need to consider Wealth Tax – which should be discussed in detail with your Abogado as it may well affect the means by which you acquire or hold your property.
And breathe.
E&OE.
Should you be interested in discussing the process involved in buying a property in the Marbella region, we would be delighted to assist you. Please contact me to discuss your precise requirements.
Please note that our posts are for general interest. There is no substitute for proper advice tailored to your specific circumstances as provided by a qualified Abogado who is experienced in the application of the Spanish Law.
Nothing contained in this article should be seen or taken as the writer or the publisher providing legal, tax or financial advice. All details have been reasonably fact-checked and all efforts have been taken to ensure that facts are accurate as at the date of publication.
My details: Mark FR Wilkins, during usual business hours on +34 600 343 917 or e-mail me at mark@therightsgroup.com
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