UK landlords looking to invest in Spanish property

Simon Misiewicz

Simon Misiewicz

Expat & Property Tax Specialist

12th July 2022

UK landlords looking to invest in Spanish property

UK landlords looking to invest in Spanish property need to identify the right place in Spain to make money from renting out holiday and vacation homes.

Researching the best place to buy property in Spain is vital before investing in Spain.

Are you looking for property to rent in Spain before buying is one option?

Many UK landlords rent a house in Spain before investing in property there.


What are the basics for UK landlords looking to invest in Spanish property?

As property accountants serving thousands of UK landlords that purchase buy-to-let properties. Spain is a popular destination for British tourists and property investors alike.

More than 18 million Brits visited Spain in 2019, and for many buying a property in Spain as an investment is an attractive option.

Brits buy more Spanish property than any other foreign nationals.

British buyers accounted for 13% of total house buyers in 2020, buying 60% more Spanish properties than French and German property investors.

There are no restrictions on foreigners (resident or non-resident) buying a property in Spain.

Foreigners can buy property in Spain regardless of their nationality.

Investing in Spain is a popular choice for UK landlords looking to diversify their portfolios.

Before investing in Spain, it is worth looking at UK landlords’ tax on foreign income.

 

Where are the best places to buy property in Spain?

For those unsure where to start when it comes to the best places to buy property in Spain, it can help to look at flights from the nearest regional airport to home and narrow down the easy provinces to visit.

Some of the best places to buy property in Spain include:

Alicante

Alicante is the most popular location for foreign buyers and is surrounded by a lively ex-pat community.

15% of the region’s population are foreigners, and 43% of house sales are made to foreigners each year in Alicante.

The area is in the south-east of Spain, with a good climate all year round, and more than 200 miles of coastline and stunning beaches.

Travelling around Alicante is easy, and the region has excellent transport links to the UK.

Andalusia

This is a popular second home location for UK landlords.

Andalusia is located on the south coast of Spain and has been one of the country’s most popular tourist locations since the 1950s.

There are blue flag beaches, arts and culture, long hot Summers and a superb combination of the laid-back beach lifestyle with the active urban environment.

With 38 different fishing ports, there are incredible seafood and fish offerings here.

Andalusia is home to areas including Seville and Malaga as well as the tourist hubs of Costa del Sol areas such as Fuengirola, Marbella and Torremolinos.

Andalusia has a thriving rental market, so this is a great region to invest in property in Spain.

Costa Blanca

Golf plays an important part for UK landlords who decide to buy property in Costa Blanca.

Spain has world-class championship courses located all over the country, and Costa Blanca is a favourite.

Costa Blanca is home to social housing communities and complexes that include leisure facilities.

 

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How do I find property to rent in Spain?

Renting a property is an excellent way to get to know Spain and decide where you’d like to invest in property.

The most common way to find a property to rent in Spain is through an estate agent, online property portals, newspaper adverts and word of mouth.

If you find a property in Spain through an estate agent, it is important to know that the landlords usually pay them.

If you specifically ask an agent to find you a property to rent in Spain, you can expect to pay for this service.

You will typically be asked to provide:

* Evidence of employment or ability to pay the rent

* Tax identification number (if you are working)

* Passport or ID

* Personal references

Renting in Spain is an excellent way to decide if you are committed to investing in Spain at a future point.

 

Is it worth investing in Spain in 2022?

Spain encourages foreign investment from UK landlords, and each year the restrictions are reviewed, with regulations commonly being eased.

To start investing in Spain, you will need to obtain an NIE, an identification number for foreigners.

This is required for all foreigners who wish to conduct legal or tax activity in Spain.

The Spanish NIE number is a form of identification and a tax number.

You can obtain an NIE number by visiting a police station with your passport.

The whole process usually takes no longer than a day.

New rules mean that UK nationals no longer benefit from freedom of movement.

While this doesn’t affect property investment or ownership, those who want to move to Spain permanently will have to get residency, or the length of time they can stay in Spain will be limited to 90 days.

It is also essential to know how to avoid inheritance tax in Spain as a British ex-pat.

 


What rental return can I expect from a Spanish property?

According to figures released by the Central Bank of Spain in March 2022, the rental return expected in Spain’s residential real estate market is 10%.

Rental properties are in high demand in some parts of Spain.

Rents in Spanish major tourist cities increased by around 15% in the last 12 months.

There has been a boom in short-term holiday rentals and uptake of holiday lets via AirBnB.

There are various restrictions in various regions in Spain to limit this type of property investment growth, such as the holiday tax in Malaga.

This sector still has potential growth, and holiday rentals in suitable locations can be lucrative property investments.

According to Spanish law, the corresponding debts or financial obligations are transferred to the new owner.

UK landlords need to check that there are no debts associated with the property in Spain when it is sold.

Alternatively, ensure that the terms of any contract cover any liabilities.

 

How much does it cost to buy property in Spain?

The total buying costs for resale property in Spain will be around 10-11% of the property price.

The costs of purchasing a new-build property will be around 13.5-14.5% of the property price.

In addition to the purchase costs, UK landlords must consider the property’s running costs.

These will include average household utility bills, the local Town Hall tax IBI, the refuse collection tax Basura, and if the property is in development with shared costs and services, then community fees.

A property buyer in Spain will need to pay notary fees, property registry fees, NIE certificate charges, property purchase tax, legal adviser fees, stamp duty if applicable, and other charges, including bank, courier and translation fees.

UK landlords should also consider fluctuations in the exchange rate between the pound and euro.

The total cost of a property in Spain may vary from region to region.

In most cases, the buyer pays all costs associated with the acquisition.

We recommend that readers review the UK Spain tax treaty before investing in Spain.

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