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A small mortgage a big difference!

Thu, 02 Feb 2012 11:12:00 GMT

Even though the property market has seen significant price corrections over the past few years, they have tended to level out and hold some ground at least for the desirable ones!

It’s always a good idea to view a range of property at slightly higher prices than your budget will allow. This will help you to establish a true value, plus you never know how much you may be able to negotiate.

Even after negotiations and price reductions, we get many buyers that still need the extra 50,000 Euros!
It’s amazing what difference some additional funding can make, especially on properties under say 400,000 Euros

Buyer and seller expectations are still widely apart and even though sellers may have reduced their prices significantly, most are still willing to take a fair offer. However, there does come a point where one cannot go. Usually this is when a purchaser may see something fantastic but way beyond their budget and regardless tries their luck!

In most cases they do manage to get a substantial reduction but inevitably fall short. This is where a Spanish mortgage for a small amount could help you buy something very special. It could be a short term solution rather than take second best. You just need to be able to service the debt until you can pay it off in full should you wish to.

Cash buyers are always around and ready to secure a deal unlike anyone needing or considering some extra finance. It may well be worth your while to investigate the cost of some additional funding as it may help you fulfil a dream or acquire a property that will be a much better investment, especially if it attracts a considerable rental income.

Should this be the case, it’s better to know exactly how much you can get and at what cost as well as go through the banks means testing process before looking at properties. This means you are well prepared and ready to strike a deal. If you are unprepared and happen to find something special, chances are another cash buyer will pip you to the post by the time you get mortgage approval!

To help prepare anyone seeking a Spanish mortgage here is a simple outline of what a bank will require.
Take note that some of the figures and examples given will change but were correct at the time of writing 1st Feb 2012.

It’s also worth noting that many banks now require a physical appointment with you before you can open an account with them. It never used to be like this. However some do have banks in the UK which would suffice.

What will a bank require from you?

(Assuming you are working for someone else)

A copy of your employment contract
Three recent Wage slips.
The bank will also look at the strength of the company you work for.
Last P60 Tax return
Recent bank statement
Experian or Equifax credit report
If you have an existing mortgage they will want a copy of your payment history.
If you intend to obtain a mortgage in joint names both parties will need to supply all this information independently.
Passport copy
NIE number- you need to obtain this before purchasing a property in Spain. It’s used to pay taxes against. This can take a few weeks so it’s prudent to get one in advance.
Asset list. You need to write down a list of main assets like properties, investments and shares.

(Assuming you are self employed)

Same as above plus 2 years accounts

(Assuming you are a director of a limited company)

As above plus

Company details and registration number . Date of incorporation/ copy of certificate.
Your directorship/position and shareholding/ equity in the company. Last full set of audited accounts.
Company loans and a list of the board of directors.

For a bank to consider extending a mortgage to you, your debt to earnings ratio should be no more than 33% including your new mortgage! Credit cards are only taken into account should the debt on them be very excessive.

Usually mortgages can be extended as follows:

Non resident in Spain: Mortgage period up to 30 years but maximum age 75 and can lend up to 70% based on the minimum amount i.e. Valuation or purchase price.

You can pay off the mortgage at any time, partially or fully but you will be liable to a cancellation fee of 0.5% for the first 5 years. After that the rate drops to 0.25%.
This is governed by law and not a bank rule!

Most banks avoid interest only mortgages, so this is difficult to obtain and usually short term.

The mortgage can be for a resale property or for a new build project with a plot of land. In this case funds are given out over a period of time subject to the progress of construction.

Most banks require that you have your life insurance with them.
For the first year you must also use them for your buildings insurance. After which you are free to obtain alternative quotes but not for your life insurance as that is normally an integral part of your mortgage.

If resident in Spain you can get up to 80% mortgage for your main home, up to the age of 75, for a maximum period of 40 years. If it’s a second home this changes to a maximum 70% mortgage.

Mortgage cost (figures will vary)
A Spanish mortgage can have a fixed interest rate for its life, currently 6.1%
Variable rates are reviewed annually. Currently 1st year 4.25% then Euribor plus 2.2%
Euribor current rate is 2%. There is a minimum and a maximum on the rates to be applied. Currently 4,25% – 12%. This means that the interest rate will never be less than 4,25% (as first year) or more than 12%.
For example, if on rate review, Euribor is 1% , + 2,20 = 3,20%, regardless, the rate applied will be 4,25% as a minimum.

Initial set up fees are typically 1-2% of the amount loaned to you.

There is also a mortgage tax called ADJ and is 1.7% so you need to allow for this on the typical 10% purchase cost. Plus there will be extra notary and land registry fees for the new mortgage deed. However, if you take over an existing mortgage you can avoid the ADJ tax. See below.

Based on the above, lets say you are a non resident and wanted an extra 80,000 over 15 years.

A fixed rate of interest of 6.1% would mean your monthly payments including life insurance would be 710 euros.

If it was a variable interest rate the monthly payments for the first year would be 628.90 at 4.25%

To check the Euribor rate you can find it Here

Another option is to take over any existing mortgage on the property. Bearing in mind you will inherit the previously agreed mortgage terms, so worth studying to ensure you are happy with them.
Taking over a mortgage is called “subrogacion” doing this means you will avoid the set up tax of the mortgage deed known as ADJ (Actos Documentados Juridicos) also known as stamp duty. Banks will also negotiate or remove any set up fees if you ask them nicely!
All other purchase cost are the same and typically amount to 10%

You can also use our mortgage calculator. Just scroll down to the middle of the page and you will find it Here

Moraira & Javea property news Nov 2011

Wed, 16 Nov 2011 07:39:00 GMT

It’s been 8 months since our last Moraira and Javea property news update. Time fly’s!

This year started very well as we reported previously. Thankfully many more clients have decided to use our services and we have continued to be very busy.
Many of the leading estate agents have also reported having a very busy year. Regardless of the dire economics we all face, there has been a glut of buyers ready with their cash.

The biggest problem has been and continues to be the significant reduction in the average property budget that buyers now have in relation to the bulk of property prices out there.

Consequently the availability of quality property stock that falls into the price band that people can afford has diminished and the amount of legwork involved with finding an affordable property has increased substantially for all concerned. You have to kiss a lot of frogs!

Over 93% of enquiries are for less than 400,000 euros and 70% of these are for less than 300,000 euros.
Having spoken to many agents they have confirmed a similar enquiry pattern.

For the majority of properties for sale, agents are struggling to close the reality gap between vendor and purchaser expectations.

Quality properties that do fall into the mainstream affordability band and represent value for today’s money have continued to sell throughout the year and expect next year to follow the same trend.

We have had a very busy year doing just that for our many clients and this is where a property finding expert can help you find quality property quickly and help you decipher the best from the rest in a short space of time.

Happy hunting!

Moraira Property Update Feb 2011

Wed, 23 Feb 2011 18:24:00 GMT

The end of February 2011 is drawing in and before writing another news blog again, we thought we would see what kind of start to the New Year we, and many others, would have as far as the Moraira property market is concerned.

Looking back and having had a very difficult 2009, at the beginning of 2010 we thought the year ahead would be nothing short of a disaster. However, what we did not appreciate was the knock on effect of low bank interest rates and how this would change the mind set of savers.
Throughout 2010 and to our surprise we experienced a glut of cash buyers that seemed to come from nowhere, but they all had one thing in common, they were all removing savings from there banks and wanted to purchase property in Spain to enjoy the dream, which in essence boils right down to a fabulous climate.

Some liked the idea of their asset being income bearing if required and many hoped their investment had a good chance of future capital growth, but most did not really care as it is something to be enjoyed today by all, knowing full well that long term the property/asset will have good upside potential, which is more than one can say about having too much cash lying around. The fact is, most of us seem to be getting less value for cash/money each day.

Consequently, 2010 has turned out to be one of our best years to date and we have had many satisfied customers as a result of our property finding services! We work hard for our clients and manged to find many fantastic properties offering exceptional value for money, whilst avoiding the “lemons”, if you are familiar with this phrase used for poor second hand cars!

Having spoken to many leading estate agents in Moraira, they have all reported increased sales throughout last year, however enquiry levels for most, including ourselves, tended to drop slightly from November to the end of January but this can be put down to the seasonal changes. The good news is that it has gone ballistic again and with so much bad news about it takes a lot of understanding as to why property continues to sell, so we try to make some sense of it all rather than just talk it up for the sake of it.

Regardless of all the doom and gloom we hear on the news, we still have a grab your savings and go long on property mind set/trend, well for Moraira and Javea at least.
Already this year has set new records for us and many others in terms of actual sales not just enquiry levels.

Obviously there are many bargains around, it’s the sign of the times but if there are bargains to be had, we find them as we work with every estate agent in the area and beyond, including those off the beaten track, which surprisingly can have some very tasty properties from time to time!

You still need to be careful though if you want to find a genuine bargain. Many so called bargains can be fundamentally flawed and in most cases have been reduced time and time again. So please be extra careful that you do not make the wrong compromises. You may one day regret what you inherited.

As sure as eggs are eggs, fundamental compromises will rear their head again in the future, especially when you come to sell your property. We help our clients make the right decisions based upon the comprehensive feedback we glean from the expectations of previous clients, that in essence dictate what sells and fundamentally what doesn’t.
We are well placed to advise and drill down every aspect with you, so being open with us is the only worth while policy to have.
Consequently, we have many satisfied customers whom have decided to use our dedicated property finding services, thus saving time, money and in the process buying a property well worth while and one that will always be highly desirable in the future.

There have also been many properties sold in Javea during 2010 and many have reported a busy start to 2011, so it would seem the pattern is similar.
In particular the Dutch have been very busy snapping up many property bargains all over.
We have also seen a significant increase in British clients and we think the trend will continue throughout 2011 from the number of enquiries we are getting from the UK.

We obviously speak to many clients and it would seem the worse it gets in the UK the more disillusioned and unsatisfied the people become and for those lucky enough to afford and enjoy another lifestyle, that’s exactly what they are doing because they realise life is too short and do not wish to wait for the promise of better government, honest banks or sound economics. It’s just not going to happen, well for many years to come at least. This is one of the main reasons why property has been and will continue to be sold, providing it is in a highly desirable location, like Moraira and Javea.

So glad we chose Moraira as a place to live! We are some of the lucky ones but we made it happen.

Until next time happy property hunting.

Moraira Property Update

Tue, 27 Jul 2010 08:25:00 GMT

It’s been a while since we wrote about the Moraira property scene as we wanted to see and experience where it was heading.

As far as the property market goes it has picked up significantly for most if compared to the previous two years. The market seems to have stabilised albeit there are still many properties that are over priced. That said price corrections are now common place, but still the best bargains tend to be down to the personal circumstances of the vendor.

The year so far for us has been fantastic and likewise for many agents we speak to with property sales on the increase. Thanks to Moraira being a highly desirable place to be it attracts property sales as soon as things start to stabalise. There are many buyers around at the moment and hope this trend continues regardless of the UK media always talking about Spain’s deficit and painting a doom and gloom picture. The negativity probably takes the heat off the UK’s recent austerity measures.

Spain has its problems and they are of course very serious as is the UK’s but the coastal town of Moraira remains far more insulated from the wrath of the poor economic climate as a whole. In fact this summer has seen some of the largest crowds at the local fiestas ever and villa rentals are almost full.

The market here in Moraira is driven by Northern Europeans more so than the nationals or Spanish economics, although it’s bound to have some bearing on things especially when taxes or rates increase. Regardless of increasing living cost here in Spain, northern Europeans still want sunshine and a little paradise for their families. The irony is that people are now getting used to the economic problems and know they will not be going away for some time but meantime they still have a life to get on with regardless and now seems to be a good time to invest in property rather than leave cash in the bank which is also a concern for many.

The threat of turmoil was worse than actually being in it as we are today.
The problem with a threat is that you don’t really know how bad is it going to be, so people fear the worse and sit tight becoming spectators for a while which makes things even worse and then they wait until it’s bottomed out. The talk of a double dip recession does not make much sense unless you believe in a so called recovery. We all know the economic struggles we have today will last for years, it’s hardly going to recover and will simply stabalise itself and remain tough. We will probably see some more bailouts, mergers and austerity measures over the next two years or so but for most it will be no surprise and life will continue and wealth will still be created and spent.

So when does it bottom out? If bank bailouts, country bailouts, hardly any interest being paid from the banks to savers, debasement of their currency through the printing of even more money, lowest interest rates in history as well as the real cost of inflation being hidden is not enough, I don’t know what is!
Its no wonder property is becoming a safe haven again.

Consequently we see so many property buyers coming from Holland, Belgium and the UK. Only this time around it is being led by people that understand value for money and investment opportunities plus they are mostly cash buyers. Very different from the boom days where the many could well afford the Spanish dream based upon their equity in their main residence and when banks fell over backwards to lend money which all added to the property price hike.

Having spoken with many clients over the months it’s obvious there has been a shift in the mind set where once people were more than willing to sit it out and leave their money in the bank or in other investments.
95% of all our clients are now cash buyers. This is because anyone with savings, especially in a bank, hardly earns any interest. They seem to be taking their money and investing it into something tangible. Most do not gamble with stocks and shares at this level and historically property has always been a good long term investment that is reasonably safe, plus it is income bearing if you go down the letting route and you get to use it with the family, so it kind of makes sense.

Spanish banks have begun to lend again but to get the best deals around you need to put down 40%. The less risk for the bank the better the deal for you!
They do lend up to 70% and sometimes a little more but the packages are not as good.
They also vet you like never before especially if you have your own business, so be prepared! We have a few contacts for mortgages if needed!

A word of advice: It’s better to get your finances in order before looking for a property because you may be refused by the bank or if not by the time you get mortgage approval the property you found to be a real bargain gets sold to someone else. Happens all the time! If it’s any good that is.

Happy property hunting and don’t forget we can take away the stress and find properties others can’t as well as make things very easy for you!

Good luck until next time

Life In Spain

Thu, 15 Apr 2010 14:06:00 GMT

I thought this news blog would be useful to those out there that may be single and wondering how on earth they are going to find love and companionship again.

If you happen to be a happily married ex pat couple living in Spain enjoying the outdoor lifestyle all well and good. But what about when relationships go wrong or you find yourself alone for another reason? What then? How do you you meet new people especially if you left the bar & club scene behind years ago!

Many join various organisations like social activity and interest groups. This is a good start to begin building your own network of friends and who knows you may find someone you really like. But what if you have done all these things and everyone you meet that you like seems to be spoken for? Nothing worse than going home alone all the time. The friends you have try to help match make for you but this is usually very limited. The other day I came across a website that specialises in Dating In Spain

Buying property for sale in moraira

Mon, 12 Oct 2009 19:37:00 GMT

Moraira Coast

Over the past eight weeks or so many properties have been sold in Moraira. The majority of which have been of low value. Anything under 350,000 euros is considered low value in Moraira. Average is around the 500k mark and you don’t get much for that! Unless you drop lucky.

We speak with many estate agents and the really good properties at low prices seem to be selling fast. If only there were more! There seems to be a big problem finding quality property of low value in Moraira or Javea. Recently we have all been inundated with property hunters many of which go back slightly disappointed and wondering exactly where the recession is around here. That was a comment made to us the other week
from some clients with 500k. Believe me we have experienced 20-30% price reductions on today’s advertised prices. Make’s you think just how easy obtaining money use to be!

And there lies the problem. “Liquidity” not many people have it and not many can raise it to the level required to satisfy their expectations. Those that do have liquidity are chasing the bargains and snapping them up. But what’s a bargain in Moraira’ well if you can get a “quality” 3 – 4 bed villa (not a project) with a good real sea view from pool level on a useable flat plot near to amenities for under 600k you are doing well!! We have several clients wanting just that. So remember a good sea view and that’s nothing wow cost 100-150k minimum. Sea view plots cost upwards of 340,000 euros!

This leads me to a reoccurring problem that we never used to see very much but it is becoming more common because of the low offers some vendors are having to swallow.

Basically once you manage to find your dream home and agree on a price you usually put down a 3000 reservation deposit and then instruct lawyers to do the due diligence etc…This takes a couple of weeks. Meantime the property is still on the market with several other estate agents and if they have a cash buyer wanting to take a look the vendors hardly ever refuse. They try their luck and see if they can get a better offer.

You see it’s only legally binding once the 10% deposit is paid and the private purchase contract signed by both parties. Other than that you can easily get gazumped. Don’t leave it to chance.

To save the heartache there is a very simple way to avoid this. We have just recommended it to a client and it has been done with ease.
Instead of putting down a reservation deposit which doesn’t mean anything in legal terms, you instruct your lawyer to issue with immediate effect a private purchase contract and make it “subject to due diligence”. Then both parties sign it. This now legally means that the vendor would have to pay you back the double if they sell it to someone else!
It’s worth ensuring this common “pay back the double clause” is in the contract.

The 10% deposit is held within a lawyers client account until all the searches have been completed to your satisfaction. If they are good you continue with the purchase. If they show a problem and the problem can not easily be rectified it is within your right to back out of the deal and get your 10% back from the lawyer. You can not back out other than for legal reasons, otherwise you would risk losing your 10% deposit which is understandable because you may have prevented them selling it to someone else..

Lawyers have standard private purchase contracts that can be tweaked accordingly and used. This means within a couple of days you can secure your deal even if a inventory is required!
It’s also worth mentioning title deed insurance It’s new and well worth while for peace of mind. It’s called Safe Purchase Scheme

Javea Property For Sale update

Sun, 04 Oct 2009 17:40:00 GMT

Sketch of Javea Montgo Villa for Sale

The Euro zone nations have recently been leading the way as far as Javea property for sale and Moraira property for sale is concerned. Buyers from the UK still think that property for sale in Javea or property for sale in Moraira is overpriced even though there has been a significant price reduction.

The recent fall, yet again, in sterling means the UK buyers are no better off regardless of a 20 –30% price drop on average. The UK media coverage says that the prices have fallen sharply in Spain and you can pick up villas at a fraction of the original cost.

This generalization is not true of the Javea and Moraira property market. In all fairness the prices have held up very well. I think a lot of this is more to do with the fact that Moraira and Javea are very well established areas full of villas of a more bespoke nature for the more discerning client. Yes there has been a property boom here too but it has not been built up in the same way as the massive purpose built housing estates to the south of Alicante, created at a price to sell to the masses.

This is where we see massive problems and consequently massive price reductions. Unfortunately the media rarely make any distinction between the prosperous areas and the not so prosperous areas. Remember bad news sells papers!

There are various articles about Moraira and Javea that may go some way to explain why these areas are so highly desired. If you are thinking about investing in a holiday home it is well worth while to do as much research as you possibly can and hopefully this website will aid you in some way. If you prefer to speak with one of us directly please feel free to do so, we don’t bite! Or you may want to view some properties for sale in javea or properties for sale in Moraira

Trip To Galicia

Fri, 02 Oct 2009 08:06:00 GMT

Mo & Ali Segovia

Ant & Sal in Segovia

Our first stop was Segovia, north of Madrid – a beautiful city with a stunning cathedral and Roman aquaduct.

Segovia Cathedral

The walled city is perched on a rock rising out of the surrounding Castillian plains, and is a maze of narrow streets dotted with Roman monuments and noble mansions.

Mo & Ant Segovia

We stayed one night in a converted monastery within walking distance of the old town.

Wow Beef Rib En Route

Then on to A Pobra de Trives, near Ourense in rural Galicia, after an interesting drive north west through spectacular scenery. No postcards here (well no shops, actually), so just a couple of snapshots of the hotel, which was a luxuriously converted old manor house on a farm, set in beautiful lush pastures, woodland and lakes.

Converted Old Manor

Manor Views

Very green with lots of livestock, the cows and goats with bells so the herdsman can find them to bring them home. So peaceful, and no English spoken – popular area for walking holidays, but few foreign tourists come here so we were something of a curiosity!

Manor Gardens!

Space ship!

Our next stop was Vigo

Escudos Hotel

A busy commercial port on the south coast of Galicia (not far from the border with Portugal).
The city itself was busy and a bit touristy as many cruise liners stop here. But our hotel was a delightful, peaceful haven overlooking the estuary, another lovely old building with gardens down to the beach and all mod cons – we got a free upgrade to a huge suite overlooking the estuary.

Escudos View

Escudos Gardens

There are lots of traditional fishing villages in the many inlets, and summer resorts popular with Spanish holidaymakers. And fantastic seafood restaurants – every conceivable type of shellfish is caught or farmed off this coast.

Seafood Lunch

From Vigo, we visited Santiago de Compostella.
The buildings, especially the cathedral, were spectacularly ornate though rather gloomy.

Not difficult to imagine the throngs of pilgrims there in the Middle Ages, and what an awesome sight it must have been for them. We didn´t get to pay our respects at St James´s reliquary as the queue was several hours long.

Then on to La Coruña for 2 nights – this is where the Armada set sail from and the site of many historic sea battles and sieges. Another busy port on a rocky islet linked to mainland by a narrow strip of sand. Two sleepless nights in a beachfront hotel in sweltering heat – the only bad hotel choice I had made when I booked them all on the internet. The “English weather” we had been promised did not materialise, it was sunny every day and only a few drops of rain during the whole trip. More spectacular coastline, maritime museum and aquarium. The Costa del Muerte (coast of death) is here, very rugged coastline where many ships foundered on the rocks, and Cape Finisterre (heard of in the shipping forecast, always wondered where it was!). Finis Terra in Spanish, means “the end of the world”, which of course it was until Christopher Columbus came back. We celerbrated Mo’s birthday in the famous El Coral seafood restaurant.

Mo’s Birthday Bash at El Coral

From La Coruña we drove into the Picos de Europa, a spectacular mountain range in the province of Asturias, only 18 miles from the sea. A wonderful drive through deep gorges cut by gushing mountain rivers. It was a Sunday, and the area was busy with Spanish holidaymakers and day-trippers, every little town had canoes, bikes or horses for hire and there were hundreds of families enjoying a day out on the river and picnicking under the trees. We stayed overnight in Covadonga, a small village in the mountains with another spectacular church, huge monastery and convent.

Church close up

Another pilgrimage site, to a shrine carved out in the rocks to the Virgin of the Battlefield.

Covadonga Shrine

Covadonga Cave

Woodlands

Church in Covadonga

The legendary battle of Covadonga (not heard of it? Shame on you ….. neither had we!) took place here in 722, when Don Pelayo defeated the Moors and heralded the start of the Spanish Reconquest.

Mo & Ant Covadonga

Next stop was near to El Burgo in Castilla-Leon. Lots of old fortified towns and villages and lofty castles en-route, this being the oldest kingdom in Spain.

Rope Bridge En Route to Meseta

Then on through the “Meseta” – the vast central plains with acres and acres of arable farms, but strangely empty of people. We stayed in a delightful former convent in a quaint walled town where the locals looked at us as if we´d just landed from another planet!

On through more meseta to another walled town at Mora de Rubielos, near to Teruel. A beautiful small town with mediaeval origins, immaculately cared for. Exploring the maze of narrow streets revealed beautiful historic town houses with balconies hung with bright geraniums.

Sally and I walked the stations of the cross to the shrine at the top of the fortified hill with a lovely view of the town below.

Mora de Rubielos Shrine

One of the locals chatted animatedly with Maurice, in sign language, about how cold it is there in the winter, like England! They do get lots of snow in winter and there are ski resorts in the mountains nearby.

!http://assets1.advanceagent.co.uk/4h9d/a9c1f7ad/Castilla-Leon.JPG!

Mora de Rubielos

Local stonework

And then home to Moraira, after 10 days “on the road”, 7 different hotels, and having traveled about 3,000 km. Another huge area of Spain explored, and a breathtaking diversity of scenery, history and traditions experienced, but there is so much more to see ………..

Property valuations in Javea & Moraira

Tue, 28 Jul 2009 20:26:00 GMT

3 bed 120m2 moraira apartment for sale

Recently I have been trying to make sense of property prices and valuations in Moraira and Javea.

There seems to be all sorts of data around with regard to valuations. The majority is not area specific relative to the Javea and Moraira properties for sale. Although we have seen, in some cases, a price reduction of around 20 – 30 % in advertised sales prices, it does not represent a true picture of the underlying value that was born during 2007 – 2009 financial crisis.

What the majority can afford will always dictate the underlying value of a property. It just takes a while for the reality to kick in. Many property owners out there simply don’t have to sell or can hang on to an unrealistic price until such a time when the majority of prices have been corrected. They then have to follow suit if they wish to sell. This process usually takes three years to bottom out to a realistic level. Some properties are priced to sell but the majority for sale still doesn’t reflect reality.

The properties that seem to sell are being substantially reduced when it comes to the actual deal done. Most never get to know how low the actual sales price was relative to the asking price. Many offers are refused but the ones that are selling are deals based upon a more realistic price level to start with. So how do you get a realistic valuation?

The process of valuation is arrived at by various means but rest assured, it’s always way behind the market when it comes to the reality of reductions! Most vendors already seem to know how much their villa is worth. They arrive at this in the usual way and this is based upon other advertised prices and what they think properties have been sold at next door or down the road over the past few months. Then by making adjustments for what they paid for their property and how much money they have spent on it, plus adding some on to negotiate with and “oh, the exchange rate is not in my favour” etc.

The other way is to ask an estate agent to come around to value the property. Estate agents are aware of the market conditions and will use slightly revised figures per square meter that reflect this but will still hold out in hope that the market will improve or will not be as affected like other areas. Historically there is a lot of truth in this as far as Javea and Moraira go. These desirable areas have been able to ride the storm far more than other areas, but of late there seem to be many people having no alternative other than to sell at low prices. In my opinion this time next year will see the low priced deals done today being the advertised sales price next year. So the initial figures estate agents arrive at will be similar to what the banks come up with to lend new money.The only difference is that estate agents are more at liberty to be a little bit more creative with the rest, usually increasing the valuation to please the vendor subject to how desperate they are to sell.

The truth is there is no rock solid formula and the formulas that exist in my opinion, do not reflect the true underlying value of a property or basically what the majority can now afford. Even the official figures are lagging behind what’s happening on the ground and what’s actually happening on the ground is lagging behind the financial crisis born during 2007 and it’s not over. It may take another year before we see some realistic prices being advertised, maybe even longer.

Estate agents talk amongst themselves and know, even if they are not selling much them selves, some of the properties being sold and at what price some are exchanging hands for. Many can’t believe the deals that are being done and it would insult many vendors out there wishing to sell if they knew. Consequently it’s easier to live in the past and avoid the confrontation when asked to put a value on a property! They allow the market to take its natural course.

Another way, though at cost, to value your property is to pay a bank to do it and allow them to be as clinical as possible. Don’t sell it to them! After all these guys will probably be financing the 70% mortgage to someone, somewhere down the line. Its inevitable banks will have their say because most buyers require some form of funding or at the very least an official valuation, so you might as well know how banks are going to look upon the value of your property before hand. At least you can waive an official bank valuation in front of them regardless.

Recently I thought I would compile 200 villa properties in Javea, taken at random from various websites. I made sure that the prices were reduced prices and that the properties had a similar build 150 – 175 and plot size of 850 – 1200. Then I totaled up the build size and divided it by 200, likewise with the advertised prices. Then I divided the average price by the average build and came to an average figure of 2,300 euros per M2.
I compared this 2,300 M2 figure with some recent bank valuations and arrived at a figure that was almost the same. Today I have spoken to a property valuation expert that does valuations for the banks. Banks use various registered organizations that specialize in such activities whom follow the guidelines laid out by central government.

One such organization is Tinsa and a report by them echoes my sentiment on this subject matter even though there info is dated relative to what’s happening on the ground.

Tinsa, a Spanish property valuation company used by several high street banks, has signaled that advertised house prices will drop a further 20% over 2009. In the same report, they have calculated the drop in 2008 as being 10.1%
If this figure is correct, Tinsa say that this will bring house prices back to their advertised levels in 2005. The monthly drop may be between 1 and 1.4%.
This is not news to many agents down here on the ground, who have seen price reductions of between 20 – 40% in the resale market. The official figures often lag behind the reality of business day to day.
A 10% drop in price does not really attract attention among the bargain hunters looking to purchase a Spanish home at a drastically reduced price. It is only those properties that have reduced to 2005 prices that are actually selling.

It may well take time for certain vendors and developers to catch up with the pricing downturn. It is only those that need to sell for personal or financial reasons that are pricing their properties realistically or accepting very low offers.

This translates into only a small percentage of properties available at ‘distressed’ prices. However, they are the only properties that are selling and selling quickly.

As there seems to be no accurate formula for property valuations, I asked how they establish a value on a given property. It was a little vague but here we go…..

Firstly, they have a valuation guide by province and this is broken down to some degree by area. The problem is that there are huge fluctuations from province to province and town to town. The system depends greatly upon each individual valuation officer having knowledge of a given area and the prices these areas are able to attract. For example a like for like property in the south of Alicante would be significantly less in price than say the north of Alicante in areas like Moraira and Javea.

The bulk of the valuation is based on the amount of actual living accommodation, excluding garages, terraces and undeveloped under builds. The plot is usually included in the price/calculation, unless it’s a double plot. The pool also tends to be included. Then adjustments are taken into account relative to the overall condition of the building, gardens, views and area. So it’s part science part art. One thing for certain is that properties with greater living accommodation have always valued up very well, where as smaller accommodation will not calculate favorably and therefore will be more difficult to sell especially if the buyer requires finance.

Some of the recent bargains I have come across are larger properties of 280 and 290 M2 build. As far as bank valuations go, they value up well and one was recently valued at 670k two months ago. But the prices they are being sold at are way below a bank valuation. The figures work out at 1,300 – 1,400 per M2!!
The reason for this is because that market for older properties that were once worth 600 – 750k has virtually gone, and what’s left of that market sector can buy something that was once worth 1.2million!

So to get back to property values in a real world, many of the once 600k – 750k properties are selling at around the 400k mark, some above and some below. This is mainly due to the fact that lending has become difficult and people have less value in their currency. Spain used to be cheap!

It all sounds like doom and gloom, but let’s not hide away from what is actually happening here on the ground. You might as well know because if you have a villa that you need to sell and it’s not too dissimilar to the many out there and amongst hundreds of others for sale within a given price band that 90% of the market can not even afford, through no fault of their own, how are you going to sell your villa?

If 90% of all buyers can only raise 300k – 400k at best, plus the additional 10% cost and you happen to have a villa that you think is worth 700k or 800k, think again!
Where is your market? Who are you selling to? The few buyers around with this higher budget can find amazing villa bargains that seem unreal and unfair but they indeed exist.
If one day the advertised prices are within the grasp of the many and sterling recovers to 1.45 against the euro, you may stand a better chance of finding a buyer. Either way, you will lose out on both the reduction in price and probably on the exchange rate if you need sterling!

One thing for certain is that resale properties represent amazing value for money. And are far less expensive than new build. You would be lucky to find a decent plot for less than 225k and anything with a sea view is at least 350k for a 1000M2 plot. With the cost of architects, building permissions and modern day materials and labour you don’t get much change out of 600k and that’s for something basic. Consequently, the future of new build looks grim and only prime and very expensive plot locations seem to be being built on for a more discerning customer.

Non Resident Taxation Explained

Wed, 22 Jul 2009 09:56:00 GMT

Non-Resident Home Owners and Annual Property Taxes

Most non-resident owners of property in Spain are under the misconception that they do not need to submitt their annual tax forms anymore!

It would be great but it is not the case. However as from 1st Jan 2008, the law changed and the taxes payable are less than people paid in previous years.

Up until the end of 2007 non-residents with property in Spain were liable to pay a “wealth tax” (Patrimonio) which was calculated on the value of their assets in Spain.

It is interesting to note that when Prime Minister Zapatero fulfilled his election promise regarding Patrimonio or “Wealth Tax”, with the introduction of Spanish Law 4/2008 passed on the 23 December 2008, the tax was finally amended by reducing the taxable base to zero.

Is this technically a formal abolition of the Tax? The answer is no. Certainly the effect is that no wealth tax will be paid by either residents, (obligación personal) or non-residents, (obligación real).

The law, which ironically was published in the Spanish Government Official Gazette (BOE) on Christmas Day 2008, applies to tax years starting 1st January 2008 onwards which, under the previous scheme would have been payable in arrears in 2009.

The mechanics of the new law mean that the obligation to submit a wealth tax return (Modelo 214) is terminated by applying a 100 per cent deduction to the taxable base.
By reducing the tax to zero but not abolishing it, is the Spanish Government retaining the option to re-introduce the tax in the future? That may well be the case!

So to reiterate, the Patrimony “wealth tax” has to all intents and purposes been done away with. But that does not mean that there are no annual property taxes for Non-Residents to pay. You may remember noticing on previous year’s Modelo 214 forms that there were 2 separate calculations: The Patrimony amount and the “Declaración de la Renta” amount.

The “Declaración de la Renta" or “Non Resident’s annual tax return” must still be made and paid!

Taxation, and particularly dual taxation issues are an extremely complicated subject and I would always advise readers who make financial gain from their property in Spain to get a qualified assessment of their own personal circumstances, either directly from the Spanish “Hacienda”, Spain’s Inland Revenue, or from a tax professional.

However, in general terms the earnings from rented property or sub-let property are calculated on 24 per cent of the gross income received from the tenant, excluding IGIC.
If the property is only rented out for part of the year, the earnings are calculated as above for the rented period. For the part of the year that it lies empty, the calculation is made as for “Deemed Rental Income”: see below.
See if your Catastral Value has been updated since 1994 if the answer is yes the coefficient to use is 1.1 if the answer is no then use 2.Multiply the Catastral Value by 1.1 or 2 (as above) per cent Take this value and multiply by 24 per cent – thats how much deemed rental income tax you pay.

Example: Catastral Value 150,000 revised since 1994 = yesx1.1 % = 1650x 24% = 396 euros tax payable
If your property is left empty, even though you do not let out your holiday home for gain, Spanish law assumes you have what is called a “Deemed Rental Income” which is subject to non-resident Income Tax.

The “Deemed Rental Income”, which used to be included on the old Modelo 214 form, is now declared on a Modelo 210 form.
The amount you pay is calculated using the “Valor Catastral” (Rateable Value) of your property in Spain. This can be easily ascertained by looking at the receipt for your “Impuestos Sobre Bienes Inmuebles” or IBI, (often referred to by English speakers as “Rates”) – which is paid to your “Ayuntamiento” annually.
This receipt will also tell you whether the rateable value of your property has been revised since 1st January 1994. This is critical because the percentage used to calculate “Deemed Rental Income” is higher if your rateable value has not been revised since that date. Tax payable on the “Deemed Rental Income” is 24 per cent. The deadline for the submission of form Modelo 210 is the June 30th 2009 for income deemed or actually derived in 2008.
All of the above applies to Non-residents with no permanent establishment but who own a holiday home in Spain
An example of a receipt for “Impuestos Sobre Bienes Inmuebles” or IBI: The format can vary between Ayuntamientos, or whether you get the receipt from your bank rather than paying in cash. But all the information you need will be on there.

Anyone treating apartment letting as a business
If someone owns property in Spain, but is not resident in Spain for tax purposes and has at least one office or premises used for managing the letting business and employs one or more people on a full time contract, then the owner is considered to have income through a permanent establishment in Spain and is subject to different regulations.

It is important that non-resident homeowners are aware of their legal obligation to submit an annual income tax declaration in Spain. What holds true for all, is that no non-resident home owner, whatever their circumstances, are exempt from making a non-residents Income Tax return.

You probably know someone who has owned property for years and never made a declaration? However, if they are caught, and computerised records are making that ever more likely, they are liable to pay the last four year’s tax and probably a hefty fine.

But in any case, when that property is eventually sold or passed on as part of an inheritance, the Spanish Tax Agency can and will check their records, which will show that the property is owned by a non-resident and that no tax declarations have been received. The taxes will then need to be paid, including any fines imposed, before the property can be legally transferred.

I believe that at the very least it makes sense to clarify what your tax liability is and if at all possible, keep things up to date, rather than looking over you shoulder and waiting for a fine to drop on the mat.
Research and script by www.diana-mcglone.com