Your Mortgage features Conti

As featured in the January/February 2014 edition of Your Mortgage

Is it time to invest in Spanish property?

The Spanish property market is showing signs of bouncing back, and Brits are leading the way when it comes to investment, says Clare Nessling

There have been numerous media reports over recent months about opportunities in the Spanish property market, and you, like many others, may be wondering if it’s finally the right time to buy. Or are the bargain property deals we’re hearing so much about just toxic assets in the making?

The Spanish property market has endured a turbulent time of late, to put it mildly, but it appears that buyers are rekindling their affair with the country. People who have been sitting on their hands for the last year or so are taking advantage of the favourable conditions open to them, and deciding to go for it in case they miss out on the best deals.

According to figures from the General Council of Notaires, the first six months of 2013 saw international purchases of property in Spain grow by 13.6 per cent compared with the same period in 2012. In addition, the Bank of Spain has reported that foreign investment in Spain reached more than €2,834 million in the first half of 2013, the largest amount recorded since 2004, and the British are still the biggest group of buyers.  

Sales to overseas buyers are now expected to increase even more, thanks to the introduction of the long-awaited law granting a residency visa to non-European Union nationals if they spend a minimum of €500,000 on property. After being approved in September 2012, the new law has effectively opened the door to thousands of potential investors. This comes alongside efforts being made by regional estate agents and tourism boards to improve Spain’s tarnished image, and it’s hoped that these will help to revive the country’s property market.

The future’s looking bright

So, things appear to be looking up at last in the Spanish property market, and it certainly appears that confidence is returning. At the time of writing, Spain accounts for 43 per cent of enquiries received at Conti, higher than any other country, including France which has enjoyed the coveted top spot for several years. The story has been similar for a few months, with Spain outperforming any other destination.

A number of factors are pulling buyers in. Tourism is booming, access is easy and the culture is familiar, but it’s also becoming more affordable – mortgage rates are very low, the pound has been getting stronger, and prices are still bottoming out. According to Sociedad de Tasación, one of Spain’s biggest appraisal companies, average Spanish property prices were set to decline by 52 per cent by the end of 2013, compared with their peak in 2007. And buyers are in a strong position – dramatically reduced prices and the opportunity to negotiate these down even further with some motivated sellers mean that it’s a buyer’s market.

According to recent reports, even Bill Gates is getting in on the act, with the acquisition of a 5.7 per cent holding in Spanish builder Formento de Constucciones y Contratas SA (FCC). Is it time to follow him?

Obtaining finance

Despite the recent boom and bust nature of the market, Spanish lenders are still willing to provide finance to foreign nationals, particularly if you can prove that you have a sound financial profile. They will require more details about your income and outgoings, so it’s important to have your accounts in good order. Lenders will also use the debt-to-income ratio, which establishes whether you can afford to maintain the mortgage repayments. So your existing liabilities, including any UK mortgage or rental payments, loans, and credit card commitments are taken into account, together with the proposed overseas mortgage payments. The general rule is that the total of these should not exceed 35 per cent to 40 per cent of your monthly net income.

We always recommend that a prospective buyer obtains an Approval in Principle before committing to a property purchase. This costs nothing, but will tell you up-front about how much you can borrow, and therefore what price range you can realistically consider.

We also recommend that an overseas mortgage and the income used to service the mortgage repayments are in the same currency, thus avoiding exchange rate issues. And if you have plans to pay off your mortgage early, you should check what the redemption penalties are on any mortgage deals on offer, particularly fixed rates. 

In Spain, you can generally borrow up to 65 per cent of the value of the property, and rates currently start from just 3.22 per cent. One of the easiest ways of obtaining a mortgage to buy in Spain is to use a specialist UK broker, as they will know the exact mortgage application requirements for each lender and can source the best possible deal for you.

Take advice and choose wisely

As always, it’s vitally important for buyers to seek the right advice. Bitter experience has taught many Spanish property buyers that scrimping on independent legal advice can effectively cost them their holiday home. You should always go through the same process that you would follow if you were buying a property in the UK. Take independent advice from an English-speaking lawyer who is not connected to your seller, estate agent or property developer. It’s essential that they confirm to you that all required permissions have been obtained.

Last word

For many people buying property in Spain, it’s a lifestyle choice, and they’re attracted by the climate, amenities and culture, rather than earning a prospective fortune on their home there. If people enjoy what Spain has to offer, property can be snapped up there on better terms than have been seen for years. As long as you treat your property purchase as an investment over the long term, you can still buy with confidence, if you buy wisely. 

Top tips for buying in Spain

Obtain an Approval in Principle

This will confirm that you can obtain the necessary funds before signing any dotted line and prove to sellers that you’re a serious buyer.

Consider exchange rate fluctuations

We generally recommend that an overseas mortgage and the income used to service the mortgage repayments are in the same currency, thus avoiding exchange rate issues.

New-build properties

Check the developer’s track record and how long they’ve been trading. Obtain references from previous buyers and check comparable properties in the area and any re-sales offered on the same development.

Factor in additional costs

Bear in mind that bills don’t end at the asking price. Lawyer’s fees, local and national taxes, insurance, and so on, can often add at least a further 10 per cent to the cost of your acquisition. 

Seek professional advice

Take independent advice from an English-speaking lawyer who is not connected to your seller, estate agent or property developer.

Clare Nessling is Director of Conti, the overseas mortgage specialist

Call 0800 970 0985 or visit

Spanish mortgage best buys available through Conti

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 Rates correct as at 14/11/13. All product specifications will depend on individual circumstances. The table shows a small selection of the deals currently available and should be used as a guide.
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