Investing in Spanish Real Estate: Challenges and concerns

by | Aug 9, 2024 | News

Investing in Spanish real estate is attractive, but there are some challenges and concerns you need to consider as an investor.
We have listed them for you below.

  • Work & Cultural Differences
    The Spanish work mentality differs from that in many other countries.
    Long lunch breaks and siestas can affect the speed of service and response times.
    It is important to be patient and anticipate possible delays in business processes.

  • Scarcity and Price
    In sought-after areas, such as tourist hotspots and major cities, affordable and conveniently located real estate options can be scarce and pricey.
    This makes the search for suitable real estate time intensive.
    In addition, overbuilding in some areas can lead to price competition, making the market dynamic and sometimes unpredictable.

  • Tax implications
    When buying, renovating and selling property in Spain, there are no transfer tax refunds, and 19% profit tax must be paid.
    This makes it less attractive compared to the tax benefits that may be available in the Netherlands.

  • Legal Complexity
    Insufficient legal preparation can lead to problems.
    It is important to have legal matters properly checked by a lawyer or gestoria (administration office).
    This helps avoid problems such as property rights, debts and legal restrictions.
    Make sure you have all documentation and permits in order before completing a transaction.

  • Permits
    Obtaining the necessary permits for renovations and construction can be a lengthy and complex process that requires patience.
    Delays can impede the progress of projects and potentially incur additional costs.
    Plan well in advance and take into account possible bureaucratic obstacles.

  • Tenants’ rights
    Tenants in Spain have many rights.
    It is important to fully understand the different types of rental contracts and their duration.
    Knowledge of local rental laws is essential to avoid legal complications and ensure fair treatment of tenants.

  • Aftersales Service
    Aftersales service in Spain is often less extensive than in the Netherlands.
    Investors should therefore take into account that not everything is solved as well and quickly as in the Netherlands.
    This can lead to longer waiting times for maintenance and repairs.

  • Rental licenses
    Not everywhere a rental license is available and obtaining one can take a long time.
    In addition, in some regions the issuance of rental licenses is restricted, temporarily or even stopped permanently.
    In addition, local regulations, such as that 3/5 of the Owners’ Association (VVE) can vote against renting out properties in a complex, can limit or complicate rental options.

  • Mortgage criteria
    One of the conditions for taking out a mortgage in Spain is that the borrower meets a 35% income requirement.
    This means that mortgage expenses cannot exceed 35% of net monthly income.
    In addition, refinancing existing mortgages is generally not possible in Spain, which can limit flexibility for investors.

Investing in Spanish real estate offers many opportunities, but proper preparation, sound legal advice and cooperation with Your Destinations Real Estate’s trusted local partners can help minimize risk.