Usefull tips on buying off-plan in Spain

Planning to buy a new house or apartment in Spain? From the search to the keys delivery, discover the steps of the purchase process off-plan.
Buying "off-plan" means that you acquire a property before it is built. The acquisition is made before the construction but after the plans have been defined and the building permit has been filed.

Things to know before signing up

To buy a house or an apartment in Spain, it is necessary to have a passport and a NIE (Identification Number for Foreigners) which can be obtained from a police station. It is also strongly recommended to be assisted throughout the purchase process by a real estate agent and a lawyer. In Spain, the notary will authenticate the deed of purchase, but it is the responsibility of the buyer to know the situation of the property.

In the case of a purchase of a new-build property, it is important to be informed on several points and gather a few documents before signing the sales agreement.

  • Check the financial situation of the property developer. Is it a solid company? Is it financially stable?
  • It is recommended that you get an Aval Bancario from a Spanish bank. This is a bank guarantee that will cover your financial losses in case of bankruptcy of the developer.
  • Also verify that the developer provides a bank guarantee for monetary deposits once the permit has been granted.
  • The developer must also offer constructor's warranties (in particular the decennial guarantee and the warranties on the construction components).
  • Before signing any contract, the developer must be able to provide all legal documents concerning the land, the building permit...
  • Also obtain the cadastral certificate of the land and the certificate of the planning situation (documents available on the Spanish cadastral website).

In addition to the guarantees and legal documents, discuss your search criteria with the real estate agent and the developer and do not hesitate to ask to see a show home when you meet with the developer.

When signing the sales contract, make sure the document indicates the amount of the property purchase and the deadline for the construction to be completed.

The seller will ask you for a deposit upon signing the contract to book the property. Then, most of the time, a second deposit is made at the beginning of the second phase of the works. The rest is paid when the final deed is signed at the notary's office.

When you receive the keys, the developer will provide you with a certificate of completion (or Certificado final de Obra) and a license of first occupation (Licencia de primera ocupación).

Benefits and risks

There are several advantages to buying a new property: the purchase can cost less than for an old property, the housing is designed on measure within the limits of the possible, the delivery periods are announced in advance...

But in any real estate purchase there are also risks. The developer may go bankrupt. In this case, the property will not be delivered and you could lose your investment. That's why since 2008 the banks offer a guarantee or Aval Bancario (see above).

If the builder fails to deliver on time or fails to meet construction standards, you may decide to extend the contract or rescind it. In the latter case, your deposits will be returned to you. For this type of procedure, you will need to call on the services of a lawyer.

How much does it cost?

Among the costs associated with the purchase of a new home in Spain, there are of course the notary fees. As a general rule, they vary between 400 and 1500 euros depending on the value of the property.

The real estate transaction is subject to IVA (VAT) which amounts to 10% of the sale price. On the other hand, a new home is not subject to the Tax on Transfer of Ownership (ITP) which amounts to 10% of the purchase price of the property.

Then there is the tax on documented legal acts (Impuesto de Actos Jurídicos Documentados or AJD), which arises from the property registration. It varies from 0.5 to 1.5% of the value of the property depending on the region.

Finally, you will have to pay the property tax (IBI) which varies from 0.3 to 1.3% of the cadastral value of the property, the garbage tax and the non-resident income tax (IRNR) which amounts to 19% for non-residents.