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Property investment in Spain. How to Make Money Renting property in Spain

What’s on this page?

  1. Buying property in Spain is a good investment
  2. What types of real estate are more attractive for investment?
  3. Financing and taxes
  4. Where should the investment property be located?
  5. What to do if the process of buying a property seems complicated?

The real estate market in Spain is constantly growing. This is due to a number of reasons, among which are the unique climate, developed infrastructure, reasonable prices, and wide investment opportunities. All this creates favorable conditions for buying investment property in Spain.

According to statistics, the Spanish real estate market has been stable since 2014. A serious decrease in the number of sales in 2020-2021 is associated with the Covid epidemic, but this trend was observed in most countries. It should be noted that Spain has stabilized the investment market in a short time, which has led to its significant growth in recent years. Today, property investment is characterized by a high yield of 11.2%.

Buying property in Spain is a good investment

Why is Spain the right country to invest in? Many people from all over the world are looking for an opportunity to buy or rent properties for recreation on the sea coast, for tourism purposes or relocation to a country with a high standard of living. Spain fully meets all these criteria. In addition, an increasing number of buyers are buying property to generate income. Due to high demand, the rental market is widely developed in Spain.

Property in Spain

Spain today ranks 7th in the world in terms of investing in real estate. There are many reasons why the Spanish real estate market has advantages over others:

  • highly developed legal framework - the rights of investors are protected by law, regardless of whether the investor is a resident of Spain or not;
  • regular income - the investor can be sure that when renting out the property, they will receive a stable income;
  • stable economy - the country has created conditions for doing business, developed medicine and education, social guarantees are provided;
  • developed supply and demand markets - with great interest in both residential and commercial real estate in Spain, the pace of construction of new facilities is quite high;
  • the possibility of obtaining a residence permit - when investing in real estate which costs more than € 500,000, the investor can obtain a residence permit. Since 2013, according to the state program, an investor can rent out real estate and receive a stable income. At the same time, after living in Spain for five years, one can obtain permanent residence status, and after another five years - citizenship;
  • the possibility of buying real estate and taking out a mortgage.

Legislation encourages property investment in Spain, greatly simplifying the procedure for processing a transaction, making it possible for almost everyone, both residents and non-residents, to obtain a mortgage loan. Here you should pay attention to the conditions for obtaining a mortgage loan, in particular, the interest rates on the loan.

As elsewhere in the world, there is inflation in Spain, primarily associated with the global economic fall due to the Covid epidemic. This affected the growth of interest rates on mortgage loans and at the end of 2022 they were about 2.9%. However, such rates are still considered low. Many investors take out loans at fixed rates that cannot be affected by inflation. And, finally, the mortgage lending market is developing in connection with inflationary expectations: buyers consider it a better option to purchase real estate now than in the future.

What is a successful real estate investment? If you purchase housing with your own money for permanent residence, then you will have your own house, which your children will then inherit, and create your own cozy atmosphere in it. Isn't this a great investment? When buying a home for a seasonal holiday, the rest of the time it can be rented out and you will receive income. Or you can immediately invest in residential or commercial real estate for rent.

Real estate investment

In the European Investor Plans 2023 report, the Spanish cities of Madrid and Barcelona are among the top six cities in Europe to invest in real estate. On average in Spain, 1 m² of living space costs € 1829. For comparison, we can provide data on the cost of 1 m² of real estate in European capitals:

  • London - € 7916;
  • Paris - € 12,917.

According to economic standards, investing in real estate is considered successful with a rental yield of 13-15% per annum. That is, if, for example, you purchase an apartment for € 100,000 and rent it out with a monthly rent of € 1100, then the rental yield will be 13.2% and will be considered quite successful.

Examples of successful real estate investments:

Property type Location Property price, € Rent, €/year Profit from real estate rental,%
One-bedroom apartment Alicante, outskirts of the city 53,000 7200 13.5
Three-Bedroom Apartment Murcia, city center, resale housing 88,000 12,000 13.6
Penthouse with three bedrooms Valencia, a new residential complex in the city center 443,000 66,000 14.9
Five-bedroom villa Torrevieja, coast 1,669,000 228,000 13.7
Hotel (commercial property) Barcelona 2,349,000 336,000 14.3

What types of real estate are more attractive for investment?

The real estate market in Spain is diverse. It presents a large number of different types of properties - from small apartments in the countryside to luxurious penthouses and villas in megacities and on the Mediterranean coast.

The most popular are budget apartments in the secondary market, as well as townhouses, the demand for which is constantly growing, which contributes to active housing construction in almost all regions of Spain. On the other hand, expensive mansions are also always in the spotlight, and one of the reasons for buying them is to get a high rental income.

Apartments in Spain

Each type of property has its own advantages and disadvantages, which must be taken into account when buying. For example:

Property type Pros Cons
Apartments on the secondary market

Low price

Ready for use

Low operating costs

Bad location

Possible need for repair

Outdated communications

Apartments in new residential complexes

Great value for money

New communications

Modern infrastructure of the complex

Delayed commissioning possible

High cost of operation

Unforeseen costs

Villa

Autonomy

Plot of land

The luxury of furnishing

Big area

High maintenance costs, high utility bills

Financing and taxes

The sources of financing for the purchase of real estate are own funds or a mortgage loan. Mandatory costs are taxes and fees. When buying a home, the main tax is VAT or ITP, the rate of which is about 10%. Notary services, registration of property, including in the land cadastre, are additionally paid. When you receive a mortgage loan, you will repay it at a set rate, and you will also need to pay mortgage fees: for property appraisal, for mortgage processing and registration fee.

Taxs in Spain

In the future, you will pay property tax, which is municipal. The rate of this tax is in the range of 0.4-1.1% of the value of the property. Also, do not forget about utility bills. When renting out real estate, income tax is paid, the rate of which is 19% of the rent for residents and 24% for non-residents.

Where should the investment property be located?

Spain is an amazing country where every corner is attractive for recreation or permanent residence. The choice of the location of the future investment property depends, first of all, on your preferences: it can be a large city or a quiet patriarchal hinterland that has preserved its national flavor, the north of the country with a unique Basque culture or a beautiful Mediterranean coast.

You will not have to worry that in some areas there will be no conditions necessary for a comfortable life. Almost every small town has everything to ensure a high quality of life - from shops and restaurants to medical, educational, cultural institutions, places of recreation and entertainment. In Spain, the transport system is widely developed and you can get from one place to another without any problems and in a short time.

The main areas for investing in real estate are:

  • Madrid and Barcelona are the absolute leaders in the market with the highest real estate prices and, accordingly, high rent;
  • large cities (Valencia, Seville, Zaragoza, Malaga) are attractive for those who want to live in a metropolis with a large number of cultural and architectural monuments. The prices here are somewhat lower;
  • Costa Blanca is the absolute European leader in real estate investment by the sea. Climate, nature, healthy food, beach holidays, sports activities are factors of high demand for any real estate. Prices for properties near the coast are quite high, on the second line and farther - quite affordable;

Coast of the Costa Blanca

  • small towns in the center of the country - here you can buy decent apartments at low prices, and with them - peace and comfort, national flavor and unique local cuisine. Another beauty of small towns is that everything is within walking distance.

What to do if the process of buying a property seems complicated?

An excellent solution to this problem can be contacting local specialists who have the necessary knowledge of Spanish legislation and the state of the local real estate market. A large number of specialized agencies have been operating on the market for a long time and have gained a worthy reputation. A professional agent will help you with making a choice, as well as with paperwork, obtaining a mortgage loan, and completing a transaction.

Investment property in Spain is, of course, an excellent option for investment. However, you should be careful when making a choice. It is not enough to study the information resources available on the Internet or take the advice of friends who have housing on the Mediterranean coast. Even talking to a real estate agent online may not be enough.

The most reliable way to protect yourself from making the wrong decision is to visit Spain for a certain period of time and see the properties that interest you with your own eyes. Also, carefully study the legislative framework governing purchase and taxation issues in advance. Be prepared for some unexpected financial costs. Check the reputation of the agent you are going to work with.

Buying a property in Spain is a good investment under any circumstances. There are many arguments for making such a decision such as climate, nature, developed economy, high standard of living, wide range of real estate prices depending on your preferences, favorable investment climate, high return on investment and goodwill of local residents. Do not waste your time and invest in real estate in Spain!

FAQ

Is investing in property in Spain a good idea?

Investing in real estate in Spain is a good idea if your plans include making a profit from renting out real estate located in a developed European country. Your capital will bring you a stable income, regardless of whether you are a resident or non-resident of Spain.

What are the costs associated with buying property in Spain?

In addition to paying the price of the property, you will have to pay taxes and fees, such as VAT, notary services, registration of property, including in the land registry. Upon receipt of a mortgage, you will repay it and pay mortgage fees: for the appraisal of the property, for the registration of the mortgage and the registration fee. In the future, you will pay real estate tax, and in the case of renting out a property, income tax. The amount depends on the value of the property and its location.

What type of property is popular for investment in Spain?

Any type of real estate can be chosen for a successful investment, depending on the goals of the investor and his financial situation. According to statistics, the most popular are apartments, villas and commercial real estate.

Are there any legal requirements for foreigners buying property in Spain?

Spain has created favorable conditions for investing in real estate for both residents and non-residents. It is important for foreigners to work with professional lawyers and real estate agencies in matters of real estate acquisition. You will also need to obtain a non-resident identification number (NIE) and open a Spanish bank account for financial transactions.

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