The Canary Islands Country Guide
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Before you start to view any properties, it is worth considering what you are going
to use it for. There are several options available:
Residential
Congratulations! You have decided to take the plunge and move abroad and are looking
for a comfortable family home where you can best enjoy your new Spanish lifestyle.
Obviously, primary considerations will be similar to those in the UK, including
size and layout of living space, how many bedrooms/bathrooms, parking availability
and proximity to amenities, schools, etc.
Investment
Are you are looking to get a good return on your investment with a minimum capital
outlay? The best option would be to buy at the `new launch´stage of an off-plan
development release. An average capital outlay would be in the region of 30%, to
be paid (often in stage payments) during the construction process (generally 18
- 24 months). Upon completion, you will then have the option of selling the property
prior to taking title or taking title and renting the property.
Holiday Home
Many people would be horrified at how much they spend per year on package deals
abroad. Consequently, it makes a lot of sense to buy your own home abroad, especially
if you are fortunate enough to take holidays several times a year. Depending on
your level of usage, you also have the option to gain income through rentals, whether
this is to family and friends or through a managed rental scheme on the island.
Buy-to-Let
Traditionally a popular reason for purchasing a property in the UK, this method
also makes a lot of sense in Fuerteventura, particularly when you take into consideration
the number of residents there. There is currently a huge demand for long term rental
properties on the Island. As with the Residential´ option, you need to take the
same considerations on board as this is going to be home to someone for an agreed
amount of time. The advantage to the purchaser is that you will have a regular monthly
income from the property - useful if you have taken a mortgage on the property and
need help to finance the repayments. The disadvantage, of course, is that your personal
use will be restricted by occupation of the property. Standard long term rental
contracts can be for 3, 6, 9 or 12 month durations and rental management fees are
in the region of 10%.
Short-term Rentals
If you are going to rent a property to tourists then important criteria to consider
is accessibility of amenities e.g. supermarkets, bars, restaurants, availability
of a swimming pool and proximity to the beach. One of the main advantages of renting
to tourists is the higher income you will receive per week compared to renting to
residents/long term tenants - a guideline is that one week of tourist rates is the
equivalent to one month of long-term rates. Another is that you can choose the weeks
you would like to keep the property free for your own use. Obviously, the disadvantage
is that you are not guaranteed occupation all year round so will need to be flexible
regarding the income you will receive from the property.
Guaranteed Rentals
Alternatively you can opt for a guaranteed rental option. These are generally for
a set period of time (usually one or three years) and you will receive a pre-determined
amount per month or quarter, regardless of occupation. This can be an excellent
option for first-time buyers, however remember to check what availability you, the
owner, will have as this will generally be restricted.
FINANCES
Fees & Taxes
Anyone who would like to open a Spanish bank account or purchase a property in Spain
needs to have a foreigners identification number (N.I.E. - Numero de Identifi cación
de Extranjero) and a qualified local representative who will deal with tax affairs.
Throughout the purchase process, there are several fees and taxes to be paid. As
a general rule, remember to add around 10% onto the purchase price and this should
cover all your fees and taxes. A breakdown of where the fees go is as follows: Document
tax of 0.75%; Local tax (I.G.I.C.) which is currently 5% of the official value of
a new property (off-plan) or 6.5% transfer tax of the value of a resale property
from a private owner; Notary fee for the preparation of the Title Deeds (Escritura);
Notary fee for registering the property in the new owners name; Plus Valia, a tax
on the increased value of the land; Solicitor or lawyers fees (dependant on how
much time and work is involved). Always use a bonded lawyer to ensure the final
bill matches your quoted fee, your Estate Agent should be able to recommend one
for you. Under Spanish law, the vendor should pay the Plus Valia tax but in practice
the purchaser is asked to pay all fees and taxes on the transfer of a property (resale).
The fees and transfer tax need to be paid soon after the Escritura is signed, the
Plus Valia will be asked for later on.
Reservation Fees
Once you have chosen your perfect home in the sun, you will be required to make
a reservation deposit. Depending on the purchase price of the property, this will
be between €3,000.00 and €6,000.00. Payment of this ensures that your property is
taken off the market and reserved in your name and following this, contracts will
be drawn up. This reservation fee forms part of the 30% deposit you will generally
need to make.
Mortgages
As the capital investment you make will invariably increase at a higher rate than
inflation, buying a property is one of the safest forms of investment you can make
and your home in the UK can be used to release equity to enable you to purchase
your second home abroad. As a non-resident, you are generally eligible for a Spanish
mortgage of up to 70% of the value of the property at completion (off-plan) or of
the official value of the property (resale). Residents can generally get mortgages
of 80% and upwards. It is relatively easy to arrange
a mortgage in Fuerteventura, with all banks providing this facility for overseas
purchasers. An added benefit of arranging your mortgage there is to take advantage
of the lower interest rates enjoyed in the Canary Islands, between 3 - 4%. As in
the UK, various types of mortgages are available, according to your requirements.
Further Information -
Useful Information | Buying Your Property