The Latest Spanish Property News from Kyero.com
February 28th, 2007
With 75,000 UK pensioners currently living in Spain, the subject of Inheritance tax for British expatriates is one that needs to be given careful consideration, says Bank of Scotland International.
If you have, or are considering, retiring permanently to Spain it is vital to consider the implications of Spanish inheritance tax and law that applies in Spain, and assess how this may affect your future heirs and the value of your estate.
Many British expatriates who have moved to Spain believe that, upon their death, their assets would pass automatically to their spouse tax-free, or be disposed of in accordance with their wishes as outlined in their will. Another assumption many people make is that they will automatically avoid the issue of inheritance tax if they are living overseas. However, this is not the case.
Confusingly, Spanish law dictates that, with regards to British property owners, British law should be applied in the event of death. However, British law states that if you are UK domiciled you are subject to inheritance tax on your worldwide assets.
As a general rule, if you are living overseas, the key factor behind inheritance tax is domicile, rather than residence. Your country of domicile is determined by where you were born and where your father was born.
The only way that you can lose UK domicile is to severe all of your ties with the UK and dispose of all of your UK assets. You cannot, however, lose your UK domicile until you have lived away from the UK for at least three years and even then you need to convince HM Revenue and Customers (HMRC) that you have acquired a new domicile with no intention of returning home. Another point to note is that if you lose UK domicile you need to acquire a new domicile in Spain.
Once you are domiciled in Spain, you will be subjected to Spanish inheritance tax on all of your assets. Under Spanish law, if a property is owned in joint names and one of the spouses was to die, the surviving spouse would inherit the remaining spouse’s 50% share (this is also true of UK law.) The surviving spouse would be subjected to inheritance tax upon the other half of the property that they have inherited. Inheritance tax is Spain is charged at 7.65% to 34% upon a progressive basis. The 7.65% rate starts from €7,993.46 and 34% is triggered on amounts over €797,555.08
This is different to the system in the UK in that if assets pass to the surviving spouse, who is also UK domiciled for inheritance tax purposes, there would be no charge to inheritance tax as this would be an exempt transfer. The tax in Spain must be paid within six months of the death (this is also true where UK inheritance tax is to be paid) but the property cannot be sold, or have the ownership details changed until the tax has been paid.
The important factor to note is that where there is both UK and Spanish liability to inheritance tax, one can be offset against the other. It is however, advisable to have a working structure and adequate financial arrangements in place.
Consequently, many solicitors advise British expatriates to write a will under Spanish law, stating that they wish to have their assets disposed of according to Spanish national law.
If UK domicile is still present, then British expatriates will still have to pay UK inheritance tax upon all of their assets at a rate of 40% on estates over £285,000.
In this respect, anyone buying property in Spain should seek qualified and independent legal and financial advice.
Tony Wilcox, Managing Director at Bank of Scotland International, said: “If you are planning to leave the UK to live temporarily or permanently overseas, you need to get expert tax and financial advice and have the right products and services in place.”
February 26th, 2007
It goes without saying that owning a second property in Spain is attractive to many people, providing the perfect holiday home for you, your family and friends to enjoy perhaps before you retire to the relaxed lifestyle and warm climate that makes Spain so popular. While holiday homes are used for only a small proportion of the year they still require a significant financial commitment, so it makes sense to put the property to work in order to maximise any returns that it can provide. Perhaps the most common method of achieving this is by renting, either in the short term or for holiday lets.
Knowing that more clients are now looking towards properties for investment, it is not surprising that developers are marketing their properties with promises of guaranteed rental returns over a given period of time. These schemes look particularly attractive when the purchaser is also able to use the property several weeks of the year for holidays while still being assured of a minimum amount of rental income that helps to offset the purchase or maintenance costs or simply provides a regular income from the property.
So, do guaranteed rental schemes work, are they good value and most importantly, what guarantees the guarantee?
In most cases when you buy a property with a rental guarantee agreement, the developer undertakes to take over the management of the property for you, advertising to potential tenants, collecting the rent and maintaining the property are all included in the service. This agreement will be separate from your contract to purchase the property and the developer will get his income (and incentive) from the profit in selling you the property. However, great care must be taken to ensure that the scheme is not simply a skilful marketing promotion.
While there are genuine long term agreements offered by reputable companies, rental guarantee agreements that are for a relatively short term with unusually high yields for the area should be viewed with extreme caution. In these circumstances it may well be that the developer has simply added the total rent for the guaranteed period to the price you are paying for the property. Not only are you in effect paying your own rent from an increase in the purchase price this can also lead you into a false sense of security that this level of rental income will be maintained after the guaranteed period has ended. If it cannot, this can leave a significant shortfall in your budget especially if you are relying on this income to subsidise your mortgage repayments.
As with any agreement, the devil is in the detail and the contract for the rental guarantee should be scrutinised by your own independent lawyers. Particular attention should be given to how the developer will meet their obligations if they should fail to let the property or worse, should they go out of business. You should find out whether the rental guarantee is underwritten by an insurance company or if there is a bank guarantee for it? If so, have you seen the policy document?
It is vital to know this information as a rental guarantee is nothing more than a contract between you and the developer. Should the developer or rental company fail to let the property or make the guaranteed payments for any reason, your only recourse will be to enforce the contract under civil through the courts, a procedure that can be time consuming and expensive. Even if successful, it is of little comfort if you were relying on the rental income during the time the legal process takes to reach its conclusion. In the worst case scenario the developer may even have gone out of business, leaving you without a remedy and large legal fees.
Issues that also need to be considered will include who is entitled to any funds in excess of the guaranteed amount? Who is responsible for any dilapidations to the property during the rental period? What conditions are there and is there an option for the agreement to be extended? Who is responsible for insurance while the property is let and how will the rent be paid to you? You should also consider how easy the property may be to sell and whether the rental guarantee agreement can be transferred to your purchaser.
A prudent purchaser relying on a rental guarantee should also conduct their own independent research into the development and the surrounding area to gain an idea of the level of demand for rental properties and the typical rents being asked (and achieved). The developer may be offering a guaranteed return of 8% while other properties are achieving only 3%, but this is of little comfort if once the guarantee ends this is the maximum that can be achieved.
Finally, if the property is to be subject to a mortgage you should ensure that the anticipated returns are not going to be diluted by a higher rate of interest that may be charged and that the mortgage company agrees to the letting of the property. As with all agreements and contracts, ensure that you take the advice of an independent legal advisor.
February 21st, 2007
British citizens living abroad could be wasting over £300 million a year when claiming their state pensions because of unnecessary bank charges and fluctuating exchange rates, according to HIFX.
The figure is based on the average retiree expenditure on bank charges each year of £300 multiplied by the number of retirees living abroad – 1,03,600 according to figures from the Department for Work and Pensions from May last year. The DWP also confirms that the maximum weekly state pension for a couple living together is £84.25 each a week which equates to £730.16 a month in total.
HIFX points out that the average retiree living abroad claiming their pension through their bank are charged between £10 and £30 – plus average receiving charges of 0.5% of the total value of the monthly pension in many cases. The FX specialist also highlights fluctuating exchange rates, so the value of their pension can go up and down continually throughout the year. The 37,240 retirees living in South Africa, for example, have been exposed to one of the world’s most volatile currencies - the South African Rand (ZAR).
“HIFX’s regular payment service means retirees no longer have to pay expensive bank charges when making regular payments overseas,” said Mark Bodega, Marketing Director at HIFX. “The plan also means retirees know they will be receiving the same amount of income every month, which means they can budget and save themselves the worry of currency fluctuations eating into their pension.
“Everything is done via direct debit and means the customer doesn’t even have to speak to their foreign or UK bank, therefore saving again on high call rates. HIFX arranges everything on their behalf and gives retirees living abroad real peace of mind.”
The top ten countries for British retirees, and the number of claimants in each, are listed below (Source: DWP):
- Australia - 241,050
- Canada - 153,820
- USA - 128,430
- Republic of Ireland - 102,530
- Spain - 75,380
- New Zealand - 46,680
- South Africa - 37,240
- France - 34,580
- Italy - 33,240
- Germany - 31,910
Story from OPP (subscription required)
February 20th, 2007
According to the National Institute of Statistics, (INE) the number of foreigners registered on the population census in Spain has passed the four million mark. The figure represents 9.3 per cent of the resident population. The most recent population census carried out on January 1st 2006 counted a total of 44,709,000 inhabitants, of whom 4,145,000 were foreign.
With regard to the previous year, the number of foreigners registered on the census increased by 415,000, representing an annual variation of 11.1 per cent.
The provisional figures released by the institute also revealed that the number of residency cards granted to foreigners reached 2,739,000 in 2006 in comparison with the 1,977,000 cards handed out the previous year.
Interestingly, the number of foreign residents has gone from 2.3 per cent in 2000, (924,000 people) to 9.3 per cent (4,145,000) in the last count, in just six years. In 2001 there were 1,371,000 foreigners on the population census; 1,978,000 in 2002; 2,664,000 the following year; 3,034,000 in 2004 and a total of 3,730,000 in 2005. In the period (2005-2006) the biggest increases were noted in 2005 with a total of 696,000 new foreign residents, and 686,000 in 2003.
With regard to the regional recipients of the new residents, 22 per cent of the foreign population resided in Cataluña; 19.3 per cent in Madrid; 16.1 per cent in Valencia; 11.8 per cent in Andalucía; 5.6 per cent in the Canaries; 4.6 per cent in Murcia; four per cent in the Balearics; 3.2 per cent in Castilla-La Mancha; 2.6 per cent in Castilla y León; 2.5 per cent in Aragón; 2.1 per cent in the Basque Country; 1.8 per cent in Galicia; 1.3 per cent in Navarra; 0.8 per cent in La Rioja; 0.7 per cent in Asturias and Extremadura; 0.6 per cent in Cantabria and 0.1 per cent in Ceuta and Melilla.
The provisional INE figures also revealed that 53.5 per cent of foreigners on the population census in 2006 were male and the remainder (46.5 per cent) female.
The average age of the foreign resident was situated at 33 years in comparison with the average age of 41 years average of the Spaniard, and 28.8 years of African citizens. The average age descended even further for those residents of Central and South American origin: 30.7 years. The oldest average age registered for foreign residents was for German (48.3 years) and British citizens (48).
Madrid is the province with the highest percentage of foreign residents over Spanish nationals (13.3 per cent) followed by Alicante (20.1 per cent) and Almería (17.4 per cent).
February 16th, 2007
Spain has long been a favourite with Britons looking to invest in property abroad, and now it is set to become even more accessible with the launch of a new air route from London.
Spanish low-cost airline clickair will launch daily flights between Heathrow and La Coruna in the north-western Galicia region of the country on March 25, with prices starting at £16 one-way.
Clickair appeals to those travellers that wish to leave from London’s premier airport but who also want consistently low fares. It also flies to Valencia and Seville from Heathrow.
La Coruna is far removed from the commercial and frantic cities of southern and eastern Spain, and those looking to buy homes here will be after a more tranquil and traditional atmosphere. The town offers a true picture of the “real” Spain.
Recent research by property developer Lar Sol and seen by SPC found that many Britons find buying property in Spain far easier than buying in the UK.
February 15th, 2007
The Spanish coast has been popular with second home owners for decades. However, there is currently a huge surge of foreign interest in inland properties in Spain.
Brits and other overseas investors are making a move away from the traditional coastal resorts and are looking inland to buy, avoiding the coast because of overcrowding, the lack of “Spanish-ness” and the expense. This is supported by recent figures from Holidaylettings.co.uk who reported that over 30% of online enquiries about holiday homes in the last year related to inland Spain.
It is no longer always the case that property in Spain is cheaper than at home. The average price for a property in Malaga province is €315,000/£206,850, compared to the average UK house price which is less at €303,770/£199,467. In the very popular south coast, in the ex pat town of Marbella, this amount increases again to €601,000/£394,675, which is even more startling when the overall average Spanish house price is just €245,000/£160,883.
Lesser known inland areas are now becoming investors’ and homebuyers’ hotspots, and it is likely that they will shortly overtake the coast when it comes to demand for new housing.
The market town of Antequera has seen a huge 13.25% increase in foreign residents in the past year. The town is located right in the centre of Andalucia, set in a rich, fertile plain, 40km north of Malaga and 40 minutes drive to Malaga airport. The average price of a house there is just €187,670/£123,219, but this is changing as more and more people discover the benefits of living there.
1 Casa currently has a choice of twelve properties in Antequera, including a large five bedroom family house. Complete with two reception rooms, bathroom, kitchen with open fireplace and utility room, the house also offers a storage room, some out-buildings and a large rear patio with stunning views of the local mountains. Asking price: €200,240/£136,160. They also have many others in towns and villages in the area all at enviable prices.
Major improvements in the transport infrastructure has opened up the opportunity to commute to Seville, Granada, Ronda and most of the coastal towns and despite the town’s acceleration into the 21st century, the area retains its Spanish culture. It offers year-round sunshine, wonderful country walks, little noise or pollution and many historical places of interest to explore. All the necessary services are here too, including supermarkets, restaurants, shops, health centres and a Spanish school.
Foreigners make up only 4.74% of the town’s population, compared the rest of Malaga province which has a foreign population of 12%. But the numbers of overseas investors and new residents in the inland regions is increasing, over 13% in the last year. In Antequera the countries most represented are Brazil, Britain, Romania, Morocco and Italy. There are 326 Brits in the town which has increased from last year by 47 making them the biggest North European group.
Tourists too are heading inland in search of the real Spain and there are plans for a new airport in the region to cope with increasing demand.
The inner Spain that has been hiding its treasures for centuries is now being discovered by foreigners wanting a country lifestyle but with access to the beaches and amenities of the coast.
February 13th, 2007
Principal International in association with one of Europe and the UK’s leading quality house builders has recently announced the acquisition of a site to build a new luxury development in Competa, on the Spanish Costa del Sol.
The site to be named Terrazas de Competa will consist of 50, 1, 2 and 3 bedroom luxury apartments which are being released for sale off plan early 2007.
Competa is situated at the foothills of the Sierra Almijara 700 meters above sea level with stunning views over the countryside. The development is 11 kilometres from the coast, and set amid a typical Spanish whitewashed town, adorning a labyrinth of narrow cobbled streets and charming plazas.
Translated “crossroads” or “meeting place” Competa is located 45 minutes from the nearest international airport just east of Marbella and the pretty town of Nerja. There is an annual wine festival in August aptly named “Night of the Wine” where tourists can sample locally produced sweet and dry wines amidst a flurry of Flamenco dancers and Sevillana music.
The town whilst small and traditional is totally self sufficient boasting a magnificent 16th century church , a bustling food and flower market and several shops restaurants and bars. This makes it an ideal tourist getaway whilst retaining the local charm and history of a typical old Spanish town.
Spain is set to become one of the most popular destinations for the British investor in 2007 but experts say that the more shrewd buyers will be looking for property in the upper end of market. Taylor Woodrow undoubtedly has a reputation for building quality units both here and in Europe and this development is certainly expected to fall in this category. With the climate and low cost of living still being major factors in deciding where to holiday, investors are expected to snap up these units and cash in on the rental opportunities that the Spanish market continues to provide.
February 9th, 2007
Granada in Andalusia outperformed all other Spanish cities in terms of prospective property purchase interest last month, according to new research.
A study by property company Amberlamb found that more prospective buyers showed an interest in the city than any other in Spain.
Holiday home prices in Granada are around 30 per cent less than the national average, despite being situated in a fantastic holiday destination on the Spanish south coast.
“Granada has a stunning coastline, a fantastic climate, an excellent blend of culture, history and entertainment and benefits from landscape and real estate diversity, therefore it has a great and broad appeal for many,” Rhiannon Williamson, co-owner of Amberlamb commented.
The relatively cheap cost of buying in Granada could be driving its popularity. The traditionally high average property price in coastal regions has been forcing holiday home buyers to choose cities to invest in rather than their preferred areas.
“City properties are far less popular with those looking for a holiday home abroad simply because the dream of a home in the sun is not generally associated with one in a location where there is congestion, crime, pollution etc,” Ms Williamson said.
“Affordability is the main constraint that leads buyers away from the realisation of their dream and into a compromise either in terms of location or property type.”
February 7th, 2007
The overdevelopment of apartment properties in Spain has led to many investors being able to buy them at a reduced price, an expert has claimed.
Marketing director of property site Spanish-living.com, Ailse MacFarlane, said that property developers had been “greedy” with the amount of apartments they had built and that a lot were lying empty.
This had led to a lot of people reducing the asking price or coming up with innovative ways to buy property, Ms MacFarlane explained.
Villas and semi-detached villas were the most sought-after property among investors, although they were the more expensive option, she said.
While Alicante and Malaga remain traditional favourites with British investors, there has been an increasing trend to look towards inland locations when choosing an investment property.
Ms MacFarlane said: “Because the prices on the Costas are more expensive a lot of people are looking to buy further inland.”
She added: “On our property portal we get a lot of people looking for properties for around EUR 30,000 to EUR 50,000, which is a lot cheaper than the average cost of a property in Spain.
“A lot of them need doing up, but that seems to be the budget that a lot of Brits are interested in.”
February 5th, 2007
If you’re looking for an alternative investment approach to profit from property in Spain now that the Costas are crowded and Barcelona is packed with investors and both locations are seriously over-priced, why not consider investing in property in Seville?
After all, long gone are the days when the city had a seedier side - today Seville is considered to be the cultural and creative capital of southern Spain as well as its economic capital, and there are two main investment approaches that are currently proving successful for investors in Seville and in this article we examine both.
But firstly it’s important to highlight just what it is about this stunning city that makes it appealing for both business and tourism and which will ensure that any investment made into Seville real estate will be built on firm and sustainable ground.
Seville is an historic and cultural metropolis. It is a city jam packed with sights to see and experiences to have. There are historic buildings and monuments aplenty, there is fantastic food to sample on every street corner, there are street performances of music and dance and the city is famous for its flamenco and internationally renowned for its festivals, food and stunning climate.
Visitor numbers to Seville have been on the increase ever since the early 1990s and today the city is serviced by cheap flight operators from Ireland and the UK meaning that there is steady demand for tourism based accommodation year round. Seville is blessed with an excellent climate (though in July and August the heat can be stifling) – this means that there is year round potential to holiday let centrally located properties as well as properties with charm and character that are located on the outskirts of the city and which allow visitors the chance to explore both the city and the greater autonomous community of Andalusia in Spain.
Those wanting to take this approach to buy-to-let property investing should be looking at centrally located one bedroom apartments preferably with parking (they can be found!) and which offer a resident guest almost immediate access to Seville’s sights, sounds and flavours. Tourists coming for a holiday in Seville usually want to be centrally located. The other option is finding more family friendly accommodation such as a finca with a pool located outside the city that has easy and direct links to the airport and from which a family can sightsee and/or relax and enjoy the weather.
Seville is also quite a prosperous city, it offers employment in many diverse fields from education to financial services and it is a city popular with students, both local and international. For these reasons there is also a good long term let rental market for property in Seville which presents an investor with their second approach to investing in property in Seville – namely the long term let of multiple bedroom apartments. Two bedrooms are a minimum must for a long term let but the good news is they don’t have to be so centrally located. They need to be near good every day amenities and transport routes.
Prices have risen quite rapidly in Seville in the last couple of years alone but many believe prices have a long way to go to level off with Barcelona with which the city competes for tourism, business and investment traffic. And even if prices falter or fall in the short term, Seville is continuing to change for the better meaning that property in Spain, in Seville will likely make an excellent long term investment choice.
February 2nd, 2007
House prices in Spain are 30 percent overvalued, according to report released on Tuesday by the Organistion for Economic Cooperation and Development (OECD).
Spain is becoming increasingly vulnerable to a sharp fall in house prices, the OECD said in a report on the Spanish economy.
It added: “It is becoming increasingly uncertain whether this upswing in house prices can be sustained for much longer
“Such an adjustment could occur in an orderly manner, during which price increases would gradually moderate and stabilise at a more prudent level. However, a more abrupt adjustment in which prices would plunge cannot be ruled out.”
A gradual fall in the Spanish housing market remains most likely, but even that would have a huge impact on the economy, by reducing consumer spending and hitting the residential construction sector.
The OECD said house prices in Spain have increased almost 130 pct in real terms since 1996, with only Ireland and the UK recording faster house price growth in the OECD area.
And although the rate of increase has moderated in the past year, it is still running at close to 10 pct a year.
Household indebtedness reached more than 115 pct of disposable income last year, up from around 45 pct in 1996.
This increased the vulnerability of households to further increases in interest rates, the organisation said.
The report urged the government to take steps to stabilise the housing market by phasing out the various forms of assistance to home ownership to reduce distortions in the property market.
Reducing Spain’s inflation differential with the rest of the euro zone would also help stabilise the property market because it would lead to a rise in the currently very low level of real interest rates.
Narrowing the inflation gap should be one of the key priorities for Spain, the OECD said.
The report added: “The losses in competitiveness induced by this inflation problem would be particularly damaging in case of a weakening of domestic demand and if the recovery in the euro area proves to be weaker than expected.”
