Spain Real Estate Market
One of the most popular tourist destinations in Europe is Spain, where a small villa is not a luxury, but a way of life. The coast here is divided into 12 coasts – from the border with France and almost to Africa, so that everyone with financial resources will be able to find their place in the sun.
Located in the southwestern part of Europe, Spain is a modern country with a developed industry, with a population of 45 million people. The level of GDP per capita is $ 27,814 in 2006 indicators. Spain joined the European Economic Community in 1986 and was one of the founding countries of the European Monetary Union in 1999. In 2002, she reached a full currency agreement with the EU and introduced the euro.
The most expensive city in the Spanish region by the average cost of housing is Madrid, where the price per square meter. According to the December 2006 indicators, a meter of housing is 2955 euros (this is 6.11% higher than a year earlier). At the same time, in Galicia during this period there was an even greater increase in housing prices – from 1282 euros per square meter. meter in 2005 to 1448 euros per square meter. meter in 2006, that is 12.93%.
One of the main reasons for the increase in housing prices is the presence of restrictions related to the provision of land. The planning system is very decentralized. The payment of taxes from the sale of land falls to the share of local government governing bodies, and they do everything possible to contribute to the process of price increases by establishing restrictions on the provision of land. In 2001, an attempt was made to reform this system, but this reform was not passed by the decision of the Constitutional Court as going against the established laws governing local state powers.
Living conditions in Spain are one of the most cramped among the rest of the EU countries, with an average of 3.3 people per living space. 82% of the Spanish population lives in their own homes or in homes owned by their family. In the mid-1990s, 44% of men and 30% of women aged 30 were still living in their parents’ homes, while only 5% of people aged 65 were living alone.
As long as foreign investors are actively investing in real estate in Spain and while coastal zones are more valuable and promise to become even more profitable, the cyclical nature of market processes suggests that rising real estate prices in Spain are a result of Spain’s internal economic processes. When Spain is experiencing an economic boom, property prices go down there. Real estate purchases are heavily subsidized by tax breaks on mortgage interest and the absence of capital gains taxation.
In general, the Spaniards inactively used a mortgage when buying real estate. But the simplification of the mortgage lending process has changed the situation, and the incredibly large mortgage debt of 14% of GDP in 1990 grew to 32% by 2001 and reached 42% in 2003. Of course, housing prices today are much higher than in the early 1990s, but real incomes have risen significantly. However, according to studies conducted by the Global Property Guide, despite the price boom in real estate, property prices in Spain are still lower than in the UK, Ireland and the Netherlands. Income from rental property in Spain is generally quite low. A study conducted by the Global Property Guide shows that the rental yield of real estate located in the center of Madrid ranges from 2.9% to 4.2%. Real estate in Barcelona brings even lower income, from 2.6% to 3.75%.
Landlords often benefit from keeping their properties unoccupied, as the damage (depreciation) caused by tenants, as a rule, cannot be compensated by the amount of income received from rent. In 2001, 14% of the entire real estate market was free, which is more than the entire real estate rental market.
In 2005, in order to expand the scope of rental activities and reduce the number of free real estate properties, the government created a new public organization, the State Leasing Company (La Sociedad Publica de Alquiler), which is engaged in the rental and leasing of real estate. This company manages 1,500 properties, of which 1,200 are privately owned and leased. The company selects tenants and offers real estate at a price slightly lower than the market. Subsidies are also provided for companies, public institutions and individuals who buy property with a view to their subsequent rental. In addition, additional assistance is offered to poor tenants under the age of 35 years.
Buying Property in Spain
You will need to pay 10% of the purchase price as security. A real estate agent will keep this amount in a bond personal account. As a precaution, it will be advisable to put your security deposit on the escrow account – a frozen account, from which neither side will be able to withdraw money until completion