Buying property in Andalusia: What you need to know beforehand!

Andalusia and the Costa del Sol are among the most sought-after regions for buying property. Here we’ll show you what to look out for when buying a house in Andalusia… plus a tip on avoiding practically all typical pitfalls before committing to a purchase!

DON’T BUY A HOUSE WITHOUT SUPPORT YOU CAN TRUST
In Andalusia, hardly any property purchase goes through without an estate agent. Real estate agents make their living from sales. It is therefore advisable to look critically at the way in which a property for sale is described. Defects are frequently overlooked, “forgotten” or only mentioned if you explicitly ask about them.

Signing the deeds at the notary’s office is often a chaotic scene when you don’t know what to expect: expired identity cards, missing marriage certificates, unpaid property taxes, etc. Clarifications are usually sought in the local language. As an out-of-town buyer, it can easily – and quickly – become overwhelming.

Strange entries can sometimes be found on the land register too, such as centuries-old leases with a share in the yield of the annual harvest. We recently had a case from 1826 (!) but the entry was successfully deleted. And in general, the document check often does not correspond to reality, especially with regard to borders, plot size or installations. Let’s not forget that in Andalusia alone that there have been approximately 450,000 properties built without permission on non-urbanisable land.

Of course, we don’t want to scare anyone away from buying a property in this beautiful region in the south of Spain. On the contrary! But be sure to get professional advice before you buy. Most things can also be solved quickly, either by reducing the purchase price or by updating the relevant data.

Incidentally, the legal framework in Andalusia is almost identical to all other EU countries. Here, too, there is a strictly protected housing law, a land registry and cadastral office. If someone knowingly sells you a house with a serious defect and does not inform you about it beforehand, the purchase can be rescinded. The seller could also face prosecution.

DOCUMENT CHECKS ARE GOOD BUT AN INSPECTION IS BETTER
Those buying property normally get legal advice to ensure that all relevant documents are checked for their legality and clarity and are prepared for the sale. This does not necessarily have to be done, but it makes sense. However, you must remember that a lawyer won’t visit the property in person and therefore cannot identify possible irregularities. Here are some examples that we see on a daily basis:

Entries in the land register that are not compatible with the master plan
Illegal extensions
Insufficient floor-to-ceiling height
Parking spaces that are registered but not on site
Incorrect property boundaries (especially in the case of countryside fincas)
Neighbour’s right of way
Parts of buildings that are registered but don’t exist
Parts of buildings that have been added but not yet registered
Illegal or semi-legal dwellings

SIZE MATTERS
Many intuitively value property according to its square-metre value. A 100sqm home for €400,000 equals €4,000 per sqm. But how big is this dream house in Andalusia in reality? A general legal basis for the correct calculation of area does exist, but it varies according to the authority concerned and there are different versions too.

For example, estate agents like to count the roof terrace or the covered terrace as part of the floor space. The land registry office, meanwhile, likes to count the pool as living space, because this is how the property tax is calculated.

In the case of basements, external storage rooms, pool houses or garages, there is some room for debate. Are they considered ground level (good for conversion into an independent apartment) or basement level?

YOUR OWN HOLIDAY LET IN ANDALUCIA
Renting out your own property to holiday guests is generally not a bad idea. It helps with financing and keeps the property occupied when you’re not there yourself. After all, an unoccupied property deteriorates; vacant houses could encourage “guests” you’d rather not have.

Andalusia regulates holiday rentals quite logically; the requirements are minimal. But beware: holiday rentals are not allowed everywhere! Since 2019, homeowners’ associations can stop you from renting out your property with a simple majority. So make sure you check beforehand.

ADDITIONAL COSTS & TAXES WHEN BUYING REAL ESTATE
When buying a property in Andalusia, you should expect the following additional costs:

The land transfer tax (ITP) is payable by the buyer. In 2020, it was reduced from 8% to 7% in Andalusia. The real estate transfer tax is based on the value registered in the sale deed.
The Actos JurÍdicos Documentados (AJD) tax: This is 1.2% in the case of a public deed such as a mortgage. The tax is to be paid by the “interested party”. For years, banks were happy to transfer this tax to borrowers. In the meantime, however, the Spanish legislator has determined that the lender has to pay, i.e. the bank. It can be assumed, however, that the bank will get this tax back, for example, in the form of worse conditions or some kind of fees.
The plusvalía tax is a capital gains tax and is assessed by the respective municipalities at different percentage rates. It is to be paid by the seller. However, in case of doubt, the municipalities also try to charge the plusvalía to a buyer. The plusvalía taxes the increase in value of the land during the period of property ownership. Without the payment of the plusvalía tax, a property cannot be registered in the land registry. It is, therefore, advisable for buyers to check whether this tax has been paid. If not, it should be deducted from the purchase price.

This tax has been challenged for years before the Constitutional Court in Spain. In fact, it was upheld as “non-constitutional” (STC 59/2017) yet municipalities continue to insist on payment, on the condition that it will be refunded once the judgment is written into law.

Income tax (IRPF): When selling a property, income tax is payable on the profit, if there is any. The old rule applies: selling price – purchase price = profit before tax. Income tax must be paid by tax residents in Spain and those taxes go to the Spanish tax office (Hacienda). In Spain there is no tax exemption after the holding period, as in Germany.

If you’re a non-resident, you must pay income tax (19%) on rental income, even if the property is not rented out. An assessment is required here, which can be modified accordingly by the tax office.

In the event of a sale, a flat rate of 3% of the sale value will be withheld as compensation for the IRPF tax (as non-residents don’t pay income tax in Spain).

Apart from the aforementioned taxes, you also have to think about the other service providers who want to be paid when buying a house: a lawyer (1-2% of the purchase price), notary and transfer costs for the land register (approx. 1000 €), as well as the house inspector. The estate agent is usually paid by the seller in Andalusia. However, more and more estate agents are favouring the Central European model, i.e. the buyer and the vendor share 50% of the commission (total approx. 5% of the purchase price + VAT).

Conclusion: Prepare to pay approximately 10% in additional costs when buying a house in Andalusia.