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Article copyrighted © 2021. Plagiarism will be criminally prosecuted.
By Raymundo Larraín Nesbitt
Abogado - Lawyer
21st of November 2021
As we have been pointing out over the last year, a series of factors have built up to create excellent buying opportunities. Real estate experts share a general consensus that now is the right time to buy property in Spain, specifically in Andalusia.
- Ultra-low taxation. As we’ve covered in previous articles (Andalusia lowers Property Transfer Tax and Stamp Duty), early on this year Andalusia drastically reduced the taxes on buying property, to the point we have never seen such low taxes in this region. Furthermore, the tax breaks on buying property have now been extended indefinitely, so they are no longer time-gated. The Junta de Andalucia has also approved a batch of measures to also cut down several other taxes (Inheritance Tax, IRPF, Wealth tax etc) turning Andalusia de facto into an ultra-low taxation area, along with Madrid. In plain English, Andalusia and Madrid are now the two areas where you pay fewer taxes in all of Spain. And last I checked, Madrid had no beach, so the choice is easy. To sum up, the continued landmark tax changes implemented by the new regional government since April 2019 (lowering, negating or supressing them) are so eventful they have ushered in a new era of wealth-planning in Andalusia.
- Ultra-low interest rates. Interest rates are sitting now at an all-time low, which enables would-be buyers to secure cheap loans (fixed interest is your best bet if the ECB hikes the interest rate in the future to offset a spike in inflation). Bank loans become ‘cheaper’ as inflation rises, as you actually owe less money to your lender (in real terms).
- Pandemic & Brexit induced price reductions. The ongoing pandemic and Brexit have forced sellers to reduce their asking price creating once-in-a-lifetime buying opportunities for savvy investors.
- Bull market. In Andalusia, we are undergoing since April 2021 a property boom that has prompted a rise in property prices, specifically in coastal areas. Property is appreciating an average of 8% p.a. in coastal resorts and rising YOY. In some exclusive locations, such as Marbella, property prices have risen by over 30% over the last two years.
- Spike in inflation. In a financial context of a sharp rise in inflation, having your money stuck in a bank is a losing proposition. In an inflationary environment, money depreciates fast losing its value day-to-day. Finance experts agree that a smart way to hedge your savings against rising inflation is to take on a mortgage loan and invest in real estate to avoid losing purchasing power over the long run as bank deposits devalue over time with high inflation. This was the key strategy that many savvy investors followed in the 70’s, during a time of high inflation, which in hindsight made them very rich.
- Buy-to-rent. Annual rental yields are over 5% net. If you also add on top the capital appreciation (point 4 above), you are looking at a safe investment that is netting you over 10% p.a. risk-free. No other safe investment offers you such yields in a context of an underperforming bond market. In addition to this, the Spanish Tax Office offers lenient tax breaks which on average reduce landlord’s tax bills by 70%, or more (if EU-resident). A landlord can offset most, if not all, of their property-related expenses, vastly reducing their income tax on buy-to-lets (i.e. holiday rentals). More on this topic in my articles: Rental prices soar for 5th consecutive year in Spain! and 8 Tips for Buy-To-Let Success in Spain.
- Pound rally vs. Euro. Following up on point two above, expectations are high the BoE will raise the interest rate to combat the pernicious effects of inflation. In anticipation of this move, the pound rallied, since April this year, appreciating significantly against the Euro. This translates into UK buyers having greater 'purchasing power' on buying euro-denominated property. In plain English, any property in euros becomes much cheaper for sterling pound purchasers.
In short, it’s never been safer and more profitable to buy property in Andalusia than today. Don’t fight the current and move with the flow; take full advantage of Spain’s real estate property boom.
Are you really going to miss out?
At LNA we can assist you buying, selling or renting out your property in Spain. We have 18 years’ experience in conveyance & tax. We are also specialized in Immigration & Residency permits.
Larraín Nesbitt Abogados, small on fees, big on service.
Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, residency, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at firstname.lastname@example.org, by telephone on (+34) 952 19 22 88, or by completing our contact form to book an appointment.
Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.
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