Britons used to dominate foreign purchases of Spanish property, but now rising demand from Russian, Chinese and Scandinavian buyers mean more nationalities are looking for bargains, it is claimed
At one time, Britons dominated Spanish property buyers, but with low prices in many areas, more nations are getting in on the act, says market commentators.
Russia, China and the Scandinavian region are sending more and more buyers, such that foreigners are more important than ever to the Spanish real estate market, completing a record percentage of all purchases in September.
Property asking prices have risen by 7% across the country, according to leading property website, Kyero.com, and top homebuilder Taylor Wimpey España says investors and foreign buyers are rushing in to snap up bargains.
Kyero Director, Martin Dell, tells OPP Connect, “The diversification of foreign buyers is helping to support a record proportion of all house sales.
“In the past, Britons easily made up the largest share of the foreign market and, while a long way short of the kind of activity seen in the last decade, buyers from Britain are rising again and approached one in five of all sales recently.
“Yet we are unlikely to see Britons dominate the overseas market as they once did, as there is a more general increase in foreign demand for Spanish real estate.
“In particular, Russia, China and the Scandinavian region are sending more and more buyers, such that foreigners are more important than ever to the Spanish real estate market, completing a record percentage of all purchases in September.”
In the same period, Spanish property prices dropped again slightly, but on a month-by-month basis they fell by an almost inconsequential 0.08%, but Mr Dell believes that market sentiment and sales are improving.
“Confidence is up and the market is improving in an increasing number of locations. Foreign buyers have contributed hugely, accounting for a record proportion of overall sales, which has helped to stimulate the market and move it away from stagnation.”
While some areas of Spain continue to feel the hangover from the economic crisis, other are experiencing strong demand, says Marc Pritchard, Sales and Marketing Director of Taylor Wimpey España.
“Coastal areas and those offering top class sporting experiences such as the golf courses of the Costa del Sol have seen a definite upturn in terms of enquiries and sales during 2014.
“High-quality developments with communal pools have attracted particular interest, with both property investors and second home owners keen to take advantage of Spanish bargains. There has been a fresh optimism in the market this year.”
Mr Pritchard also sees a good year ahead for Spanish overseas property sales. “The increase in foreign buyers that we have seen this year has got the Spanish property sector motoring once more. With this newly optimistic market, we expect to see domestic demand pick up during 2015, with significant price recovery in well located properties, such as those in large cities or popular tourist areas.”
Meanwhile, with Spanish Capital Gains Tax rising on 1 January 2015, the tax department of international law firm, Scornik Gerstein, says overseas owners should consider selling their property before the year ends, as they may pay less tax.
“Although the applicable tax rates to the capital gain made by a non-resident as a consequence of the transfer of his property in Spain will be reduced as from 1 January 2015, it is likely that the final tax liability will be higher than if he transfers it during 2014,” it advises
“The reason behind this apparent incongruence is that from 1 January 2015, it will not be possible to reduce the taxable difference between transfer price and acquisition price.”
According to the current rules, the purchase price can be updated by taking into account the increase of the general index price and the rise of the theoretical value of the property, so the gap – transfer price minus purchase price – is reduced and so the taxable base.
“Therefore, although the tax rate will drop from 24.75% to 24.00%/20.00% depending of the specific circumstances, the taxable base to which this percentage has to be applied to calculate the tax liability will be increased.
“As a consequence, provided a non-resident expects to make a capital gain derived from the transfer of his Spanish property, it will be generally tax – efficient to do so during 2014 unless it was recently acquired.”
However, each seller must examine their individual circumstances to find the best way forward and should seek professional advice, says Scornik Gerstein’s Tax Department.
The Spanish-International law firm was established by Fernando Scornik Gerstein in 1977. It has central offices in London, UK, and associated offices in Spain, Poland, the Americas and Hong Kong.
Scornik Gerstein mainly represents the interests of Spanish and English speaking clients – both corporate and individuals – as well as those from other Asian and Middle East countries.
By Adrian Bishop, Editor, OPP Connect