It may seem a good idea to buy a home in sunny Spain, but do beware that the cost of selling the property could be surprisingly high and you could be unwittingly contributing to your estate agent's commission.
Excessive commissions from greedy estate agents are driving prices up throughout Spain, and with capital gains tax at 35 per cent, they are substantially reducing the investment returns of Spanish properties.
A non-resident property investor, for example, buying a resale property worth £170,000 with no mortgage, would need six per cent capital appreciation per annum just to break even if he or she wants to sell after three years. Capital growth for the year would only amount to ten per cent, leaving the investor with only £15,000 after tax. The investor would only gain eight per cent net return after three years, which would be less than the agent would make.
Commissions vary from region to region. In northern Spain, the Balearics and Catalonia, you can pay anything from three to five per cent, plus VAT. Estate agents' fees are even higher in the south with many large agents charging 7.5 per cent upwards, plus VAT. British agents usually charge more than Spanish ones.
API and GIPE, professional organisations that represent trained and registered real-estate brokers in Spain, recommend that their members should charge five per cent, plus VAT. But most UK buyers don't deal with API or GIPE agents because their members must be fluent in Spanish.
If you are selling your property, don't deal with any agents who charge more than five per cent and before agreeing on the fees, do make sure that they have outlined all the costs involved.
