In our series about how to relocate to Mallorca we already explained how to get your NIE number as without it you wont be able to buy a property. We also talked about renting a flat in Palma or in Mallorca in general.
If you are new on the Island, we recommend you to rent a flat first, before you decide on buying one. Once you have settled down and decided where you would like to live, buying a property in Mallorca could be a good choice.
After considering the region you want to buy in, you should conciser your budget!
Property prices in Mallorca
As Mallorca is one of the wealthiest parts of Spain, loved by tourists and residents alike, you should not expect a bargain price on real estate on the island. Prices have dropped since the economic crisis, but not as much as on the mainland. Recently, prices for properties have distinctly risen again.
There is a wide scale of upmarket properties for sale in Mallorca, with high standards and sea views (the sea views are more expensive of course). There are also a lot of huge properties or fincas for sale in the unmarked sector.
If you do not mind renovations you also could grab a bargain by buying a property in the need of renovation. Especially in Palma old town there are a lot of buildings for sale that are nearly falling apart. Before doing so, you should check the conditions with a local architect so to make sure the building is not listed and what you need to invest.
How to find a property in Mallorca
Once you have decided to purchase a property, there are many options to find the right one.
You can choose to buy a property:
- Through a local estate agent
- Using a property searcher
- Using solicitor services
- With a real estate agency in Mallorca
If you do not speak Spanish you generally should opt for the first option. There are a lot of international real estate agencies on the island, offering high quality properties. Prepare to pay a higher price though. Governmental regulations for real estate agencies in Spain a low, so make sure the agency you work with knows his business.
Usually real estate agencies in Mallorca are split by region and you are likely to find the same property in multiple agencies as there isn’t normally any exclusivity. Prices may vary when offered from different agencies so it’s worth checking. Also make sure the advertised price includes the commission fees of about 5 %. This is important to know when it comes to fees & taxes, as these should be based on the cost of the property only.
Many agencies also offer to search for the type property you are looking for. There are also other property searchers, that will look at properties that are within your price range and match your requirements.
The Notary ‘Notario’
If you buy a property, you will most likely need a Notary. They should be highly qualified in the Spanish legal system and have been given powers by the State to legalize property purchase transactions that cannot be enforced by any other means. Their responsibilities include conveyance, preparing the various documents and confirming the seller’s title to the property, checking that there are no other mortgages on the property, etc. The notary is responsible for the legality of all documents that are signed before them in their personal capacity, which provides a guarantee for the client.
Buying Process in Mallorca
Buying a property in Mallroca can be a bureaucratic affair. You should choose an independent property lawyer for professional advice. Make sure they are registered in the Bar Associatoin Colegio de Abogados. If your real estate agency recommends you a lawyer, be aware of the potential conflict of interest!
As a foreign property owner in Spain, you will need to obtain a NIE number. Your lawyer can apply for one or you can apply for the NIE number yourself. Your lawyer will also help you with the contracts, payments and will register your property for you. They normally charge 1.0% to 1.5% of the property price. You could also negotiate an hourly rate.
Buying costs properties in Malorca
Spanish law states that the housing seller needs to pay a part of the notary fee, the “plusvalia municipal”. In Mallroca, it doesn’t work like this as it is understood that the BUYER pays all charges. If however the plusvalia is a substantial amount this can be a point of negotiation.
A summary of the costs are as follows:
- Legal fees – allow 1-3% of the purchase price for Notary fees, legal fees and property registry.
- Plusvalia Municipal – a municipal tax paid each time a property changes hands, usually paid by the BUYER. Complicated to calculate, it directly relates to the length of ownership by the seller and increase in value on the land, but is usually less than1% of the price
- Tax/VAT new homes have 7% IVA + 0.5% stamp duty, and second hand homes 7% transfer tax. PLEASE NOTE When you choose the amount to be declared on the Escritura, the buyer should ensure they do not under-declare. Guidelines have been laid down by the tax office for the minimum value they will accept, approximately twice the rateable value quoted on the latest rates invoice for the property ( IBI ). If it is deemed too low, they may reassess its’ value and send a demand for the additional tax due. It may be difficult to argue otherwise! We recommend you ask the advice of a legal adviser. Plots plots with multiple sub plots with building permissions, 16% IVA + 0.5% stamp duty is due. Otherwise the normal taxes apply.
- Mortgage Fees mortgage lenders will explain their fees, this is normally between 0.5% and 1%.
After buying, there will also be annual Spanish property taxes to pay, but in general they are not too much. For example a two bedroom apartment can have total annual costs of between 1500 and 2500, which will include electricity, water, waste disposal, insurance and annual property tax. It also includes a payment to Spanish representative who will have to submit these payments officially. Ask your legal adviser to assist you with this.
We wish you the best of luck finding your property.
One more thing: If you think about renting your property out, be aware of the strict regulations in Spain. For renting out a property short term via Airbnb and the like, you actually need a licensee that is not handed out anymore!
This was the last part of our series on how to find a place to stay in Mallorca. Next we will inform you how to find a job!
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