Buying Property in the Canary Islands
The Canary Islands Property Market
The Canary Islands and Tenerife in particular have always been one of the most popular locations for people to buy property for the purpose of relocation, retirement, holiday rental investment or holiday home.
Following the financial crisis in 2008, the property market suffered heavily and property prices tumbled. It has taken a few years for the market to recover and there are now strong signals indicating the property market in the Canary Islands is rebounding. Now is the perfect time to snap up a great deal as demand for property in the Canary Islands continues to increase.
In the first quarter of 2014, a report released by Spanish Government website, La Moncloa shows property sales in the Canary Islands had increased by 13.9% on the previous year. Average property prices in the Canary Islands in 2013 were €204,000. Property price reports from Kyero.com indicate average property prices in the Canary Islands for 2014 are currently at €208,000.
The popularity of the Canary Islands as a tourist destination is also rising robustly. 2013 recorded its highest ever number of tourists visiting Tenerife and data released by the Spanish Government indicates 2014 is looking set to beat last years’ records. In 2013, there were a record 10.63 million visitors to the Canary Islands of which were from mainly British, German and Scandinavian countries with Italian and Russian visitors growing strongly.
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What makes property in the Canary Islands a secure investment? Why will the Canary Islands always be a popular tourist, relocation and retirement destination?
- All year round sun – great Winter sun get away destination
- Close proximity to all major European airports
- Modern infrastructure
- Continued investment from a supportive Government in infrastructure and business subsidies
- EU membership
- A strong tourist economy
- A finite amount of land
- An open banking system
In case you need any more persuasion, visit our page on Why to Buy Property in the Canary Islands for further information on the benefits of buying and owning property in the Canary Islands.
Buying property in Tenerife or any other of the Canary Islands can appear to be quite a daunting task. Not only are the contracts and agreements all written in Spanish, the formalities and costs are different to those in the UK. But fear not! Woods the Estate Agents have it all covered and we will make your property buying experience as straightforward and transparent as possible.
Here’s an idea of how the whole property buying process will pan out when buying a property in the Canary Islands using Woods the Estate Agents. Once you place a deposit on a property, we will issue you with a checklist and keep you fully informed on every aspect of the purchase process.
- Register on our website as a buyer.
- Perform a search for properties on our website. If we have nothing on our books which suits you, we will work closely with our associates to find you your ideal home in the Canary Islands. Please remember, it is advisable that you make allowances of 10-12% on top of the property’s asking price to cover legal fees and taxes. These are summarised below.
- Arrange with Woods the Estate Agents in Tenerife to view the properties on your shortlist.
- We will apply for a “Title Deed Search” (Nota Simple) from the local Town Hall for you if one has not already been carried out. The results of which will tell you if there are any charges, mortgages or any other outstanding debts on that property. We will also check all utility bills and taxes are paid and up to date.
- If you decide to make an offer, we will put the offer forward to the vendor. Assuming nothing comes up following the Title Deed Search and the seller accepts your offer, your Spanish lawyer will then draw up a purchase agreement which will be signed by both parties. A deposit of 10% for the vendor plus a 500 Euro deposit to the Agent will be needed to secure the property and it will be taken off the market. If the Buyer backs out of the sale, the Buyer forfeits their deposit to the buyer and to the agent. If the Vendor backs out of the sale, the Buyer receives their deposit back from PLUS the same amount again from the Vendor. This is by Spanish Law.
- At this stage, it is wise to appoint an independent Spanish solicitor and apply for a mortgage. Good news! It is easier than most other European countries to get a mortgage in Spain. You will just need some basic information on your financial situation, an NIE number and a Spanish bank account. We will help you with both of these.
- It usually takes 4 to 6 weeks for all the paperwork to be completed and for your mortgage to be approved. At this stage, you will be invited to sign the Title Deeds (Escritura) at a Spanish Notary office (Notario). Both the vendor and buyer should be present when signing the Title Deeds. However, if you are unable to attend, you may appoint power of attorney to someone you trust to sign it for you (lawyer, estate agent, friend, etc.) It is also at this stage where you present the bankers drafts as payment to the sellers. If the seller of the property in Tenerife or any other Canary Island is a non-resident, 3% of the purchase price will be paid by you to the tax office (3% non-resident retention). This tax is redeemable.
- It is extremely important to organise a will as soon as possible. Spanish Law is different from the UK and it is worth having a Will to avoid any problems when it comes to inheritance and funeral plans should the worst happen. Remember, it is important to check if your Will provides for funeral care. Not nice to think about but certainly something to address as soon as possible.
- When transferring money from abroad, we advise all our clients to deal with Currencies Direct. Their expertise in foreign exchange and special agreements with banks in Spain makes your money go further and helps reduce costs significantly.
Summary of Costs involved in buying property in Tenerife and the rest of the Canary Islands
- Deposit – 10% of property price plus 500 Euros to the agent.
- Notary’s Fees – Between 500 and 600 Euros.
- Land Registry Costs – Around 85% of Notary’s fees.
- Taxes – 8% for new builds. 6.5% for resales.
- Plusvalia Tax – (Capital Gains Tax) Usually a few hundred Euros unless the previous owner has owned the property for many years or the sale involves a large plot of land. Otherwise known as “Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana”, Plusvalia is calculated by the property’s Rateable Value (Valor Catastral) between the point of previous purchase to your purchase. We ensure Plusvalia is calculated before completion has taken place so that the buyer doesn’t have any surprise costs to cover. In most areas, it doesn’t cause a problem but in rapidly expanding areas in terms of attractiveness such as Arona, the plusvalia in this area has increased by 400% over the past few years due to increasing property prices. The average plusvalia in Arona for an average sized apartment owned previously for six years or more is now around €1,200.
- Legal Costs of Lawyer/Solicitor – 1% of property purchase price. It is advisable to agree on a sum for the total cost in advance.
- As a rule of thumb, the total costs of buying a property in Tenerife or any other of the Canary Islands is usually around 10% of the purchase price (to be paid on top of the purchase price).
And there you have it, the complete outline of the legal process of buying a property in Tenerife or any other of the Canary Islands. If you would like to carry on reading about property in Tenerife or any other of the Canary Islands, we recommend you read "Information on owning a property in the Canary Islands". This page summarises all information you need to know about owning a property in Tenerife or any of the other Canary Islands including the costs involved in owning a property in Tenerife or any other of the Canary Islands.
You may also be interested in reading our "Buying and Owning a Property in the Canary Islands Q & A" for questions commonly asked by people interested in buying property in the Canary Islands.