Spain’s property prices have been steadily increasing year on year since the European credit crash in 2008 and the market is recovering strongly since the pandemic. According to the National Institute of Statistics (INE), in January 2022, a staggering 52,684 property transactions took place in Spain, which is the highest figure for the first month of the year since 2008. February 2022’s figures were slightly higher at 53,623 transactions, which is an annual increase of 24%.
20.4% of February’s property transactions were new homes and 79.6% were used. The number of new homes being purchased increased by 9.2% compared to February 2021 and used homes increased by 28.4%.
A recent news report by one of Spain’s national newspapers- El Mundo, highlighted how the demand for Spanish homes continues to outweigh the supply, with a huge decline in available properties. The stock of available housing for sale has fallen by 17% in the last year alone. The decline of available homes is no doubt a knock-on effect from the pandemic, a pattern which is being seen in several countries across Europe. 2020’s lockdown temporarily brought the property market to a standstill and construction of new properties was paused. When the country started to open back up, there was then a surge of backlogged buyers and a lack of available projects.
According to Idealista, in the year of the pandemic, sales among foreign residents fell by 22.1%, but in 2021 these figures rose by 51.2%. It’s clear to see that the Spanish property market is on an upward trend and experts estimate that we will see approximately 750,000 property transactions take place this year with an average price growth prediction of 10%.
The tropical climate of Tenerife makes it ideal for those who would like warm weather all year round while still living within the confines of Europe. The island is less expensive than most tourist destinations in continental Spain with lower real estate prices compared to the national average, which makes it an excellent investment opportunity for property buyers.
As is the case in almost every corner of Spain, the prices of apartments and houses are also increasing in Tenerife. The average price per square metre was around €1,200 in 2016, with properties in Santa Cruz de Tenerife, the capital of the island, fetching almost €1,400 per square metre. The market is expected to grow steadily throughout 2017, although at a slower pace than Madrid or Barcelona.
Which Areas in Tenerife Are Most Sought After?
Although the island is small compared with Sardinia or Cyprus, Tenerife has a wide variety of landscapes with average temperatures of 18 degrees Celsius and higher, even in winter. The main tourist areas are Las Américas and Los Cristianos on the South of the island. For beach lovers who want to enjoy warm days and sunny weather all year round, the southern areas will be ideal.
There are established Los Cristianos estate agents in the south who can give you all the advice you need to make the right choice when purchasing a Tenerife property either as a home, or as an investment.
If you don’t mind cooler weather but would still like to live right next to the sea, the north of Tenerife has a more temperate climate compared to the south. At Puerto de la Cruz most days are cloudy due to its close proximity to the 3,700 metre Teide volcano, the highest mountain in Spain.
San Cristóbal de la Laguna, known as the university city of Tenerife, has a very mild mountain climate that can be very pleasant when most other places on the island become very hot. It is situated just a few kilometres from Santa Cruz if you need something that can only be found in the capital city.
For city lovers, the best option is Santa Cruz de Tenerife where all the basic facilities such as big shopping malls and hospitals can be found. Due to the small size of the island, the beach can be reached easily by car within an hour. The highway connects the South with the North and other main routes make it easy to reach any place on the island by car in less than three hours.
Easy Access to Spain and the Rest of Europe
The island is reachable only by plane or ferry and has two airports in the North and South with connections to all major cities in Europe.
British, Italians, and Belgians are the top investors although the British top the list, as in other parts of Spain. There was also a considerable interest by Russian investors during the economic boom in their country and as a result, there are quite a few restaurants and shops promoting Russian food and goods in their language.
Tenerife offers the prospective home buyer more than any other location in Europe and in recent years, better returns have rarely been found elsewhere in Europe. Property prices have increased comfortably for homeowners in Tenerife making it an extremely attractive destination for anyone from the UK looking to relocate to a warmer climate while staying within the borders of Europe.
There are several well established estate agents in Tenerife to choose from. They’ll be able to guide you through the process and the language barrier if you’re not Spanish speaking.
Let’s begin with a very important message for all Tenerife property owners who are not residents of either Spain in general or the island of Tenerife. Even if you are only using the property yourself for a few weeks out of the year, and then leaving it empty for the remainder of the time, according to Spanish law, you still are deemed to have rental income.
Although you might think that is extremely unfair, that is the reality of the situation. Renta imputada, or “deemed income” is therefore subject to non-resident income taxes.
Something Even More Unfair
No demands or reminders are sent out by the Spanish Tax Office for the tax payment. You are responsible to obtain the appropriate form (which is Modelo 210), get it filled out properly, and then pay the amount that is required.
Unpaid taxes can really add up for non-payment – along with increasing fines. You could get away with it for several years, but eventually they will end up catching up with you. They will definitely discover the tax arrears if you decide you want to sell your property.
At that point you will get hit with a highly exorbitant sum of money that you will be required to pay. Before transference of ownership is allowed the tax bill will need to be settled.
How The Tax Is Calculated
The tax is based on your property’s catastral value. That is the rateable value. Hopefully every year you will have paid your rates bills (discussed below), and the catastral value is displayed on the receipt when you get the payment. It will also state when it was revised last and for this calculation, that is important.
If it has been since 1994 that your property has been valued, then you will be required to pay a bit more of the value (2%). However, it is more likely that the property will have been valued more recently, and the percentage is 1.1 in that case.
The following is a sample calculation:
100,000 euros rateable value
1.1% of that is 1,100 euros
Divided by 2 = 550 euros
Then multiply this by 0.2475 (since the current tax rate is 24.75%) = 136.13 euros, which is the tax payable amount.
You can access the form here online and print it off and then fill it in. However, after you see the form, you might want to have a fiscal representative deal with it for you.
If You Are Renting It Out
If your property is earning an income for you with holiday lets, it is just taxed as income tax, which since has been 24.75% since the end of 2011 for non-residents.
Since the start of 2011, non-residents who earn an income from property in Tenerife are allowed to deduct such expenses as local rates, rubbish collection, water, and electricity from their payment. However, as a non-resident, you must get your certificate as a fiscal resident from the local tax office and the Modelo 210 form must be presented.
Referred to as Patrimonio, it is a tax on total assets. The rate of the tax was reduced to 0% by the Spanish Government from 2008 through September 2011, which effectively removed it as one of the factors of your tax expenses. However, it was not totally abolished, and it has now been put back up, at a rate of 0.2 to 2.5%, which depends on several different factors.
The percentage applies to things like savings and property, but only when total assets exceed a 700,000 euros value. Properties that are worth less than 300,000 euros are also exempt. So, although it has been reintroduced, sort of, you most likely won’t be affected by it.
Local rate payments, or IBI, is basically the same thing as the council tax in the UK. The payment similarly covers your community’s upkeep, things like public services and rubbish collection.
The local council sets the rates and certain factors are considered, like your property’s rateable value.
If the property is located in a place that has been designated as a “tourist area,” then the IBI will be a lot higher compared to an area that has been designated as a “residential area.”
These payments are made on a yearly basis, and theoretically the council will send out reminders. However, in my personal experience, those reminders don’t ever get sent out, so you will need to do some investigating to find out when they are due. A penalty of 10 to 20% is incurred when you fail to pay it on time.
They definitely don’t make things easy on you.
Capital Gains Tax
When you sell a holiday apartment, despite being a non-resident of Tenerife, you will still be liable for paying the Capital Gains Tax.
Recently it increased from 19% up to 21% on the profits made from the property sale.
Spain is a modern country and when you live in it you can have the advantage of living in a modern environment enhanced by a well-developed infrastructure. Life runs at a pace that is balanced and relaxed in comparison with other neighboring countries in Europe, while the climate allows you to enjoy its outdoor resources, regularly.
Spain has an architecture that is rich in culture while having buildings that are modern and historical. The majority of the population, about 90%, is Spanish with other ethnic minority groups that include people from Morocco, Romania, Ecuador, and Colombia.
Spain and Expats
Of the total population of Spain, 6% are expatriates, and they are made up of immigrants from North Africa, South America, and Britain. The country is popular with people who have retired because of its warm climate, low cost of housing, and a high living standard. People who come to Spain from other countries, as expatriates, open up facilities that are popular with tourists, like nightclubs, cafes, and bars.
If you are seeking a life that is relaxed and laid back, expatriate life in Spain is one that will suit you. The local population is trusting and friendly, and most of the people in the country are family friendly. If, however, you are looking for a quiet life, you may find the coastal towns inappropriate, as they tend to attract a large number of tourists, annually.
Living Costs In Spain
The cost of living in this country can depend on the town where you live, as well as your own lifestyle. Luxury goods and fine dining are very expensive in Spain, but if you adopt the living and eating style of the local population, your money can go much further than it used to in your country.
The cost of housing is reasonable, but can be high in cities and towns that are tourist destinations. The costs of utilities are high and you will find a difference of at least 20% than in the USA and UK, and this is especially marked in the cost of bottled gas. The food, however, is much cheaper as long as you avoid fine dining and the tourist spots. Prices in restaurants are reasonable.
Spain has a number of languages and dialects in its various regions.
Catalan is the language in the province of Catalunya (Barcelona)
Valenciano that is a close relative of Catalan is spoken in Valencia
Gallego is spoken in the province of Galicia in the northwest and is a mixture of Portuguese and Castellano
Euskera/Vasco is the language, traditionally spoken, in northern Navarra and Pais Vasco
Makkorquin in the Balearic Islands is its principal dialect
Asturianu (Bable) is spoken in most of the countryside and is similar to Castellano.
Coastal Spain that is on the North Atlantic and has mild summers, fairly cold winters and substantial amounts of rain.
The interiors of Spain have a climate that is continental, while its Mediterranean coastal areas in the east and south are hot, both in summer and winter.
Career Prospects for Expats
The unemployment rate in Spain is relatively high, and this results in competition for jobs. The situation is made worse, because of regulations in force for the employment of foreigners, and people who are not citizens of European Union countries will find job opportunities very limited. Even those who are from EU countries will need to have a fair knowledge of Spanish (Castilian) and must have a strong network, as most jobs are found on the basis of personal connections. You can find jobs if you are willing to work in restaurants or bars, in retail, or as a teacher of foreign languages.
There are vacancies for technical posts. Occupations, where there are such shortages, are listed on the INEM website. You will need to know Spanish if you want information from this website of the National Employment Institute or Instituto Nacional de Empleo.
Important Facts for Expats Wanting to Live in Spain
You will need to get an NIE number which in Spanish is the Numero Identificacion de Extranjeros. It is an identification number that is given by the Foreigners Office or the area police, and Spanish law requires all foreigners to be registered with the local authorities. Refer to city guides if you want to know how to register for an NIE number.
Once you have decided where you want to live in Spain, Register your family including your children at the Town Hall for the “Empandronamiento”. This is important, as then the town can claim a budget, that depends on the number of people who live there. The Certificate of Empadronamiento is a document that is needed when you want to use health facilities, register for schools or even to purchase a car.
You may find water shortages in Southern Spain and at these times, there are restrictions on its use.
Motorists do not always stop at pedestrian crossings, and so you need to be careful when you cross a road.
Banks in Spain only operate in the mornings.
Accessible housing is fast becoming an important aspect in many localities in Spain and is set to grow with continuing innovation in technology so it’s a major plus for people with disabilities looking to live in Spain.
The government legally can knock your home down whenever they want to.
This has evolved over the past couple of years from accounts of properties that have been built illegally and therefore need to be knocked down. The developers most likely paid off the local town councillors and then they paid other relevant individuals to receive the “building permission.”
I am not claiming those kinds of envelopes haven’t been passed around in Tenerife, but fortunately, the only properties I am aware of that the government has nocked down are the ones that were built too dangerously close to the coast and ran into problems with the Coastal law.
If you are planning to purchase property in Tenerife, be sure to use an attorney and if you have any concerns about the property’s legalities, make sure to have them checked out.
“Black Money” can be used for purchasing Tenerife property and you can declare whatever you want to at the notary.
Unfortunately, those types of things still occur, however, the Government and Notaries are attempting to clamp down on them. However, you cannot simply declare whatever you want to and then use black money to pay for the rest. At least you shouldn’t do that. You may think as the buyer that you can get away with taxes, however, there are certain things you might not know about.
If you are purchasing second-property in Tenerife, then there is a land transfer tax that you will need to pay, which is currently 6.5% of the transaction’s value. So if you are paying €150.000 as the buyer and make the decision to declare only €100.000 and then pay the other €50.000 under the table, then you will pay only €6.500 instead of €9.750. However, the first mistake you will have made is when you under-declare it could result in the property you are purchasing being liable for the complimentary tax.
That tax may be charged if your local town hall feels you have not paid enough for the property. Maybe you really did purchase the house for that cheap of a price, but you will still have to pay something. However, paying in cash and then declaring that the purchase price was lower than what you actually paid could result in you paying more in complimentary taxes than you would have by declaring the full amount that you paid.
The second mistake that you might make is when it is time to sell in the future for say €200.000 since you declare a purchase price of €100.000, your capital gains will be €100.000. You will wish then that you had declared €150.000 since then you Capital Gains Tax would only need to be paid on the €50.000 instead of the €100.000. Currently, the Capital Gains Tax is 19%, which is much higher than the 6.5% that you pay when declaring to the notary the full price.
If the UK ends up leaving the EU, you won’t own your property, since Brexit will stop Brits from purchasing property in Spain.
This isn’t true at all. Even if the UK does leave the EU (and I am saying If still since I have a feeling it won’t happen), there isn’t anything for Brits to worry about when it comes to purchasing property in Tenerife or anywhere in Spain.
Think about that for a second, if you are Chinese or American, you still can purchase and own property in Tenerife, despite the fact that you don’t belong to the EU.
The same thing would be true for Briths property buyers in the future, so if the UK ends up not being in the EU, there might be some more paperwork to deal with, and the tax law may change somewhat, but the fact is non-EU buyers are able to purchase property here now and there are no concerns for them – so you don’t need to worry about those kinds of major changes affect your right be able to own Tenerife property.
Tenerife holiday homes can be purchased for under €50.000.
It is true that Tenerife does still have some bargains, but if you think you can buy a holiday home here for €50.000, then you definitely need to think again.
There are still some deals, and there are actually properties for that amount of money for sale, but they aren’t in areas that are all that residential.
They are areas where there is no swimming pool where the apartment is, not many properties that have ocean views, and they aren’t within walking distance to the local beach. Even if you were interested in purchasing one of those properties to live like the locals and avoid tourists, most likely they won’t be in areas that your family and friends would want to go on a holiday.
Brits are not allowed to rent out their property.
No one is banned from renting out their properties.
There is not a new land that bans anybody from renting out their property if they want to. What is occurring is that there was a law that was passed initially in 1995 regarding short-term letting that in recent years has been enforced but it doesn’t stop anyone from being able to let their property. You still can rent out your property but you need to read the Canary Island letting laws before determining what to do.
You are protected from the Spanish Inheritance Tax by having a Spanish Will.
This is false. However, having a Spanish Will can help you to reduce what your tax liability is, or help you sleep better at night so that you don’t need to worry what will happen after you die.
After you purchase a Tenerife property, hire a reputable independent Spanish Lawyer to get your will set up here and be sure to inform them about any other wills that are in place in any other countries.
Foreigners are charged prohibitively expensive taxes.
This myth might come from the Inheritance tax laws that until recently were in place.
In general, taxes in Spain aren’t any worse than in the UK or other countries and in many cases, they are a lot less expensive.
You will need to pay land registry fees, legal fees, notary fees, and land transfer tax when purchasing a property and while you own it there will be annual property owners tax that needs to be paid along with non-resident taxes probably as well as the operating costs. When you sell your plusvalia will need to be paid and probably a 3% retention will need to be paid to the Hacienda.
Those are all regular taxes you will need to pay. However, in the past, the Inheritance tax was a lot higher for foreigners than it was for Spanish nationals. Several autonomous regions in recent times have reduced their Inheritance Taxes, including the Canary Islands.
No matter how many holidays you might have spent visiting Tenerife, when you finally arrive with all of your personal possessions to set up your home it is unlike any other experience you have ever had. Full of hope and excitement for your new life spent in the sunshine, there are a couple of things you can do to ensure that your transition from tourist to a property owner in Tenerife is successful.
Rent Before Buying Property
It is very different to put roots down somewhere than it is to offend the locals by cavorting around in shorts and a bikini top. There are things you might not notice while you are vacationing on the island for a couple of weeks that once you live with them on a daily basis might assume Teide-like proportions. Imagine purchasing a pool-front ground floor apartment only to discover the loud clang that you hear each time you are leaving your home is caused by the overflowing sewage tank of the complex which is buried right underneath your front doorstep. Isn’t it funny that the seller completely forgot to tell you about that?
Try Before Buying
Just like a residence can have a much more annoying and new character after it becomes more familiar, the charms of a certain residential area can also start to fade. It may have seems to be a great idea to make the centre of Las Americas your new home, but will you still think after enduring a month’s worth of bar brawls every Saturday night on the street below your window.
Fly Before Buying
Have you seen the exposes recently in the UK newspapers uncovering real estate ads of beautiful country cottages that are for sale? They are depicted in splendid isolation and dazzling sunshine, that is until you see the entire picture including Sellafield Nuclear Plant – its nearest neighbour. Although Tenerife’s experienced and professional estate agents might not pull these kinds of sneaky and underhand tricks, that doesn’t mean Bobby McGumpher won’t exaggerate how beautiful his Las Brisas one bedroom is to get a few extra thousand pounds while flogging his property on eBay. Make sure you fly out on a plane and visit the actual property before making a purchase and kissing your cash goodbye.
Cry Before Saying Goodbye
For some people leaving home and moving to another country is just as easy as it is to switch a light off. As they look out the window of their plane and watch the country continue to get smaller below all they are thinking about is gorgeous tropical sunsets and settling into their new home in an exciting new land. In the meantime, their spouse, who still has their heart in Glasgow, is crying into their newspaper.
Homesickness is one of the major reasons why the major move to Tenerife could end up in tears. Frequently one partner will not be as excited as the other one for going to live two thousand miles apart from their friends and family. One spouse might be completely happy to leave behind the sponging son-in-law and screaming grandchildren, while other starts sobbing when they see a newborn baby. In times such as this, more sensitivity is necessary. Trying to tell someone to just get over it will never be the right or most effective thing to say.
Established estate agents in Tenerife will tell you all this above and more to makes sure you’re completely happy with your purchase.