General country information

Spain, which once prospered by excluding other European powers from its New World riches, is now a leading member of the EU.

Situated in south west Europe, it has borders with France (from which it is separated by the Pyrenees) and Portugal, and a coastline that stretches either side of Portugal from the Bay of Biscay in the north to the Mediterranean in the south.

Important industrial areas are in Catalonia at the southern end of the border with France, and the Basque Country on the northern end. Both have their own ethnic languages and aspirations of indepence.

Most overseas investors, especially those with an intention of letting their properties, will look first at Spain’s popular Mediterranean coastline facing Morocco and Algeria. Running from north east, where Spain meets France, to south west, where Gibraltar is perched, these areas are the: Costa Brava, Costa Dorada, Costa del Azahar, Costa Blanca, Costa Calida, and Costa del Sol. The last three, being the most southerly, are the most popular.

Offshore there are the Balearic Islands, and further south off Africa are the Canary Islands, both popular holiday and investment destinations.

Spanish was one of the first countries to join the euro-zone. Subsequently the economy grew annually by more than 3 per cent, partly on the back of a building and housing boom. The latter cluttered to a halt in 2007.

After years of double digit appreciation, house prices continued to rise for a while – but at a lower rate – in locations favoured by foreign investors. Howover, they began falling in a number of provinces.

Figures released by the Spanish Ministry of Housing showed national average house prices falling in 2008 by 3.2 per cent.

The website Kyero.com, which puts the average 2008 price fall at just 0.3 per cent said that, in most areas of Spain, sales of both new build and resale properties were dramatically lower in 2008. Overall, 2008 third quarter volume was down 42 per cent compared to a year earlier. Sales of new build properties were down by 25 per cent.

In line with other major economies, Spain ended 2008 facing recession with Finance Minister Pedro Solbes forecasting a 1.6 per cent contraction despite a major regeneration package designed to counter the effects of the housing crash and financial crisis. The Minister predicted a return to economic growth in 2010.

Meanwhile Spain’s Institute of Construction Technology estimated that by the end of 2008 there were almost a million unsold new homes and that it could take two and a half years to clear the backlog.

The country’s second-biggest bank, BBVA, said it believed Spanish house prices will decline by about 25 per cent in real terms over the next three years.

Against this UK owners of Spanish properties have seen the sterling value of their investments climb with the fall in value of the pound against the euro.

The Spanish house buying process has pitfalls that buyers should beware. For example, estate agents are not subject to statutory and professional controls. Also property taxes owed but unpaid by a previous owner (up to five years back) are a charge against the property regardless of a change of ownership. So a buyer can end up having to pay outstanding council taxes. Likewise unsettled mortgages remain a charge on the property.

In some areas there have been planning permission problems were investors have bought property built on land designated as agricultural and have found themselves having to contribute towards the cost of roads and utility supply systems when developers have moved into the area.

The European Parliament has taken an interest and following a number of delegations is to consider on the impact of the extensive urbanisation that has taken place in Spain on the individual rights of European citizens, on the environment and on the application of EU law.

Petitions Committee rapporteur, Danish MEP Margrete Auken. is reported as saying thousands of European citizens had bought property in Spain ‘in good faith acting with local lawyers, town planners and architects, only to find later that they have become victims of urbanisation abuse by unscrupulous local authorities and that as a result, their property faces demolition because their homes have been found to be illegally built'.

The committee is calling for he Spanish national and regional governments to review and revise all legislation affecting the rights of individual property owners ‘in order to bring an end to the abuse of rights and obligations' contained in European law.

Spanish inheritance laws have strict rules about family entitlements that need to be considered.

Property ownership is recorded in a property registry which includes details of any encumbrances and charges. A parallel but separate registration system records the location, description and boundaries of the property and any shared services and areas in common ownership. The two are now always in full agreement.

Last updated January 2009

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