Many years ago, Spain was a bargain hunters paradise. Cheap property, holidays, food and drink made it a favourite for property investors and holiday makers alike. Not so today with the exaggerated increase in mortgage interest rates and basic food stuffs.
While Spain continues to rank as one of the top european destinations, investors are looking elsewhere to make the huge capital gains in property that were to be found during the boom years. Many have also been hit by the rapid rise in interest rates over the last few years and none more so than the Spanish themselves with lower wages than many of their European counterparts.
Even three years ago the range of mortgages was relatively limited yet suddenly, we are witnessing the appearance of multi-currency mortgages, 50 year mortgages and long term interest-only mortgages. However the market must adapt and without the expansion of the mortgage market, it would be impossible for the majority of young spaniards to get a step onto the housing ladder.
Added to rising mortgage costs are increased fuel prices and the cost of basic food stuffs including bread, milk and vegetables. It is not just a case of tightening your belt, but adding an extra notch or two until you can hardly breathe.
The public as a whole can understand the simplistic economic model that there are cycles – years of boom followed by years of so-called bust which should really be called re-adjustment. However the doom and gloom merchants all jump on to the band wagon and predict major economic collapse because it makes for dramatic news.
The media and so-called experts are quick to blame homeowners and investors but not enough is said of the banks and the exorbitant costs associated with property ownership – particularly in Spain. This should improve however, with the news that there will be a reduction in costs particularly in notary and administrative fees.
It will undoubtedly be a lean two or three years ahead, but the same rules apply as when there is a boom economy – buy only what you can afford. In the long run, property is always a good investment.
This is the book that I started over a year ago and that has finally been published! It started as a rant when I wrote an article regarding social security almost seizing my car over the fact I had not been de-registered as autonomo. Silly me, having changed to Freelance I "assumed" that I was no longer registered as autonomo. Ultimately no-one was to blame but me, however, the hoops I had to jump through to sort it out were unbelievable.
Not to mention two months of dreading the visit to the post office in case there was yet another fine or threatening letter.
And then I kept writing because I realised that the stress I went through as a bi-lingual person must have been at least half of that of someone with no Spanish at all.
It is a warts and all look at the hidden problems in coming to Spain. There is so much more you have to consider than you could ever imagine before arriving and being prepared will make it that much easier to enjoy the experience.
Available at www.bookshaker.com and www.amazon.co.uk
Expats need to be creative when looking for work in a new country and a company on the Costa del Sol has come up with an interesting idea. Holiday Companions offers escort, guide and helper services to visitors to the area.
Now you might cringe at the word escorts but they stress that there is no sex involved! Escorts are just that, accompanying visitors to the area who do not want to go alone to a show, shopping or sightseeing for example.
As they say on there marketing "All companions have undergone a full interview and security check to make sure they are, reliable, trustworthy and friendly. We have companions from ages 21 to 60 with a range of personalities, we are sure to have one to suit you!".
This could be an ideal job for an expat looking for an extra bit of spending money. All they ask is that you have a friendly outlook, enjoy meeting people, are honest and reliable and live on the Costa del Sol.
It could also be an idea for entrepeneurs to talk to them about franchising the service to other areas of Spain.
www.holidaycompanions.es
If you completed on a property before December 2006 you are now required to declare your rental income to Hacienda:
"Due to the new Income Tax Act which has taken effect from January 1st, 2007, non-residents have to declare whether his/her property in Spain has generated revenue from rentals or not. Owners must continue to present this declaration every year to the Tax Office, ensuring that all documents are completed and up-to-date."
We are now nearing the end of the year so you only have a month left to present your 2006 declarations!
There once was an expat, who having been in Spain for a few months felt she had mastered the language quite well.
After a long week of shopping to furnish the new house she had just purchased, she was feeling quite tired and bored with the whole shopping lark and had one last stop to make to buy some cushions.
At the store, she asked the man at the counter where they had the cushions. "Excuse me?" he said with a strange, almost horrified look on his face. "I want some cushions" said the expat, starting to get a little irritated.
"I don´t think that is what you want madam" replied the shopkeeper. Appalled at the rudeness of the man daring to tell her what she wanted, she insisted "I know exactly what I want so give me those cushions NOW".
When the shopkeeper still looked at her with that strange look on his face, she started to think about what she had said. And with horror, it slowly dawned on her that instead of asking for cushions (cojines), she had in fact been demanding that the man give her "cojones", that is to say testicles!
For those who are not familiar with the term snagging, it is a list of all the problems found with new build properties e.g. leaky roofs, faulty installations, bad workmanship etc.
Once you have signed the contract for your new property you must submit a snagging list within 15 days if you want the work seen to immediately (a relative term in Spain!). Ideally, you should visit the property before you complete and present the snagging list to the developer before handing over any money. The developer will be much more motivated to fix any problems in this case rather than after you have signed.
There are several companies that offer to do snagging reports and the average costs seems to be approximately €190 for a two bedroom flat. While you might see it as expensive, consider that most of the problems you are likely to find will cost more than this to repair, and if the problem is structural could run into thousands of euros. (While there is supposed to be a 10 year guarantee on new build property, how long it takes the developer to come and resolve your problems is quite another matter!)
There is the cheaper do it yourself option such as using the DIY Snag Report which has apparently been recommended by EyeonSpain.com. The DIY Snag Report gives you templates to use for a step-by-step formula to snag your property.
Whichever option you choose - choose one of them! Yet something else that could save you time and money.
Many expats who come to Spain work for themselves for a variety of reasons - entrepeneurial spirit, inability to find work, language barrier etc. The truth is however, that it can be a very expensive business between set-up costs, accountants fees, social security payments... particularly in the few couple of years when you are setting up.
It takes time to build up a client database, during which your level of income is likely to be relatively low. If you are registered as autonomo (self-employed) you will be liable for social security payments (approximately €235 minimum) per month, plus you will have to submit quarterly and yearly tax returns whether you are earning or not.
An alternative to autonomo is to register as a Freelance with a company such as www.freelance.es. As a freelancer, you only pay for the days that you actually work e.g. if you are web designer and have a project that lasts two weeks, you only pay tax and social security for those two weeks. In addition, Freelance takes care of all the administrative headaches for you saving you hours of visits to the Seguridad Social and will process your tax returns for you.
While their website is in Spanish, they do speak English so if you have any specific questions you can email them at info@freelance.es.
It could save you a lot of time and money!
" The Doing Business project...provides objective measures of business regulations and their enforcement across 178 countries. The team works closely with thousands of professionals around the world."
A good source of information on starting a business around the world (select Spain for country specific details), it provides information on topics such as: Starting a Business, Dealing with licences, Employing workers, Getting credit, Paying Taxes and more.
In addition the website is looking for local partners to contribute to research on a pro bono basis. While unpaid it has the potential to make you some very good contacts with a large network of professionals around the world and raise your profile. Find out more at: DoingBusiness.org
Trading Across Borders
Lists the procedures necessary to import and exports a standardized cargo of goods in Spain. The documents required to export and import the goods are also shown.
Starting a Business in Spain
Starting a Business in Spain - lays out the steps involved in starting a business and the time it should take (in theory!)
www.hipotecas.com are offering a mortgage for EU residents with an option of 15 years interest only payments (max. 50% loan to value). They are also offering progressive or fixed monthly instalments during the first three or five years. This could be interesting for those just arriving in Spain who do not want any massive hikes in interest rates while they find their feet.
NB: As the rates have experienced such a large increase in the last three years in Spain, it is unlikely (hopefully!) that they will continue to increase at the same rate over the next three years. Therefore you should confirm what charges you will incur if you want to change the fixed rate option should the interest rates fall.
An alternative source of income for expats is writing - be it articles or books. The experiences of other expats is an invaluable source of information for those looking for advice.
Expat Writer: Release The Book Within is written by an experienced author with over 20 years experience. A step-by-step guide teaching you how to turns your ideas into income.
Find out more...
For expats who have been in Spain for a relatively short amount of time and do not have the necessary credit or work history, it can be very difficult to get a mortgage.
www.thespanishmortgagelender.com claims to be able to arrange a mortgage with no need for documents or proof of income. It is likely to be a higher interest rate than a regular mortgage and you will need to pay them an arrangement fee which I am usually against. However, if you have exhausted all other avenues with no success, it may be worth investigating.
BEWARE: Do not overstretch yourself. If you can not keep up with the payments, not only will you risk losing the house, you will also damage your credit rating.
www.thespanishmortgagelender.com
Bankinter.com is offering the chance to change your mortgage with no questions asked - no need to supply payslips, justify your income or provide 2 years tax declarations.
1. Amount to ´subrogar´ (when they take on your current mortgage without having to go through the registration process at the notary) is less than €300,000 and is no more than 80% of the valuation amount.
2. You have had your current mortgage loan for at least two years
3. Mortgage will be for no more than 30 years
4. You can show proof that you have kept up to date with all your mortage payments
5. The mortgage is on your principal property
6. No bad credit history
If the mortgage amount is less than €240,000 and you fulfill the criteria above you do not even need a valuation as long as you can provide a copy of the valuation that was carried out by your current bank.
It is important to check the fine print and the conditions of the mortages - ask an indpendent mortgage broker (who does not charge you a fee!) to explain them to you.
Remortgaging in Spain is a costly affair as not only will you have to pay any cancellation fees to your bank if applicable, you also have to go through the whole notary and registration process again. Depending on the amount of your mortgage this can add thousands to the process.
The good news is that there is talk of Spain drastically reducing the cost of remortgaging. I have read in different articles that notary and registration charges may be reduced by up to 80% and banks will be limited to charging 0.5% for cancellation charges (many currently charge 1%).
If you are thinking of remortgaging it is worth waiting until 2008 if you can to take advantage of these changes and save yourself some money!
Talk to your gestoria, accountant or lawyer and ask them exactly when the law will be in force so you can be armed with the information when you talk to the banks or mortgage companies.
Why am I not telling you when it comes into force? Well in theory it should be January - but get it from the horses mouth and ensure that there are no ´special´regulations covering the region you live in!
