Can you give us an overview of the current mortgage rates and conditions for both local and overseas buyers here in Spain?
The conditions for buying property in Spain remain very attractive to clients, with continued low interest rates and in many cases favourable exchange rates.
We offer a wide range of mortgage solutions for non-resident and resident investors with flexible, competitive terms, pricing and repayment options.
How do this situation and rates compare to say 3-4 years ago?
The average spread above the Euribor has reduced from 3% to 1.75% in the last 3 or 4 years.
A 15 year fixed interest rate starts at 2.5% in some countries, depending on the personal financial circumstances of the mortgage applicant. The opportunity to lock in rates at such low levels for such long periods remains extremely attractive for foreign investors.
How easy is it to get a mortgage via a Spanish or international bank if you are an overseas buyer?
Spanish lenders have increased their lending appetite over the last 2 years, but they do require that all mortgage applications be fully and properly documented.
At Financial North, we aim to reduce the paperwork whenever possible and to mitigate the language burden, so you can enjoy peace of mind with a clear and transparent application process.
For some customers the best option is to establish a private banking relationship in the course of the purchase of a high value property in Spain, mainly if they:
- Have a situation that is too complex for Spanish retail banks
- Don’t want to engage in the detailed documentation process for getting a Spanish retail loan
- Have an existing portfolio of cash or financial assets without any loans against them.
- In addition, a benefit of working with private bank is the interest rate on private banking loans are generally lower than those found with Spanish banks.
The essentials of a private banking relationship are that the client brings a significant amount of financial assets to the bank such as cash, bond or equities portfolio. The private banker will then agree a strategy to manage this portfolio to generate a return to match the customer’s appetite for risk.
Once this wider relationship is established with the bank, lending on property can be discussed.
We have relationships in place with international private banks based mainly in London and Luxembourg.
Do you envision rates going up in the foreseeable future?
Considering that the Euribor, which is the reference set by the European Central Bank, is at is minimum levels, it is likely they will increase in the medium to long term.
Under current situations, would you say it is more favourable to take out a mortgage than to purchase a property with cash? If so, why?
Most of our customers could pay the purchase of their property in Spain with cash, but due to low interest rates, most of them prefer to leverage their investment, as they can obtain higher returns for their capital in other investments.
What are the main factors that attract your overseas clients to buy property in Spain? (ie for lifestyle purposes, investment or both?)
The main reasons are quality of life, attractive prices compared to other cities and the fact that it is a 2 – 3 hour flight from most large cities in Europe.
What is your overview of the property market in Spain right now and how do you see it shaping up during 2016 and the forseeable future?
There is high demand for prime locations in Madrid and Barcelona, so property prices are likely to go up in coming years.
Madrid & Barcelona have been singled out as leading property investment hubs, why do you think that is?
In our opinion, several factors favour these two cities. Among others:
- There is an increased perception that investment alternatives such as London are likely to be in a property bubble and they have recently increased taxes related to property.
- Property prices in Spain remain at an attractive levels and are still below pre-crisis levels of 2007.
- American investors use these two cities as a hub for their business in Europe but also it has attracted many investors from countries in Africa and America, where they have significant instability, either financially or politically
There is some concern about the situation in Catalunya, the uncertainty of its future is deterring some buyers from investing there. What would be your advice?
Investors, like in any other country, seek a stable legal and tax framework. The political situation in Spain and Catalunya has raised some concerns as well as the new mayor of Barcelona.
In terms of the political situation, in the event of an independent Catalunya from Spain, it is likely they shall keep the same or a very similar legal and tax framework. There is no evidence that this will be different.
Regarding the new mayor, she is trying to implement new laws to increase the protection levels offered to vulnerable families and it mainly affects those properties located in low-income neighbourhoods.
Investors that acquire a property as main or second residence generate business to the local community and therefore they are likely to be encouraged by any government. For those customers that are investing in a property with the intention of renting it out, they must comply with local regulation and taxes.
In all cases, we strongly suggest to all our customers to seek legal advice.
Contact Financial North for further information on your property purchase overseas.
+44 (0)20 3287 2800