Our Take

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Recent Op-Ed’s by leading talking heads in Spain have been hailing the fall of the Catalan independence movement. This after their loss in Catalunya’s regional elections. The PSC, the regional version of President Pedro Sanchez's socialist party, had the highest vote count and their best results in years. They will now try to form a coalition with other left leaning parties.

But, were the results such a blow to the independence movement? President Pedro Sanchez has been working for years to improve relations between Madrid and Catalunya. His left-leaning agenda resonates with voters. The results coincide with the release of a study that shows the first closing of the wealth gap in Spain since 2008. The Spanish stock market, The IBEX 35, has reached new heights and many people are tired and want the political temperature taken down. Sanchez has done this. 

What does this mean going forward? The independence vote in Catalunya has been fluid. Very often vote totals change in direct response to political changes in Madrid and financial crises brought on by both domestic and global misfortunes. In fact, it was only during the financial crises that began in 2008, and then again during the pandemic, when the Independence bloc won the popular vote. Like in most places, financial instability brings on political instability. It is easy to imagine another surge in support for Independence when conservative parties take over in Madrid. The Catalan issue is well established political fodder for the conservative base. 

Overall, turnout was low which may represent a general apathy towards today’s leaders and and their political message. Recent corruption charges leveled against the wife of President Sanchez don’t seem to have resonated with voters.

One of the center of focuses of both the governments in Madrid and Catalunya has been the war on housing prices. Perhaps in an effort to curry favor with voters, the Catalan government passed new housing regulations before the election. The new legislation is focused on controlling medium-term rentals, those between one and eleven months. Essentially, most medium-term home rentals will be subject to the same rent restrictions as long-term rentals. These restrictions include limits on deposits, price increases, fees paid and other housing related charges. Politicians felt there was a hole in recent housing laws and they moved in to address it. Past legislation has restricted both short and long-term rentals. As a result many landlords have either taken homes off the market or moved to the less restricted medium-term contract. As long-term housing came off the market and less restrictive medium-term apartment listings surged, the Catalan government moved to act. Landlords will now have to submit an explanation as to why their rentals are medium-term instead of long-term. It will be interesting to see the effect on prices of further regulations on this heavily controlled sector.

For further questions, please feel free to reach out to me at: josh@mansonadvisoryservices.com  

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The End of The Golden Era

Pedro Sanchez has announced his intention to end the Golden Visa program in Spain. This program allows investors to spend over €500,000, usually in the form of a real estate purchase. In return, the Spanish government allows one to live and work in Spain. The program was started in 2013 by the conservative government of Mariano Rajoy. At the time, Spain was in the middle of the international financial crisis and was looking for investment.

Given the politics of Pedro Sanchez‘s socialist government, this move is not a surprise. For years there has been an all out effort by both the federal government and certain regional governments, to lower housing prices. The majority of Golden Visa investments are in popular city centers. Locals feel like they have been priced out and it has become a hotbed issue.

In addition, the European Union has been putting pressure on member states to end these types of programs. This is because individuals in China and Russia have used programs like this to move money out of their countries. Finally, 10 years after the program’s inception, the €500,000 threshold is considered by many to be too low.

In practical terms, this move will have little impact on the cost of housing. It is mostly a move to placate the government’s base. Over the 10 years that the program has been in effect, only 10,000 of these visas have been issued. When compared to the volume of housing needed in major cities in Spain, to keep up with demand, this is really a drop in the bucket. On top of that, Spain has a relatively high transfer tax of 10%. A slow down in luxury home sales will hit the government’s bottom line. It will be harder for them to invest in new housing for lower income individuals. It seems like tweaking the program, by restricting visas from problematic countries and raising the threshold makes more sense. But, that would be politically difficult both domestically and internationally. President Sanchez has a slim majority and this is the type of move that will energize his base.

For further questions, please feel free to reach out to me at: josh@mansonadvisoryservices.com        

__________________________________________________________________________________________

The secret to buying real estate in Spain

First Steps

So, you’ve fallen in love with Spain and you’re thinking of buying a place. It's certainly understandable. After all the World Economic Forum just voted it the best place to visit in the world. But, where do you start? Is it the right time to buy? Who should I talk to? Can I get a mortgage? Can I rent the place when I’m not there? What about taxes? Golden visa, what’s that?  Below is a quick guide to what you need to know to get started.  It should give you some insight into what you need to know and about the process that you are embarking on.

Is it the right time to buy?

One of the questions that I get asked the most is “Is it the right time to buy?” For the answer to that I would like to share with you an anecdote. In this job I have contact with many of the largest investors in the world, including some of the largest investment banks. During the crisis that hit the real estate market in Spain in 2011, I myself tried to time the market. I asked a few of the people that I know, to give me a call when the market hit the bottom. I got that call in the spring of 2014. At the time the dollar was trading at $1.40 to the euro. It turned out that the call was right. mid-2014 was the bottom of the market. However, by January of 2015 the dollar was $1.05 to the Euro. By waiting another nine months, buyers paying in American dollars could have saved over thirty percent. 

So, what’s the point? Timing the market is very hard. I advise all of my clients investing in Spain, to do so for the long haul. First, because taxes are high. Second,  if you want to make back your investment you will have to give the market time to grow. Third, because recent legislation around rental contracts and restrictions around sites like AirBnB have affected the growth of the market. Finally, because markets over the long term tend to increase, while markets in the short term are unpredictable.

Who Should I Talk to?

There are a lot of people in Spain that will offer to help you purchase real estate. Very few of them will have your best interest at heart. It’s not an issue isolated to Spain, but certainly Spain suffers it’s share of problems. The first thing you should do is to do your own research. Even if your Spanish is not as good as you want it to be, you can start by checking out English listings at https://www.idealista.com/en/. That will give you a sense of pricing. For a sense of the overall economy and state of the real estate market you can check out the English edition of EL Pais https://elpais.com/agr/economy_and_business/a .

Once you’ve gotten a general sense of things, it’s time to start reaching out to Real Estate professionals. DON’T RUSH. You may have limited time in Spain, but take your time and speak to a number of brokers. Don’t limit yourself to one and check their reviews. You can learn a lot by reading about other people’s experiences. When you find a place that you like and have an offer accepted, have a qualified legal professional handle the deposit agreement and the closing. Don’t allow yourself to be pressured and don’t trust that a broker or other Real Estate professional will protect you.

Can I get a mortgage?

Interest rates in Spain are currently very low and depending on your individual situation, you may be able to negotiate yourself a very good deal. Make sure you speak with different banks, negotiate and compare offers. Keep in mind that hidden fees and the mandatory purchase of bank products are the norm. Recently passed legislation has attempted to rectify some of this, but always read the fine print. Make sure that you get the documents in advance of the signing, so that you have time to carefully review everything and don’t be afraid to walk away if you’re not comfortable. Age can also play a role in your ability to get a mortgage, in Spain all mortgages must be repaid by 75.

Can I rent the place when I’m not there?

A lot of people have read about AirBnB and think that they can make a quick buck with short term rentals. Some people just want to make a few Euros off of a property when they are not around. Whatever your situation, it is almost impossible to rent out a property short term in some parts of Spain now. Strict legislation has curbed the short term rental market and steep fines are imposed for violators. Make sure that you check the local laws before purchasing. Also, remember that the laws regarding short term rentals are fluid and even if there is not a law in place today, the general direction is towards more restrictive regulation. One alternative is seasonal or mid-term rental and depending on how often that you want to use your property this may be an option.

What about taxes?

Taxes in Spain can be very high. Transfer taxes during the purchase of a property are 10%.  Other fees can increase those costs by two to three percent. One option to lower those taxes is to purchase the property as a corporation. However, this brings up other issues, including what type of mortgage is available to you, what type of leases that you have to offer to renters and what type of taxes that you will pay. If you are planning on residing in Spain you may be responsible for paying a wealth tax. This can run up to as much as 2.5% of your net worth annually. However, the total taxes that you pay can not exceed 60% of your annual income. 

Golden visa, what’s that? 

For those who want to use the purchase of a property to obtain residency, Spain offers the golden visa. When you invest €500.000 or more in a property, you are eligible to obtain a residency permit to live in Spain. Keep in mind that your contribution to the purchase price must be €500.000. Taxes don’t count, nor do mortgages or capital improvements. You can purchase multiple properties that equal 500.000 euros, but the titles must be identical.

So, that’s a quick look at real estate in Spain. Of course each situation is different and for those who need additional help, please feel free to reach out to me at: josh@mansonadvisoryservices.com                                                             

Pedro Sanchez has announced his intention to end the Golden Visa program in Spain. This program allows investors to spend over €500,000, usually in the form of a real estate purchase. In return, the Spanish government allows one to live and work in Spain. The program was started in 2013 by the conservative government of Mariano Rajoy. At the time, Spain was in the middle of the international financial crisis and was looking for investment.

Given the politics of Pedro Sanchez‘s socialist government, this move is not a surprise. For years there has been an all out effort by both the federal government and certain regional governments, to lower housing prices. The majority of Golden Visa investments are in popular city centers. Locals feel like they have been priced out and it has become a hotbed issue.

In addition, the European Union has been putting pressure on member states to end these types of programs. This is because individuals in China and Russia have used programs like this to move money out of their countries. Finally, 10 years after the program’s inception, the €500,000 threshold is considered by many to be too low.

In practical terms, this move will have little impact on the cost of housing. It is mostly a move to placate the government’s base. Over the 10 years that the program has been in effect, only 10,000 of these visas have been issued. When compared to the volume of housing needed in major cities in Spain, to keep up with demand, this is really a drop in the bucket. On top of that, Spain has a relatively high transfer tax of 10%. A slow down in luxury home sales will hit the government’s bottom line. It will be harder for them to invest in new housing for lower income individuals. It seems like tweaking the program, by restricting visas from problematic countries and raising the threshold makes more sense. But, that would be politically difficult both domestically and internationally. President Sanchez has a slim majority and this is the type of move that will energize his base.

For further questions, please feel free to reach out to me at: josh@mansonadvisoryservices.com        

__________________________________________________________________________________________

The secret to buying real estate in Spain

First Steps

So, you’ve fallen in love with Spain and you’re thinking of buying a place. It's certainly understandable. After all the World Economic Forum just voted it the best place to visit in the world. But, where do you start? Is it the right time to buy? Who should I talk to? Can I get a mortgage? Can I rent the place when I’m not there? What about taxes? Golden visa, what’s that?  Below is a quick guide to what you need to know to get started.  It should give you some insight into what you need to know and about the process that you are embarking on.

Is it the right time to buy?

One of the questions that I get asked the most is “Is it the right time to buy?” For the answer to that I would like to share with you an anecdote. In this job I have contact with many of the largest investors in the world, including some of the largest investment banks. During the crisis that hit the real estate market in Spain in 2011, I myself tried to time the market. I asked a few of the people that I know, to give me a call when the market hit the bottom. I got that call in the spring of 2014. At the time the dollar was trading at $1.40 to the euro. It turned out that the call was right. mid-2014 was the bottom of the market. However, by January of 2015 the dollar was $1.05 to the Euro. By waiting another nine months, buyers paying in American dollars could have saved over thirty percent. 

So, what’s the point? Timing the market is very hard. I advise all of my clients investing in Spain, to do so for the long haul. First, because taxes are high. Second,  if you want to make back your investment you will have to give the market time to grow. Third, because recent legislation around rental contracts and restrictions around sites like AirBnB have affected the growth of the market. Finally, because markets over the long term tend to increase, while markets in the short term are unpredictable.

Who Should I Talk to?

There are a lot of people in Spain that will offer to help you purchase real estate. Very few of them will have your best interest at heart. It’s not an issue isolated to Spain, but certainly Spain suffers it’s share of problems. The first thing you should do is to do your own research. Even if your Spanish is not as good as you want it to be, you can start by checking out English listings at https://www.idealista.com/en/. That will give you a sense of pricing. For a sense of the overall economy and state of the real estate market you can check out the English edition of EL Pais https://elpais.com/agr/economy_and_business/a .

Once you’ve gotten a general sense of things, it’s time to start reaching out to Real Estate professionals. DON’T RUSH. You may have limited time in Spain, but take your time and speak to a number of brokers. Don’t limit yourself to one and check their reviews. You can learn a lot by reading about other people’s experiences. When you find a place that you like and have an offer accepted, have a qualified legal professional handle the deposit agreement and the closing. Don’t allow yourself to be pressured and don’t trust that a broker or other Real Estate professional will protect you.

Can I get a mortgage?

Interest rates in Spain are currently very low and depending on your individual situation, you may be able to negotiate yourself a very good deal. Make sure you speak with different banks, negotiate and compare offers. Keep in mind that hidden fees and the mandatory purchase of bank products are the norm. Recently passed legislation has attempted to rectify some of this, but always read the fine print. Make sure that you get the documents in advance of the signing, so that you have time to carefully review everything and don’t be afraid to walk away if you’re not comfortable. Age can also play a role in your ability to get a mortgage, in Spain all mortgages must be repaid by 75.

Can I rent the place when I’m not there?

A lot of people have read about AirBnB and think that they can make a quick buck with short term rentals. Some people just want to make a few Euros off of a property when they are not around. Whatever your situation, it is almost impossible to rent out a property short term in some parts of Spain now. Strict legislation has curbed the short term rental market and steep fines are imposed for violators. Make sure that you check the local laws before purchasing. Also, remember that the laws regarding short term rentals are fluid and even if there is not a law in place today, the general direction is towards more restrictive regulation. One alternative is seasonal or mid-term rental and depending on how often that you want to use your property this may be an option.

What about taxes?

Taxes in Spain can be very high. Transfer taxes during the purchase of a property are 10%.  Other fees can increase those costs by two to three percent. One option to lower those taxes is to purchase the property as a corporation. However, this brings up other issues, including what type of mortgage is available to you, what type of leases that you have to offer to renters and what type of taxes that you will pay. If you are planning on residing in Spain you may be responsible for paying a wealth tax. This can run up to as much as 2.5% of your net worth annually. However, the total taxes that you pay can not exceed 60% of your annual income. 

Golden visa, what’s that? 

For those who want to use the purchase of a property to obtain residency, Spain offers the golden visa. When you invest €500.000 or more in a property, you are eligible to obtain a residency permit to live in Spain. Keep in mind that your contribution to the purchase price must be €500.000. Taxes don’t count, nor do mortgages or capital improvements. You can purchase multiple properties that equal 500.000 euros, but the titles must be identical.

So, that’s a quick look at real estate in Spain. Of course each situation is different and for those who need additional help, please feel free to reach out to me at: josh@mansonadvisoryservices.com