Are you thinking of buying luxury properties in Malaga? Do you know how to proceed or the steps to follow? In this guide, we’ll provide you with tips and advice on how to invest in luxury properties in Malaga, keep reading.
As real estate lawyers with more than 15 years of experience, we have helped countless clients to buy their dream home and we have a lot of experience in doing so. That’s why we bring you a few key lessons and tips.
Why buy a Luxury Property in Malaga?
More and more Spain and especially the Costa del Sol is growing economically, as well as its real estate market. This growth has been steady and stable for years.
Malaga’s thriving tourism industry attracts so many visitors annually, creating high demand for short-term and mid-long term rentals.
The city’s climate allows for an extended rental season beyond the typical summer months.
Investing in apartments or villas in key areas of Malaga can provide a steady stream of rental income, especially during peak seasons like bank holidays and festivals.
Malaga is one of the major driving forces behind the Andalusian economy. In fact, many business groups have chosen to invest in it in recent years through the Technology Park like Google, Ernst & Young, CitiGroup…
We can’t overlook the significant influx of foreigners in Malaga. It’s globally renowned for its stunning beaches, magnificent views, and an extensive real estate market.
In June 2023, a total of 237,956 foreign and national tourists visited the Andalusian city. This represents a 15% increase compared to the same month in 2022 and a 57.85% increase compared to 2021. Every day, Malaga attracts more and more people due to its great tourist offerings, quality of life, and events.
Malaga is positioned as one of the most important tourist destinations in Spain and Europe.
Malaga has been chosen as the 5th city to buy a second home in the world and the best city in the world to live and work in (Forbes). There is a support network for expatriates in the province, where they can help each other and, in addition, as there are so many foreigners, almost everyone speaks English.
What are the benefits of investing in luxury Real Estate?
The benefits of investing in luxury real estate are varied and attractive to those looking to diversify their investment portfolio and generate passive income. We typically explain the following benefits to our clients:
Passive income:
Properties can generate passive income through rental income. This means that once you have acquired the property, you can receive a steady stream of income without any additional effort. This can be especially beneficial for those looking to generate additional income without committing their time or energy.
Increased wealth:
Investment property can increase in value over time, which can result in increased wealth. This is because luxury properties tend to be more valuable and appreciated, making them more attractive to buyers and renters. In addition, the increase in value can be significant if invested in areas with high demand or in properties that have unique design or features.
Diversification:
Real estate investment can diversify an investment portfolio, which can reduce investment risk. By investing in luxury properties, one can reduce reliance on other assets, such as stocks or bonds, and spread risk more evenly. This can be particularly beneficial in times of economic instability, as luxury properties tend to be less volatile than other assets.
Renovation and rehabilitation opportunities:
Properties can be renovated or rehabilitated, which can increase their value and generate additional income. This can be especially beneficial if investing in properties in need of repairs or upgrades, as it can significantly increase their value after renovation. In addition, renovation can attract new tenants or buyers, which can generate additional income.
Long-term investment:
Investing in luxury properties is a long-term investment, meaning that the benefits can be enjoyed over an extended period of time. This can be especially beneficial for those looking to generate passive income and grow their wealth over time.
Investing in luxury real estate can offer a variety of benefits, from passive income and wealth growth to diversification, renovation and refurbishment opportunities, and access to luxury amenities. However, it is important to conduct thorough research and consult with a real estate attorney before making any investment decisions.
What are the steps to follow when buying a luxury property?
When you are about to buy a luxury property it is very important to be clear about the steps you need to take, the time and resources it will take and to consider an opinion from a Real Estate Lawyer.
First step: Appointment with a Real Estate lawyer
By consulting a lawyer specialising in real estate law, you can ensure that the purchase is made safely and in accordance with the spanish regulations.
By having a power of attorney, the lawyer can represent the buyer in the signing of important documents, such as the purchase contract and the title deed of the property.
Second step: Getting a NIE number
To purchase a property in Malaga as a foreigner, you will need to obtain a Foreigner Identification Number (NIE), to be issued by Police Authorities.
The NIE is a tax identification number which is required to carry out financial transactions in Spain, including buying property, opening a bank account, obtaining a telephone number, etc.
We can save you the process and apply for it for you, it is much easier for us to take the often scarce appointments and thus save you time and effort. You don’t need to be physically in Spain, we can do it electronically.
Once you have obtained your NIE, you can proceed with the purchase of a property in Malaga.
Third step: Open a bank account in Spain
It is necessary to open a bank account in Spain to buy a property mainly for practical and legal reasons.
Although it is not strictly obligatory to have a bank account in Spain in order to buy a property, having one can facilitate certain aspects of the process and make your life easiest.
For example, after the purchase, it is common to sign contracts with utility companies such as electricity, water and internet, and having a local bank account can simplify these procedures. Also, for the payment of annual taxes or other expenses associated with the property, having a bank account in Spain can be convenient, avoids delays in payments and is more practical.
These two things are necessary to start the process of buying a property in Spain. It is important that many times people have lost the property they wanted because they did not have the paperwork prepared in advance. If you need to do this quickly and efficiently, contact us for this.
Fourth step: Due Diligence
Is crucial to protect your interests and ensure you are making an informed decision. It involves investigating the physical and financial condition of the property, as well as the area in which it is located, before committing to the purchase. It is essential to ensure that you are getting what you are paying for and to avoid costly problems in the long run. For this you need a lawyer specialised in real estate.
To initiate the legal process, we recommend that you formalise a power of attorney at a notary’s office to authorise the lawyer to make decisions on your behalf to carry out your property purchase without risk of failure (Land Registry, Cadastral Office, Tax Office, Town Hall and Banks).
Contact us for your Real Estate purchase:
Fifth step : Completion of the purchase of the property
The process of buying and formalising a property in Spain usually consists of 3 main stages:
Reservation Contract.
The reservation contract is a confidential agreement between the buyer and seller that is intended to secure the property and take it off the market for an agreed period of time.
This contract provides an opportunity to gain time before committing to more definitive agreements. The amount given by the buyer to the seller at this time usually represents about 1% of the purchase price for resale properties.
In the case of new properties, the amount of the reserve varies according to the price of the property and the developer’s payment plan, ranging from €6,000 to €20,000 or more.
The reservation amount is used as part of the total payment if the decision is made to proceed with the purchase. However, if the buyer chooses not to purchase the property, this amount is forfeited as compensation to the seller for taking the property off the market during the agreed period, unless the reservation contract expressly provides for the possibility of cancellation.
Private contract.
Is a crucial legal document that outlines the terms of a real estate transaction between the buyer and seller. It usually takes 2-3 weeks and involves the payment of 10% as a reservation.
This document formalises the binding commitment between both parties. It is essential that this contract is thorough, complete and clear. It is therefore essential to have a lawyer specialised in Real Estate law, with experience in this field and the ability to communicate effectively with the other party.
In the Private Contract, penalties can be agreed in case that the buyer decides not to proceed with the purchase. If you would like more information on this, please do not hesitate to ask us for it.
Notarial Public Deed
The signing of the deed of sale before a notary is the final step in the public transfer of ownership and title to the property in Spain.
This process of converting the deed into a public document gives veracity and legal certainty to both the buyer and the seller, allowing for its subsequent registration in the Land Registry.
It is essential to have specialised legal advice to ensure a safe and successful transaction.
Sixth step: Land Registry
This is the last step necessary to officially register the property in your name.
Doing so provides important benefits to the buyer: It provides legal security, publicly accrediting that you are the sole and true owner. It avoids possible fraud or third party claims.
It facilitates to demonstrate the ownership if you want to sell the property in the future.
It avoids higher costs if the deed is registered at a later date. To do it immediately is simpler and cheaper.
To register the property in the Registry, it is necessary to present the public deed of sale signed before a notary. This can be done in person at the Registry offices, by mail, fax or even telematically.
The Registry has a maximum period of 15 days to register the property or to communicate the reasons why it is not possible. Subsequently, it transfers the information to the Cadastre to update the ownership.
It is a simple procedure and with a reasonable cost depending on the value of the property.
What do I need to consider when I already own a luxury property?
When you become the owner of a property, there are several things you can do to ensure that your ownership is recognized and protected.
Obtain legal documentation
The most important document for proving ownership of a property is the deed or title, which is a legal document that outlines the details of the property and the ownership rights of the person or entity named on the document. It is important to keep this document in a safe place and to make copies of it in case it is lost or damaged.
Pay property taxes
When purchasing a property in Malaga, the associated taxes must be taken into account, such as 7% Transfer Tax (ITP) in the case of second hand properties and 10% Value Added Tax (VAT) on new properties.
You will be also paying annual taxes such as Property Tax (IBI) and Personal Income Tax (Resident or Non Resident Tax).
Maintain the property
Maintaining the property and making improvements can help maintain value of it, and that you are taking care of the property.
Keep records
It is important to keep records of all documents, payments, and other actions related to the property. This can help control all your payment and can also be useful at the moment of sale.
Investing in luxury properties in Malaga is an excellent opportunity to invest your capital in a stable and risk-free way. It should always be done well informed with the help of a Real Estate lawyer to avoid possible fraud.
Malaga is a growing city and one of the most important business centres in Spain and Andalusia.
If you are thinking of buying or are looking for property, please do not hesitate to contact us so that we can advise you legally and guide you in the right direction. We will do our best to make it a smooth and stress free transaction.
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