Case Studies & Articles
Location: Marbella, SP
Location: Devon, UK
The Balearic Islands are an archipelago of Spain situated in the western Mediterranean Sea. The area is most closely associated with the islands of Majorca (often referred to as Mallorca) and Ibiza. The island of Menorca also forms part of the Balearic Islands, although the island is known for being quieter and having less luxury property available. However, as Menorca becomes more popular, that may well change, and more luxury property is likely to become available.
All three islands are top-rated tourist attractions, but Majorca and Ibiza are best-known for being luxury destinations for high-net-worth individuals and international property investors. Many people compare the Ibiza property market to that of London – luxury property is aplenty. There is lots of real estate to choose from, even at the very top of the market. The Majorcan property market also offers homes and real estate at the top end of the pricing scale, but there tends to be a broader range of properties to choose from, all at different price points.
The mainland Spanish mortgage market is continuing to recover after the financial crash of 2008. However, many repossessed stocks are held by domestic banks are slowly being drip-fed back into the marketplace.Get Started
The island of Majorca has a permanent population of around 850,000 and the broadest spread of property prices and types across the three main Balearic Islands. Majorca's economy is dominated by tourism: an average year will see more than 25 million visitors. As well as being a popular holiday destination, there is continued interest from German, British, and Scandinavian real estate investors for Majorcan property.
Property prices in Majorca can vary widely. Prices start from around €6,250 per square metre and go up to approximately €10,000 per square metre. Over the last decade, there has been a significant reduction in the number of newbuilds across the Balearics, falling from over 12,000 just ten years ago to 1,842. The change comes as authorities look to preserve the Balearics' environment from damage caused by over urbanisation. Particularly in Majorca, the rules have had a major impact on the availability of new builds. As a result, many property investors are now looking to buy and redevelop Majorcan properties instead of buying new builds.
Menorca, while being a popular tourist destination, is quieter than both Majorca and Ibiza. The average property price is €3,350 per square metre, significantly less than Majorcan and Ibizan property.
It's often noted – rightly – that Menorca has less high-end property available than on some of the more popular islands, but that shouldn't be interpreted as the island not having any luxury property to offer. On the contrary, Menorca offers many high-value apartments, homes and estates, although certainly less than Ibiza and Menorca. In addition, many Menorcan properties come with significant grounds, and some have private sea access – a rarer occurrence on other Balearic Islands.
Menorcan property can be less expensive than neighbouring counterparts. The island is particularly popular with those looking for peace, tranquillity and privacy.
Many other smaller islands form the Balearic archipelago. Many of these tend to get overlooked and have less well-developed property markets, although they offer some of the same attractions as their more famous counterparts.
Spain is one of the more accessible European countries to buy property in, and there are few restrictions on buying Spanish property, regardless of whether you will be a resident or not. It's also worth noting that Brexit has not made it more challenging or more expensive for UK residents to buy property in Spain.
Spain is also relatively open to other non-EU property investors. The Balearics and other areas of Spain are particularly popular with international property investors. Generally, if you hail from a country outside the EU, you will not face significant restrictions to buy a property as a non-resident.
Mortgages for Spanish property can be more complex for foreigners, but Enness will be able to negotiate and secure several mortgage financing options for you, regardless of your nationality or background.
If you wish to explore Spanish residence, Spain also offers Golden Visas for individuals who buy a home worth more than EUR 500,000.
Domestic mortgage providers in Spain have been extremely risk-averse since the 2008 financial crisis, which decimated many of their balance sheets. While Spain's commercial banks are fairly active in the traditional mortgage market, they are less interested in high-net-worth property investors or those looking for a second home in Spain. As a result, Spanish mortgages for non-residents isn't just a simple case of heading into a local bank and asking for financing.
On the face of it, it can seem like if you're a high-net-worth individual or someone with a solid financial position, you'd be an ideal client for Spanish lenders. In many ways, you are, but Spanish mortgage providers are often limited by risk and profiling, affecting how they offer mortgages for Spanish property – especially to foreigners. Depending on your circumstances, this may limit your options. Most of Spain's lenders won't accept foreign property as collateral for a loan, for example, which can negatively influence how much your mortgage will end up costing. On the other hand, many international lenders will offer mortgages for Spanish property that considers your global situation and overall wealth, regardless of where your assets or property is located. As a result, you may find that these lenders offer more competitive deals than what Spanish lenders can offer in comparison.
Because of Spanish lenders' attitudes to risk, your credit history and income will be especially important to them. Typically, they will want to see a credit rating from your country of residence, alongside other documents that need to be sought or applied for in Spain. The process can take some time, and you may also need to have documents officially translated. International lenders are often more pragmatic when offering mortgages for properties in Spain and will often request documentation that is easier for you to collect and submit to them. If you are in a solid financial position but don't have a regular income (i.e., you are retired, have significant assets but less monthly income, etc.), Spain’s domestic banks may also be more cautious about you borrowing.
It'll come as no surprise, therefore, that Spanish mortgages non-residents can be complicated. While Spanish high street banks are guarded when lending to foreign property investors, many do offer some kind of mortgage finance. That said, you may well find the deal such institutions provide you is a very standard and inflexible "package." The details that might otherwise help reduce your interest rate or positively influence how much you can borrow are likely to be of little interest to a Spanish bank. As a non-Spanish resident, many banks will simply view you as 'high risk' without looking further at your wealth or global assets. The knock-on effect is that you are likely to be offered higher interest rates than would be presented to a Spanish resident with the same circumstances. To be clear: Spanish banks aren't trying to penalise you, and often they will want to lend, but your status as a non-resident may well be something of a hindrance.
Getting a mortgage in Spain can be complicated as a non-resident for other reasons: Spanish banks and lenders often won't let you borrow as much as a Spanish resident. Loan-to-value (LTV) ratios vary from lender to lender, but you will only be able to borrow around 50%-60% of the price of the property as a non-resident. Lenders typically offer more significant LTVs for mortgages for Spanish property for residents, so you'll find you can be quite disadvantaged on this point. However, Enness will be able to get you higher LTV ratios and better terms than approaching Spanish high-street lenders directly. Spanish lenders can enforce maximum LTV amounts rigidly, regardless of any extenuating circumstances which could open the door for more flexible conditions or favourable rates. International lenders are likely to offer higher mortgage amounts for Spanish mortgages for non-residents.
Rates and terms also vary significantly between Spanish lenders, and you'll need to spend significant time shopping around between lenders to find the best deal if you are operating alone. Unless you have a very straightforward situation, Enness is likely to get you more competitive mortgage rates through their network of more than 500 global lenders. Your broker will also be able to tailor your mortgage to you, including how you pay interest, what you pay, loan to value and other factors.
Mainland Spain and the Balearics are some of the most popular holiday destinations for UK residents, and it's estimated that more than half a million Britons own Spanish property. While Brexit has made living full-time in Spain more challenging for Britons not already living in the country pre-Brexit, there almost no restrictions for Britons who want to buy a Spanish holiday property or second home. Spain is heavily reliant on tourism. The significant number of Britons visiting the country each year means it makes no sense to place substantial restrictions on property ownership for UK residents, regardless of Brexit.
When it comes to Spanish mortgages for UK residents, as previously noted, not all Spanish banks and lenders will offer the most flexible or competitive mortgages to you. Spanish lenders will most likely view you in a very "black and white" manner assessing your income first and foremost and then evaluating how "risky" your profile is according to their internal guidelines. If you are retired, an entrepreneur, asset rich but have little income or your wealth is tied up in property or other illiquid assets, these are likely to make lending a challenge for many Spanish lenders who prefer borrowers with lots of liquidity and a steady income.
Just like for other non-residents, if you are a UK resident looking for a mortgage for a Spanish property, Enness will be able to connect you with international and alternative lenders who will be able to offer competitive and flexible mortgage financing. In addition, Enness has access to lenders who will consider more than just your income and look at the other elements of your background to offer you a mortgage for Spanish property as a UK resident.
Given Ibiza and Majorca have extremely active property markets, and real estate sits at the higher end of the price range, there is a growing demand for international mortgage finance in the Balearics in particular.
Enness have access to more than 500 private banks and international mortgage providers who take a very different approach to financing luxury property than their Spanish counterparts. While many Spanish banks can be reluctant to utilise your full wealth and assets, other lenders are more than willing to accept various assets as collateral. This is vital when looking to minimise costs, maximise assets and arrange mortgage finance as quickly as possible. Some of the key Balearic Island mortgage product highlights include:
As with any international property purchase, you will need to consider fiscal repercussions carefully and in advance of buying a home.
As a rule of thumb, obligatory charges relating to Spanish property purchases cost around 10% of the property price. You will also need to consider residency issues and potential impacts on your broader tax situation. If you rent out your Spanish property, Spanish income tax will also be applicable, as will capital gains tax if you sell the property. Spain also has several obligations you must meet for insuring your real estate.
Overall, taxation in Spain is unlikely to be like-for-like with your country of residence or your country of citizenship if they are different. Therefore, working with lawyers, advisors and tax experts is always key to a successful international property purchase. In addition, Enness have an unparalleled network in mainland Spain, the Balearics and around the world. The team will gladly connect you with the service providers you need on your journey to securing a mortgage for a Spanish property if that is helpful.
You should ensure that the structuring of your Spanish mortgage for non-residents is both tax-efficient and cost-effective. Enness will be able to do this for you. Your broker will appreciate the intricacies of the Spanish tax system and will consider the legal and regulatory factors alongside your advisors and other specialists. Enness will also be able to utilise your complete portfolio of worldwide assets to reduce headline mortgage costs.
Enness' access to private banks and other similar facilities allows your broker to create a specific mortgage vehicle structured around your unique situation. Spain's domestic lending scene typically offers less competitive Spanish mortgages for non-residents and Spanish banks continue to be very risk-averse, especially when it comes to luxury properties and international property investors. Enness' network of international lenders is not, and you will be able to enjoy a tailored and advantageous mortgage, no matter the value of your Spanish property.Get Started Now