Spain emerging as top investment for South Africans

Moneyweb - 30.09.2017

With the Spanish property market in full growth phase and Spain’s GDP growth nearly double the Eurozone average at 3.2%, Spanish real estate is emerging as a strong investment for foreign nationals.

For South Africans looking to buy property overseas, the benefits of investing in the Spanish market are two-fold; buyers can make a return on their investment and can easily rent their second home to either locals or the millions of tourists who visit Spain each year.

But even more appealing than the financial returns of Spanish property is Spain’s decision to grant residency permits to non-EU citizens who buy property worth 500 000 euros or more. Spanish residency permits are extended to the property owner’s spouse and children.

Although the high price tag limits Spain’s golden visa programme to the wealthy, Spanish residency permits give South African families the ability to travel visa-free to Spain and within the Schengen zone, access to some of the finest schools, universities and healthcare systems in the world and establish or expand their business in the stable European economy.

What should investors be aware of before investing?

As with any overseas investment, there are tax implications associated with buying foreign property from South Africa that investors should be aware of before diving into Spanish real estate.

Under current legislation, South Africans are only permitted to take R10 million out of South Africa each year, equivalent to just under 630 000 euros. Whilst this is more than enough to cover the cost of buying a 500 000 euro property and securing Spanish residency, it is something for investors to bear in mind should they wish to purchase a more expensive property.

Investors should also be aware of local taxes before purchasing property in Spain. In Spain, these taxes include IBI tax (Impuesto de Bienes Inmuebles tax – the local property tax), income tax, wealth tax and community owners tax. IBI tax, community owners tax and income tax are all comparable to municipal taxes and tax on rental income in South Africa whilst wealth tax only applies to properties over the value of 700 000 euros, making it worthwhile for investors to stay below this threshold.

Sergio Codonyer, managing director of Door to Europe, believes that despite the tax implications of buying property overseas, we will see a rise in the number of South Africans investing in Spanish real estate.

“The costs associated with investing in Spanish real estate apply to all foreign markets, every country in the world has some form of local property tax. With the Spanish property market booming and the many benefits attached to Spanish residency, I think the opportunities Spanish real estate can open to South African clients far outweigh the cost of local taxes.”

Where and how to invest

For South Africans looking to invest in Spanish real estate, the best markets are Catalonia and coastal Spain due to their booming tourist industries and the rising capital growth of properties in the areas. Barcelona is especially popular among investors due to the high demand for rental properties and the projected 7% rise in value of Barcelona property for 2017.

Investors should be sure to do their research and visit Spain before investing in Spanish property and should consult with a lawyer and a trusted local estate agent at all stages of the process to ensure that they are being properly assisted with local law, tax and residency issues.

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