A luxury villa in Lanzarote? Leave it to Volcano Estates

Volcano Estates is a leading estate agent in Lanzarote. For prestige property on this beautiful Island at a price to suit your budget, we are an established and highly experienced Lanzarote estate agent you can trust to advise and guide you through each step of the purchasing process.

Property specialists in the Canary Isles

Luxury villas in Lanzarote are so popular because they can serve as a stunning holiday home for you and your family, as a Buy to let, Short-term Rental, or even as a permanent residence.

A Lanzarote property - within your budget

By choosing Volcano Estates as your real estate agent in Lanzarote you can be sure that every penny of your budget is spent wisely. We know the market inside out. That’s why we help make countless foreign buyers’ dreams of owning a luxury house, villa or apartment in Lanzarote a reality every day.

Buying Guide

This buying guide will serve as a basic overview of how you can purchase your new home in Lanzarote; arming you with all the knowledge you will need along the way. However, this document is not intended as legal advice and we do suggest you still seek guidance from a professional lawyer when considering entering the Lanzarote property market.

Why Lanzarote?

For many people, luxury villas in Lanzarote are the stuff dreams are made of. At Volcano Estates we make those dreams reality every day for foreign buyers. With so much going for the Island, it’s no wonder investments in Lanzarote are as popular as ever.

Here are just a few things that make Lanzarote a ‘must buy’ property location:

• A fabulous climate • Proximity to all major European Airports • A modern infrastructure • EU membership • A buoyant tourist economy • An open banking system And • A finite amount of land

All this has provided the vehicle for great property returns over the last ten years. What’s more, the Island has seen average annual capital appreciation of over 10% for the past ten years.

More reasons to buy property in Lanzarote

The all year sunshine and hence tourist season has provided an excellent background for both rental returns and for those seeking to buy both a holiday home and permanent residence.

Having full EU membership has encouraged many residents for other EU states to relocate to Lanzarote and make it their permanent home. Such moves have further increased the demand for property over recent years and create good fundamentals for future appreciation.

Finally, being a small island the amount of buildable land is very limited (80% of all land in Lanzarote is protected and shall not be built on). This short supply combined with a demand that is fuelled by the attributes mentioned above make the Island a great place for not only investing but also purchasing a home in the sun - whether it be for part-time or fulltime residence.

USAGE

Before you start to view any properties, it is worth considering what you are going to use it for. There are several options available

Residential:

Congratulations! You have decided to take the plunge and move abroad and are looking for a comfortable family home where you can best enjoy your new Spanish lifestyle. Obviously, primary considerations will be similar to those in the UK, including size and layout of living space, how many bedrooms/bathrooms, parking, availability and proximity to amenities, schools, etc.- location, location, location!

Investment:

You are looking to get a good return on your investment with a minimum capital outlay. The best option here would be to buy at the `new launch´ stage of an off-plan development release.

An average capital outlay would be in the region of 20 to 30%, to be paid (often in staged payments) during the construction process (generally 18-24 months).

Upon completion, you will then have the option of selling the property prior to taking title or taking title and putting the property into a rental program.

Holiday Home:

Many people would be horrified at how much they spend per year on package deals abroad. Consequently, it makes a lot of sense to buy your own home abroad, especially if you are fortunate enough to take holidays several times a year.

Depending upon your level of usage, you also have the option to gain income through rentals, whether this is to family and friends or through a managed rental scheme on the Island.

Buy-to-Let:

Traditionally a popular reason for purchasing a property in the UK, this method also makes a lot of sense in Lanzarote, particularly when you take into consideration the number of residents here.

There is currently a huge demand for long-term rental properties on the Island. As with the `Residential´ option, you need to take the same considerations on board as this is going to be home to someone for an agreed amount of time.

The advantage to the purchaser is that you will have a regular monthly income from the property – useful if you have taken a mortgage on the property and need help to finance the repayments.

The disadvantage, of course, is that your personal use will be restricted by occupation of the property. Standard long-term rental contracts can be for 6, 9 or 12 month durations and rental management fees are in the region of 10%.

Short-term Rentals:

if you would like to rent a property out to holidaymakers, important criteria to consider is accessibility of amenities (supermarkets, bars, restaurants, etc.), availability of a swimming pool or close proximity to the beach.

One of the main advantages of renting to holidaymakers is the higher income you will receive per week compared to renting to residents/long-term tenants – a guideline is that one week of tourist rates is the equivalent to one month of long-term rates. Another is that you can choose the weeks you would like to keep the property free for your own use.

Obviously, the disadvantage is that you are not guaranteed occupation year round so will need to be flexible regarding the income you will receive from the property.

Insurance:

Property - Just as you would insure your home and contents in the UK, the same applies to property in Lanzarote. If you are unlucky enough to have to make a claim, you must go to the local police station and tell them the value of everything that has been taken. They will record this and issue a certificate, which the insurance company will need before they settle a claim.

Life - If you are purchasing a property with staged payments or are taking on a mortgage on completion of the property, it is worth taking out life insurance to cover repayments in the event that anything happens to the main earner of the family.

Tax Retention:

According to current legislation, 3% of the declared purchase price needs to be retained by the purchaser (or the purchasers´ representative) and paid to the Spanish Inland Revenue (Hacienda) within 30 days of signing for title deeds (Escritura). This is payable whenever the vendor is a non-resident of Spain. If the vendor is a resident of Spain, there is no need to retain the 3% as they would be expected to make their own Tax returns regularly.

THE PURCHASE CONTRACT

There are 2 types of purchase contract, one for an of-plan property (one yet to be constructed or still under construction) and one for a resale (completed) property:

1. Off-Plan:

This type of contract will provide details of the vendor and purchaser, including information on ownership of land, building permissions, completion dates and setting up a community of owners etc. It will also specify the purchase price and method of purchase. There will be confirmation that the Title Deeds (Escritura) will be passed to the purchaser on completion of the sale, free from all encumbrances.

2. Resale:

A resale contract will provide the above details with the exception of items specifically relating to an off-plan purchase (i.e. ownership of land, building permissions, completion dates and the setting up of a community, etc.).

Contracts will be either in English or Spanish with an official English translation. Volcano Estates. can go through the contract with you and explain anything you are unsure of.

Taxes & Other Costs

In addition to the sales price, bear in mind that you, the purchaser, will also have to pay approximately 10% of the new declared value for a resale property, or approximately 9% if buying a new property. This is made up of the following taxes and fees:

• 6.5% ITP tax (Impuesto sobre Transmisiones Patrimoniales) when buying resale property, or 7% IGIC plus 0.5% stamp duty if purchasing new property* • Notary fees • Property registration fee • Plus Valia (capital gains tax) • Lawyers fees

Mortgages

You'll be pleased to hear it's fairly straightforward to apply for and obtain a mortgage. Non-residents can get up to 70% of the valuation price. There are costs involved, however:

• Approximately 280 Euros for a property valuation • 1% mortgage opening commission • Insurance, varying from 120 – 240 Euros per year • A fee for the Notary & Registration of the mortgage

Provided you submit the requested financial information, which is very straightforward, the mortgage can be effective within 10 to 15 working days. The advantages of securing a local mortgage include extremely low interest rates (4% variable); it doesn't reflect your country of origin; it’s tax deductible; and should you rent the property, the same account can be used as a debit credit account.

LEGAL PROCEDURES

Property purchases and sales in Spain need to be registered in a local deed registry and the Title Deed (Escritura de Compraventa) must be prepared by a Notary.

The vendor and purchaser will sign the Title Deed in the presence of the Notary, who will then collect the fees and taxes. The deed then gets sent to the Land Registry Office for registration of the new legal owner’s name. This process can take some time but an authorised copy will be provided in the interim.

If you do not have time to return to Lanzarote to sign the Title Deed, you can appoint someone to sign on your behalf by granting `Power of Attorney´. This would normally be in the name of your lawyer and can be prepared by the Notary at the time you agree to purchase the property.

A Notary is a lawyer who has extra qualifications which enable them to carry out additional duties involved in the purchase and sale of property. He/she is responsible for the correct drawing up of the conveyance deed, i.e. a full and accurate description of the property and payment to the vendor of the agreed purchase price in the correct currency.

Volcano Estates will ensure that all legal procedures are followed correctly and will assist your lawyer and Notary in completing the process, taking the stress away from you, the purchaser.

What is a sales agreement?

A private document signed between the buyer and seller. It must state the following points: • Details of the buyer and seller. • A legal description of the property • The purchase price • The form of payment and currency to be used in the transaction (banker’s draft, cash, etc.) • The completion dates and penalty clauses if these dates are not met usually, if seller withdraws after signing the contract he is liable to pay double the amount of the deposit and the buyer should he pull out, will forfeit his deposit.

What if there's still a mortgage on the property?

If there is a mortgage on the property it can be cancelled on the same day that you sign at the Notary.

Before the signing date at the notary, we will inform the holding bank to prepare the cancellation costs, and the amount that the seller still owes.

On the day of the signing a banker's draft will be made out for this outstanding figure including the costs and paid to the bank. This figure will then be deducted from the purchase price when paying the seller. The bank will then register the cancellation of the mortgage

Is it easy for a foreigner to obtain a mortgage?

Yes. So long as you can submit basic financial information getting a mortgage in Lanzarote is much easier than in most other European countries. Often builders will offer you a mortgage if you purchase a new property. But don’t worry, we at Volcano Estates will handle the whole process for you.

What does a foreigner need in order to buy property in Lanzarote?

The first thing is to apply for an N.I.E. (Number of Identification for Foreigners), which is basically an ID card anybody with a financial interest in Spain or the Canary Islands is required to have.

You'll also need to set up a non-resident bank account, which is a simple process, but again, we will handle all these administrative procedures for you.

Will we have to pay tax when selling a property?

For individuals, capital gains tax is 19%. i.e. 19% of the difference between the price you paid for the property and the price you’re selling it for, minus expenses.

As a non-resident, when you sell, the Spanish Tax Office automatically retain 3% of the declared value, which you can claim back, provided you can prove you have not made a capital gain on the property. If your accounts are in order, you should get most of this back, upon presentation of the “Declaration de la Renta” within the 3 month period following the sale.

Talk to us today

If you would like to find out more about buying property abroad through Volcano Estates, simply contact us today on (0034) 928-51.87.52, or by e-mail, for an immediate response.