Costs of buying a house on the Costa del Sol: what you pay beyond the purchase price

Count on 10 to 14 percent extra

The asking price of a property on the Costa del Sol is never the amount you ultimately end up paying. On top of the purchase price come taxes and costs that together amount to between 10 and 14 percent. For an existing property that figure is usually 11 to 13 percent, and for a new build it is slightly higher because of the VAT structure.

For a property of 600,000 euros that quickly means 65,000 to 80,000 euros in additional costs. This is money you need to have in advance, because it is not included in a Spanish mortgage. So budget from the outset for the total amount, not for the price on the sign.

Transfer tax on an existing property

If you buy an existing property, in Andalusia you pay the ITP, the transfer tax. Since the reform, this has been a flat rate of 7 percent on the purchase price in Andalusia. This is by far the largest cost item.

On a property of 600,000 euros that is 42,000 euros. The tax is settled at or shortly after the notarial transfer and must be paid within 30 days. The Spanish tax authority can compare the value against a reference value, so an artificially low purchase price on paper leads to additional assessments later on.

VAT and stamp duty on a new build

For a new build it works differently. You do not pay transfer tax but 10 percent IVA (VAT) on the purchase sum, plus 1.2 percent AJD (stamp duty) in Andalusia. Together that comes to 11.2 percent in tax, slightly above the 7 percent for existing properties.

With a new build you often pay that VAT in instalments along with the construction stages. Bear in mind that VAT is also due immediately on advance payments made during construction.

Notary, land registry and legal costs

Besides the tax, there are fixed transaction costs. These are relatively small compared with the transfer tax, but they add up.

• Notary fees: 600 to 1,200 euros, depending on the purchase sum
• Land registry entry (Registro de la Propiedad): 400 to 800 euros
• Lawyer or legal adviser: usually 1 percent of the purchase sum, with a common minimum around 1,500 euros
• Gestoría for administrative processing: 300 to 500 euros
• NIE number and banking matters: a few hundred euros

Mortgage costs if you finance

If you finance with a Spanish mortgage, additional costs apply. The valuation (tasación) costs 300 to 600 euros. Many banks charge an arrangement fee of 0.5 to 1 percent on the mortgage amount. Since 2019 the bank itself pays the stamp duty on the mortgage deed, which saves the buyer considerably.

Also count on a mandatory buildings insurance and sometimes a linked life insurance. Banks often offer a lower interest rate in exchange for taking out those products, but always work out whether that is genuinely cheaper on balance.

A worked example from start to finish

Suppose you buy an existing villa in Nueva Andalucía for 750,000 euros. The bill then looks roughly like this: 52,500 euros transfer tax (7 percent), 1,000 euros notary, 600 euros land registry, 7,500 euros lawyer (1 percent) and 400 euros gestoría. Together that is just over 62,000 euros in costs, or 8.3 percent on top of the price.

If you also finance with a mortgage, another 4,000 to 7,000 euros is added for valuation and arrangement fee. The difference between the asking price and the actual expenditure is therefore easily 65,000 euros or more.