Despite the drop in sales, the billet continues to be one of the favorite safe haven values. This is indicated by statistics: 13% of those who requested housing in Spain last year were investors, almost double that of 2022, according to data from Fotocasa Research. A profile that is gaining ground in a scenario of rising rates, high prices and attractive returns that this type of investment leaves on average, although there are certain factors that can go against profitability, such as the reference value of the home or the state of the farm.
“Price is a determining factor, but many times buyers do not take other expenses into account,” warns Helena Gallardo, president of the Spanish Association of Real Estate Personal Shoppers and co-founder of Nexitum. Therefore, before embarking on investing in the residential sector, it is essential to make a budget that includes each of the expenses that the operation will entail, for example the community fee, home insurance and property and property tax ( IBI).
In this sense, we must pay special attention to the tax chapter and be clear that the taxes paid will vary depending on whether the home is new or second-hand. By opting for the second option, the buyer will be exempt from paying the Documented Legal Acts (AJD) tax, which is paid on new homes along with VAT (10%). Additionally, you should keep in mind that there are places where you pay more in Property Transfer Tax (ITP) than in others. “Perhaps it can compensate to buy a home to invest in Madrid because in this community the ITP is 6%, while in Catalonia it is 10%,” says the real estate law lawyer.
It also warns that if the intention is to acquire a premises with the prospect of requesting the change of use to housing, the investment may end up being ruinous, since the VAT on this type of real estate is 21% and not 10%. However, the buyer who acquires the real estate as a company or self-employed person may deduct this tax.
Another factor that may end up tipping the balance is the reference value that, starting in 2022, the General Directorate of the Cadastre determines each year based on the analysis of the prices of real estate transactions carried out in a public document. It is important to consult the reference value – which should not be confused with the cadastral value – because the buyer must pay the ITP based on the reference value if this is higher than the purchase and sale price.
This recent regulatory modification, included in Law 11/2021 on measures to prevent and combat fraud, is producing cumbersome situations. Gallardo denounces, for example, the real case of a citizen who a few months ago acquired an apartment in the old part of Barcelona for 350,000 euros, but was forced to pay ITP taxes with a tax base of 546,000 euros – the reference value of the real estate that appeared in the cadastre. He considers that it was “very unfair”, since “the apartment was in disastrous condition, but he still had to pay 18,000 euros more than he had anticipated and which he did not have.”
In cases like the one described, it is time to complain to the administration. “Many buyers who have had to pay the reference value – since it exceeded the purchase and sale value – are appealing to the cadastre,” he explains. In any case, you will first have to settle accounts with the treasury and then claim a refund of the tax amount.
Francesc Quintana, CEO of Vivendex, expresses himself along the same lines. “With parking spaces, which are also an investment asset, sometimes it is scandalous.” And he argues that “spaces with a very low market value, because they are small or have a column that makes parking maneuvers difficult, have a very high reference value.” This means that the buyer has to pay the ITP based on 25,000 euros when the market value is actually 15,000 euros. Therefore, before opting for real estate as an investment, you will have to check what its reference value is.
Although it is a less common situation, especially in properties built from the seventies onwards, Gallardo recommends that the buyer of an apartment as an investment check that there is no discrepancy between the actual square meters and those that appear in the cadastre and the Property Registry. the property. “Be careful, because if there are more meters in the cadastre than there are in reality, taxes such as IBI and capital gains will be paid based on these meters.”
However, Quintana clarifies, the cadastral value usually includes both the square meters of the home and the square meters of the shared common areas, which “gives a higher value” if compared to the square meters of surface area of ??the home.
In accordance with Royal Decree 235/2013, having an energy efficiency certificate is mandatory to sell an apartment. But, in addition, the European Union is working on a directive that contemplates that existing buildings be more energy efficient and less dependent on fossil fuels. And the possibility has even been put on the table that homes with very low energy ratings may no longer be sellable or rentable.
For this reason, Gallardo considers that you must pay attention to the energy certificate of the home you wish to acquire as an investment, since, if it is one of those that consumes the most energy, there will possibly be spills and pending renovations to do. For these cases there is also European aid, although the criteria to access it, Quintana regrets, are “difficult to meet.”
Another crucial aspect before going to the notary to sign the deeds of the new property is to check the qualification of the home, since this can limit the carrying out of works and even make it impossible to obtain a mortgage. Likewise, it is advisable to find out if the real estate is affected by any urban planning and if, for example, the setback of the façade is planned. “If it protrudes from the alignment of the road, the city council can suspend the rehabilitation license and [the building] will be subject to expropriation to demolish it,” explains the CEO of Vivendex.
On the other hand, it is advisable to request the ITE certificate (Technical Building Inspection) and check that the property has passed the inspection and, if not, find out what type of improvements must be made to obtain the certificate of fitness. In this sense, “significant extra costs” must be anticipated if an elevator needs to be changed, an aluminosis or carbonation problem on the property needs to be solved, patios and roofs rehabilitated or fiber cement downspouts replaced. “The ideal thing to do these checks is to visit the home with a technical architect or construction engineer,” advises Quintana.
Finally, it does not hurt to carry out a series of inquiries about the neighborhood; Make sure that coexistence in the building is good and that there are no noise problems. Otherwise, the buyer is exposed to greater tenant turnover. “And when this happens, profitability is always lost, because it takes a while to find another tenant, the house must be repainted and adapted again,” argues the president of the Spanish Association of Real Estate Personal Shoppers.
“I remember the case of a house that had a music school underneath and was sold because it was not soundproofed. “They had been like this for years,” he comments by way of illustration, “or that of a very cute cafeteria that at dawn became the neighborhood’s after-hours discotheque.”
For all these reasons, experts recommend talking to the neighbors, making sure if there are limitations on the use of the home – for example, as a coliving or tourist apartment – and consulting the minutes and rules of the community before taking a wrong step in the land of real estate investment that can be very expensive.