Ok, so you’re interested in buying property in Ibiza. It’s easy to see why. The Spanish island is a dream come true for many expats looking for a second home and investors hoping to cash in. But before you go any further, there are a few things you should know.
In this article, we’re exploring residency, taxes, legal issues, house prices and all the essential elements that come with purchasing real estate on the White Isle.
Buying property in Ibiza as a foreigner
Much like buying property in Spain there are a few steps you’ll need to take when buying real estate as a foreigner in Ibiza.
Firstly, get yourself a Tax Identification Number (Número de Identificación de Extranjero, NIE). The Spanish authorities require this from non-citizens for security purposes. The NIE allows you to open a Spanish bank account (which you’ll almost definitely need) and permits you to buy property.
You can apply for an NIE via the Spanish embassy in your country or by visiting the Local Commissioner of Ibiza.
If you want to live in your property in Ibiza, you’ll have to follow the same rules as moving to Spain. This means getting a visa to secure your residency. For EU citizens, this is a breeze as you won’t need a visa to live or work in Ibiza. All you’ll have to do is fill in an online form, pay some fees, visit the Spanish authority in Ibiza and your residency is good to go.
For non-EU citizens, this includes UK citizens, you’ll need to go through a longer visa process. You can get a long or short-stay visa before you can get residency and may need a job to get one. You can find out more with our guide on moving to Spain after Brexit.
House prices in Ibiza
Due to its immense popularity, property in Ibiza is more expensive than any of the Balearic Islands (Ibiza, Mallorca, Menorca and Formentera). For example, an apartment inside a city centre will cost 25% more in Ibiza than in Palma de Mallorca.
The average property price differs depending on where you want to buy. An apartment inside a city centre with cost roughly €5,0000 per square metre, on average. Outside a city centre, this drops to €4,833 per square metre.
In recent years, Ibiza has become one of the most expensive Spanish territories to live in. In 2019, Ibiza Town (the capital), dethroned San Sebastián as the most expensive city to buy property in.
Property prices have risen more than 56% in the past five years on the island. Mainly, this is due to a huge surge in interest for luxury homes from overseas and resident buyers. Combine the soaring demand with a short supply of property and you’ve got the perfect recipe for high prices. The price curve continues to climb, making Ibiza an attractive location for investors and developers.
Property tax in Ibiza
Like most places in Europe, you’ll need to budget in more than just the price of the property when looking to buy. All in, taxes and additional fees add up to around 12-13% of the property price. These are paid on top of the property’s value, so you need to be aware of what’s involved.
When you buy a used/second hand property in Ibiza you must pay transfer tax (Impuesto de Transmisiones Patrimoniales, ITP). The amount you pay ranges from 8% to 11%, depending on the value of the property. The taxes are taken by the state of the Balearic Islands.
The tax brackets are:
- Up to €400,000 (8%)
- €400,000 till €600,000 (9%)
- €600.000 till €1,000,000 (10%)
- €1,000,000 (11%)
Value Added Tax (VAT)
If you’re buying a new build property in Ibiza, you’ll pay VAT (Impuesto sobre el Valor Añadido, IVA) rather than transfer tax. Currently, this is 10% of the purchase price.
You’ll have to pay Stamp Duty on new builds too. This is much smaller, at 1.2%.
Real estate tax (local taxes)
Real estate tax (Impuesto sobre Bienes Inmuebles) is paid every year by whoever owns the property. The total you pay is determined by your local town hall.
Additional property fees in Ibiza
As previously mentioned, taxes aren’t the only add-on to consider when buying property in Ibiza. You’ll likely need some support from an estate agent, a lawyer and may pay for property with a mortgage. You may not have to cough up for all of these extras, but they’re worth knowing in case.
Like most bank loans, taking out a mortgage will cost you. You’ll need to factor in the interest rate, so you know how much to pay back and pay for the bank’s valuation of the property (this is around €500). Also, you’ll have to pay the 1.2% Stamp Duty Tax when buying real estate with a mortgage.
Typically, if you are a non-tax-paying resident, the most a Spanish bank will lend you is 60% to 70% of the property’s value.
It is always advised to use a lawyer when buying property in Ibiza. They can help you ensure all documentation is correct and avoid any nasty hidden charges. Usually, a property lawyer will charge roughly 1% of the purchase price.
Notary and property registration costs
A notary is essential for handling the transaction process between the buyer and the seller. The costs of both of a notary and property registration are low and rarely exceed 1%. Often, a notary will charge no more than €2,000.
Estate agent fees
These are generally paid by the seller, unless you’ve made different arrangements. In Ibiza, an estate agent is unofficially mandatory. They take care of both parties, so help to iron out any issues.
Pitfalls of buying property in Ibiza
Buying property in the White Isle isn’t always plain sailing. There’s a lot to consider, so be careful not to get caught out.
Legal issues often cause a lot of headaches, and you can get stung by dodgy contracts. Here are some of the pitfalls of buying property in Ibiza and how to avoid them.
Ensure you buy legal property
If you’re buying property to rent out, you’ll need an ETV (Estancia Turistica y Viviendas) Tourist Rental License. It’s not unheard of in Ibiza for some elements of a property to slip the nets of the law.
Unless you complete the necessary checks before you buy, you could find yourself having to tear out certain parts of the property. This could be an outdoor swimming pool, for example. If you chose not to do this and rent your property without an ETV license, you could find yourself in some legal trouble.
Get a good lawyer
We mentioned briefly earlier about paying lawyer fees when buying a property and forking out a bit extra for a good one might be a smart idea. The legal documentation that comes with real estate in Ibiza needs thorough checking to avoid future complications.
To help your lawyer out, make sure you get all the seller’s claims down in writing. You can write these as reservations in the buying contract. This can support you if, for example, the seller says the property is in better condition than it is. Your written down notes will support your argument and avoid you having to legally pay for the property.
Price isn’t everything
If you’re interested in building a house, ensure you have a transparent quote and a formal construction contract. Investors building property in Ibiza can get hit with hidden fees and exaggerated prices.
Remember, price isn’t everything. Just because one constructor costs more than another, it doesn’t mean they will do a better job. Ask the builders for referrals for an unbiased review. By approaching the building process properly prepared, you avoid getting overcharged or sold an inferior service.
Send money to buy property in Ibiza
Whatever your motive for buying property in Ibiza, you’ll need to think about payment. If you’re making a purchase from a currency that isn’t euros, we can help you with your exchange.
At Privalgo, we offer some of the best exchange rates on the market. This means we’ll help you get all the euros your need at a cheaper price. But it’s more than just swapping one currency to another.
Sometimes, making an immediate payment is inconvenient for you or for the seller of a property. The currency market loves to move around, and this can create problems with your exchange. Our Currency Specialists will listen to your needs and offer solutions to help keep your money safe from market movements.
If this concerns you, speak to a Privalgo Currency Specialist for free and see how we can help.Book a chat with a Currency Specialist