The decision to purchase a home in Spain is never easy to take. Even now that the market has started to recover there are questions and doubts that potential buyers and visitors to the “Sima” Madrid International Real Estate Exhibition have expressed. Sima took place from the 5th to the 8th of May.
Although I always advice to obtain the help of a good solicitor and to have an structural survey done by a qualified architect, however there are other fundamental questions that apparently did come up from public surveys carried out among the visitors and they were:
What requirements must I meet to be able to buy a home?
It is essential to have a stable job with a salary that allows the correct economic effort (allocating a proportion of your income to pay the mortgage if external financing is required) this figure should not exceed a maximum of 33% -35% of your total income. The ideal situation to gain access to a standard dwelling is if the household income circles the sum of 1,800 Euros per month. Also, remember that at least 10% -12% of the cost of house purchase must have been saved previously to meet payment of taxes etc. This percentage some time could rises to 15% and a bit more I would say. There are no other special requirements except the desire and the ability to purchase.
Are prices stabilized?
I would say yes, except in isolated areas. I will go even further: They are rising at a rate of 20% in prime locations such as Madrid and Barcelona.
Those who are now buying in large cities and surrounding areas will get a certain increase in the house purchase in the coming years. In my opinion, the market is in the initial phase of an expansion stage. Prices have already set and after such a deep crisis are very difficult that they start to drop again. But is it impossible? No. Minimum prices could again drop if we enter in another crisis and if the bank rates for whatever reason rise sharply in a short time, but that it is a very unlikely scenario.
For how long we will have cheap mortgages?
Everything indicates that the Euribor, the main index that marks the interest payable on variable loans, will remain under minimum on short and medium term. Or perhaps will persist even longer. The weakness of the European economy does not invite to think that the cost of money will go up and experience shows that when a mature economy stabilizes at low rates, it is maintained there for a long time.
I dare to forecast that future mortgages with variable rate will pay very little interest, until mid-2018 but after that date, it is normal that the Euribor might go up to 3% -4% I have clear the type of mortgage I would go for: a fixed-rate mortgages (there are offers below 2%) could be a lifelong cheap mortgage. Given good mortgage conditions I would opt for a fixed loan in order to avoid future complications. Without any doubt that is the type of mortgage that it is wise to have in mind.
To buy brand new or used?
This option, as always, depends on the preferences of each person. The new housing offers better value and lots of possibilities, as (good finishes, common areas with swimming pool, quiet area, etc.), but it means sacrificing location. If, instead, what is prioritized is the location, the choice should be, in most cases, the purchase of a resale to reform.
If location is not a problem, new houses offer three major advantages: ease of payment as property developers are providing advantageous methods of payments, a bigger product choice and properties with higher energy efficiency.
Should I buy or rent?
If you can have access to credit, undoubtedly buy, recalling that, at present, the interest paid on a mortgage could be less than the cost of a let. Obviously if you intend to stay a short time in one place the best option should be to let. Except for these conditions, if you have a stable family and presume of having a stable job, this is a historic moment to buy, with impressively low prices that most probably will never see again.
The Spanish are very bad savers and home buying forces and provides a piggy bank to save for retirement." He is aware that if the employment and family situation is unstable, it is best to lease, but remember that "we are entering a world in which this double stability will always fuck with pins".