Comparing Property Purchase and Mortgage facilities: Spain versus UAE
Mortgages in Spain versus UAE are similar but some differences do apply.
With everything that is happening currently in the Middle East buyers of holiday homes, or for overseas investment may be reconsidering their options.
It has long been the case that expats who are leaving the UAE at retirement or for a change of pace, have looked to Spain as an alternative. This is often because they cannot envisage, going back to their country of origin. Climate, lifestyle, and ability to obtain Spanish mortgage financing means Spain is a good option for them.
With the volatility in the Middle East, which is unlikely to settle down quickly, property prices and stability are in question. Spains property market, and non resident Spanish mortgage market, whilst having had its past issues, is now stable and growing. Like the UAE it has an active holiday home market. As well as providing a wide range of luxury developments and communities for expats.
Buying abroad
When considering a move to any new country, particularly for purposes of investment or residence, understanding the property buying process, mortgage options, living conditions, and tax implications is critical. For those contemplating life in Spain, versus the United Arab Emirates (UAE) there are some notable differences.
Buying Property and arranging a Mortgage in Spain
Buying property in Spain involves an extensive legal process. Foreigners can purchase property anywhere in the country, though the laws differ by region. The process typically includes obtaining a Número de Identificación de Extranjero (NIE) or residency number, which is a fundamental requirement for any property transaction. The NIE is also required for completion of a Mortgage in Spain.
A down payment of around 30% is standard, Spanish banks offer mortgage options to non-residents. Spanish mortgage products and Interest rates are relatively similar to those offered to non residents in UAE. The loan to value at maximum 70% is 10% lower.
Mortgages in Spain
Spanish mortgages are generally available for up to 20 years and can also be fixed or variable. While the application process can be tedious, particularly for non-residents, there are various options to help facilitate this. An independent Spanish Mortgage broker like IMS can help navigate options and negotiate with the Spanish Banks. Additional costs, such as notary fees and property taxes, will total around 12% of the purchase price. Depending on which region you buy in. Mortgage costs are in general a little higher than UAE.
If the buyer intends to remain earning incomes from the UAE then the currency they are paid in may affect the ability to raise a Spanish loan. Expert advice should be taken before committing to a property.
Living Experience and Costs in Spain
Comparatively, living costs in Spain can be lower than in the UAE, particularly outside major cities like Madrid and Barcelona. Spain offers a strong social support system, including public healthcare and education, albeit with some taxes that vary by region.
Taxes
With zero taxes in UAE this is one area that can make a big difference. However for those looking to buy at the higher end of property value. There are tax efficient options in Spain. The Golden Visa still exists. One of the ways to qualify is to invest 500k in a property. As long as any Mortgage in Spain still means you have invested 500k of your own funds, you can apply. So if you buy at 1 million euros you can consider a Mortgage in Spain of 500k.
With the golden Visa only monies actually moved into Spain are taxable. Your worldwide wealth and incomes generated elsewhere not moved into Spain are not. Also living costs are lower in Spain.
Buying Property in the UAE
In the UAE, the property market has in the past characterized its appeal to both local and foreign investors. Foreigners can generally buy property in designated areas, such as Dubai and Abu Dhabi, often referred to as freehold zones where they can obtain full ownership. The buying process is usually quick and straightforward, primarily due to the efficient legal framework.
Upon deciding to purchase a property, the buyer typically makes a down payment of 20-25% of the property’s value. The remaining amount can be financed through local banks, which offer various mortgage options. These mortgages generally feature competitive interest rates, though foreign buyers may encounter slightly stricter conditions compared to locals.
Mortgages in the UAE
Mortgages in the UAE tend to be flexible, with options ranging from fixed to variable rates. Most banks require the buyer to have a UAE residence visa, but some lenders may offer products for non-residents, often at a higher cost. Loan terms usually range from 5 to 25 years, and it’s advisable to factor in both the interest rate and additional fees such as arrangement fees, valuation costs, and insurance.
Living Experience and Costs in the UAE
Living in the UAE offers a unique experience, bolstered by a cosmopolitan lifestyle, tax-free income, and a range of amenities. However, the cost of living can be high, especially in major cities like Dubai and Abu Dhabi. Essentials such as housing, schooling, and healthcare can take substantial portions of monthly budgets. While there is no income tax, other taxes and fees, such as property taxes and service charges, can significantly add to living costs.
Why Spain
Spain with its lower living costs. Lifestyle and climate, in the current environment offers a suitable alternative to UAE. Non resident Mortgage access, and living conditions are in many ways similar. But it is currently a much more stable and safe market to consider buying and living in.