Is Buying in Spain a Good Investment?

After comparing Tenerife and the Costa Blanca, it’s worth asking the bigger question directly: does buying property in Spain actually make financial sense, or is it a lifestyle purchase that happens to hold its value?

Financing changes the picture significantly

Conditions for non-residents depend a lot on the buyer’s profile:

• EU citizens: typically 60-70% financing on a second home, sometimes up to 70-80% on a genuine primary residence.
• Non-EU buyers (UK post-Brexit, US, and others): typically 50-60% financing.
• Fixed rates for EU non-residents: around 3.0-3.8% over 20-25 years.
• Fixed rates for non-EU non-residents: around 4.3-5.2%.
• Typical process time: 7-10 weeks from document submission to signing.

An important detail that often catches people off guard: financing is based on either the bank’s appraisal of the property or the agreed price, whichever is lower.

Ongoing costs people often forget to account for

• IBI (Impuesto sobre Bienes Inmuebles, the annual municipal property tax): 0.4-1.1% of cadastral value, typically €400-800/year depending on the municipality and the property’s size.
• Municipal waste collection tax, charged twice a year, usually €40-50 per half-year.
• Community fees (for apartments with shared pool, garden, security): €50-180/month, higher for luxury complexes with concierge.
• Building insurance: €200-500/year, required by the bank if there’s a mortgage. Worth having regardless.
• Non-resident imputed income tax: paid annually via Modelo 210 (Spain’s non-resident tax return form), even if the property isn’t rented.
• Electricity and water: usually around €60-100/month.
• Internet: usually €25-40/month.
• Alarm system: usually €40-50/month, recommended though not required.

Altogether, ongoing costs on a typical €300,000 property usually come to around €2,500-3,500 a year.

If you’re buying to rent out

As covered in the market comparison article, net yields in the 4-9% range are realistic depending on region and property type. But the yield on paper isn’t the yield in your pocket, mortgage payments, community fees, maintenance, insurance, IBI, and, if it’s a holiday let, management costs, all come out of that number first, alongside the rental income tax covered later in this series.

If you’re buying to hold

Both Tenerife and the Costa Blanca show genuine price growth based on demand and limited supply, not speculative spikes, generally a healthier sign for long-term value. This approach suits buyers who don’t need high-yield, higher-risk investments.

A worked example

A €300,000 property, financed at 65%, non-resident buyer:

• Own funds deposit: €105,000.
• Taxes and closing costs (8-11%): roughly €25,000-33,000.
• Total own funds needed upfront: €130,000-138,000.
• Monthly mortgage payment (3.5%, 25 years, on €195,000): roughly €975.

If the property rents for €1,600/month:

• Gross annual rental income: €19,200.
• Minus mortgage payments: €11,700/year.
• Minus community fees and IBI combined: roughly €2,500-3,000/year.
• Minus insurance: €400/year.
• Margin before rental income tax: roughly €4,000/year.

That’s a genuinely useful figure to know before deciding, and noticeably more modest than the headline yield percentage alone would suggest. Worth remembering, though, that ROI (return on investment) increases significantly upon resale.

An important addition

For buyers who go in with realistic expectations rather than chasing a quick flip, property in Spain has generally proven a sound investment, especially in markets like Tenerife and the Costa Blanca where demand is real and steady. The people who tend to be disappointed are usually the ones who only looked at the purchase price and advertised yield, without factoring in financing costs, ongoing ownership expenses, and taxes, all of which pull from the same number.