How Can I Buy a House in Ibiza?

The Ultimate Guide for Buyers

If you're looking to buy property in Ibiza, you’re going to have to learn the ins and outs of this complex process. There's no shortage of things to consider and learn before you buy your home. Our goal is to help you understand all of the moving parts of this process and to help make the experience go as smoothly as possible.

Are you planning to move to Spain and live in Ibiza or are you interested in purchasing a property to rent? Are you in the market for a small 1-bedroom apartment in the centre, a 3-bedroom country house with a swimming pool, a luxury villa with sea views or a commercial property?

What’s your budget? What’s your expected timeline? Are there any additional costs that come with becoming a homeowner on the White Island? Keep reading for the answers to these questions, and plenty of expert advice, in this comprehensive overview of how to buy a home in Ibiza, Spain.

Ibiza's property market

First things first: it’s imperative that you understand Ibiza's housing market, which is marked by very high land values. This is attributable to a combination of restrictions on projects for new buildings, a relatively small housing stock, and the island's idyllic location. Furthermore, increased demand continues to push prices upwards.

The value of property in Ibiza has actually over the last five years alone.

Broadly speaking, private homes are experiencing solid growth while rental property prices have declined somewhat due to the entry into force of stricter laws relating to short-term rentals.

Property prices in Ibiza are high but negotiable. As a reference, a 2-bedroom apartment might cost around 250,000 euros, a semi-detached home 600,000 euros, and a 4-bedroom semi-detached home with a swimming pool, over one million euros.

It's always an excellent idea to work with a real estate agent you trust. Not only will he or she help you find your dream home, you may find that their advice takes you down a different path than you had originally imagined.

Costs associated with a home purchase in Ibiza

Before you consider buying a home in Ibiza, you must become familiar with the real costs of acquiring your dream home on this coveted Balearic Island.

Keep in mind that, in addition to the cost of the property, you can expect to pay an additional 10% to 15% of the property price.

This will include the following:

  • IVA (Impuesto Sobre el Valor Añadido), which is similar to VAT in the UK. If you're buying a new property, currently you can expect to pay IVA of 10% plus another 1%, the latter going to the city government. Additionally, you will have to pay an AJD tax (Actos Jurídicos Documentados) of around 1.5% of the purchase price.

  • If you're buying a second-hand property, there is no IVA but, rather, ITP (Impuesto de Transmisiones Patrimoniales), similar to the Stamp Duty Land Tax in the UK. This is usually around 8% on homes up to 400,000 euros, 9% on homes priced at 400,001 to 600,000 euros, and 10% for homes over 600,000 euros. You may also have to pay Stamp Duty on the value of the mortgage if you're buying property that has a mortgage.

  • You must consider the cost of a property valuation as well as the cost of the mortgage, which vary from lender.

  • There is a land registry fee, which will depend on the property value but is usually around 0.5% to 1% of the purchase price.

  • There are fees associated with the notary public, who will be present when you sign the final agreement. These are usually around 0.5% to 1% of the purchase price.

  • If you use a lawyer, you will have to pay his or her fees as well as a power of attorney, if needed. Fees for lawyers are generally a percentage of the purchase price and are usually between 1% and 2%.

  • There are also banking costs to consider. You will have to submit a banker's check to buy a home in Ibiza, so you will need a Spanish bank account and you'll have to transfer funds from your bank in your home country. The cost of a transfer of this kind can be up to 5%, plus you may have to pay the cost of the Spanish bankers' check, which could end up being up to 0.5% of the value of the check.

  • Real estate agents will charge you a fee, usually a percentage of the price of your home, which generally runs between 3% and 5%.

  • Buyers will have to pay property tax on their home. This is generally 8% for properties of up to 400,000 euros and 11% on homes over a million euros. It must be paid within one month of your purchase. Additionally, there are local property taxes that must be covered. This includes IBI (Impuesto sobre Bienes Inmuebles), which is a municipal tax, and a tax for rubbish collection.

  • Non-resident homeowners will have to pay an Before you buy, it’s advisable to look into the current levels of these taxes to ensure that you'll be able to cover them.

  • Buyers may have to pay a Capital Gains Tax (Impuesto de Plusvalía). Although this is usually covered by the seller, sometimes it is paid by the buyer, depending on how much the land where the property is located has appreciated.

Your property plans

What are you planning to do with your new property? Will you rent your villa to tourists in summer or will you relocate to Ibiza? These are important questions that need to be answered before you buy. If your plan is to purchase an investment property with a tourist license in place, you can expect to pay an additional 10% on the price of the home. Alternatively, if you're planning on buying a rural plot on which to build your house, keep in mind that prices generally start at half a million euros, the entire construction process can take as long as a year-and-a-half from start to finish, and a new construction would not be eligible to obtain a tourist license for the first 5 years.

It’s important to note that, if you buy a plot of land without a building license, you will need to hire an architect to obtain the corresponding license, a process which can take up to 2 years.

Your real estate agent should be very active in helping you close on a price that's right for you, whatever your property purchasing goals.

The purchasing process

Once you reach a verbal agreement with the seller, it's time to get it in writing. In this first step, you'll most likely sign a private contract with the seller (Contrato de Arras), drafted by your lawyer. In this contract, the seller promises to hand over the property and the buyer promises to pay the price agreed by both parties. Until both parties sign the document, the seller can change his or her mind or make a deal with another buyer.

Once the buyer and seller sign the contract, the buyer usually pays a 10% deposit and the sale is expected to be completed within three months. The deposit will be subtracted from the purchase price when you sign the final contract.

If you, the buyer, don’t not hold up your end of the deal, you will lose your deposit. The seller is also on the line: he or she must ensure that the property passes its due diligence; otherwise, he or she will have to return the deposit and provide the seller with additional compensation.

The final step is to sign the deed of sale, which is done with a notary public and the buyer and seller or their representatives.

Before you sign, make sure you (or your real estate agent or lawyer) double-checks the property's legal standing. This includes confirming that everything is in order with the title deed and making sure it is free of charges, reviewing building licenses if the property is new, and also checking the land registry certificate.

You also want to get an energy certificate, ensure that the property tax (Impuesto de Bien Inmueble) payments are up to date, and confirm that the certificate of occupanc(Cédula de Habitabilidad) aligns with current legislation.

With regard to the latter, this document is especially important because you might not be able to obtain a mortgage without it and, if you're planning on renting your property, you will not be able to receive a tourist license without one. If you’re going to apply for a mortgage, banks will generally need to see your annual income from the previous year as well as several months’ worth of bank statements.

Keep in mind that the maximum loan lenders generally offer is between 60% and 70% of the house’s assessed value, paid over a 20 to 30 year period. Indubitably, the due diligence process is lengthy and complex, which is why it's important to have by your side at all times.

Obtaining a tourist license

If you're looking for an investment property, Ibiza is an excellent option as it is an extremely popular destination and the rental season is expected to remain strong,potentially providing you with a solid income stream. However, if this is your plan, it's important to know that the government currently grants tourist licenses for detached and semi-detached homes and not for apartments.

Can you potentially rent your apartment? Yes, but it's something of a grey area and not 100% legal.

To obtain the rental license for your home, you'll benefit from the help of your trusted lawyer and/or a gestoria (an agency that undertakes administrative paperwork), as the process involves lots of forms and, perhaps more importantly, infinite patience. The required documents must be submitted to the Island Council Tourism Department. You absolutely need the above mentioned Cedula de Habitabilidad and you should also have property insurance.

Your property must also meet the following requirements:

  • It must have no more than 6 bedrooms
  • At may not accommodate more than 12 people
  • It must have at least 1 bathroom for at most 5 people, 2 for 6 to 8 people, 3 for 9 to

11 people, and 4 for 12 people

Tips for buying a home in Ibiza

As we said, it’s a very good idea to get support from a professional real estate agency to help you on your property buying adventure.

Real estate agents charge a high commission, so you can expect to pay top dollar for their expertise and experience; however, this unique insight is invaluable. There are many risks involved when you venture to purchase real estate on your own, and there's no shortage of reliable agents in Ibiza to help you navigate the complex process.

Moreover, the right agent should be able to show you properties that are not advertised to the general public.

You will eventually need the services of a lawyer and a notary to validate the legal agreements associated with your property purchase in Ibiza. A good real estate agent will have plenty of connections and be able to help you find an English-speaking lawyer with your best interests in mind. You might consider signing a Power of

Attorney so that he or she can act on your behalf if you’re not in Spain. You will need a NIE (Número de Identidad de Extranjeros), which is essentially an ID number for foreigners. This is essential for completing financial transactions in Spain, such as signing the home purchase agreement, paying taxes, and opening a bank account and getting a mortgage. With regard to the latter, you will need to open an account at a Spanish bank to be able to buy a home. If you’re outside the country, you should be able to request a NIE through the Spanish

Embassy or Consulate. Alternatively, your real estate agent should be able to help you with the process. Broadly speaking, this is a lengthy process so get the ball rolling as soon as possible.

Before you buy, make sure to do a thorough check of the home's construction quality.

Many of the older homes built on the island were made using inferior quality material and may show considerable wear and tear.

Not only do you want to speak to a local surveyor to learn more about the quality of construction, you also need to understand any rules and regulations relating to reforms, refurbishments and redevelopment on the island. Additionally, the best time of year to visit properties on the island is from October through the middle of December and from the middle of January until June. And lastly, be aware of currency rate fluctuations when you are buying a home overseas. To minimize risks, try to lock in your exchange rate before you start the buying process.

Where in Ibiza to buy property

Before you buy, you’ll want to do an in-depth analysis of the island to ensure that you pick the right area to meet your needs.

If you look at the eastern side of the island, home to Santa Eulalia del Rio and San Carlos, you'll find an excellent selection of restaurants and stores as well as the

Island's famous hippie markets. This is an area that is busy all year round and is home to apartments, modern villas and also traditional fincas.

To the west you find San Antonio, which is the second-largest town in Ibiza. This area is quiet in the winter and extremely popular in summer, especially among English tourists looking to party. It's home to stunning coves like Cala Bassa, Cala Conta, Cala

Vadella and Cala Carbó and villages like Sant Josep de sa Talaia, San Mateo, Es Cubells and San Jose. The latter town, in the southwest, has experienced the most growth in recent years.

The north is known for its countryside, from rugged coastlines to stunning valleys and hidden beaches. It is home to picturesque villages like San Joan de Labritja. This is an extremely popular area for people looking to live a quiet life and is home to traditional Ibizan fincas and country houses.

The Old Town, also known as Dalt Villa, is in the southern part of the island, which is chock a block with museums, bars, restaurants, stores, boutiques, art galleries, and more. It's home to some of the island's most well-known beaches, such as Playa d'en

Bossa and Cala Tarida, and San Jordi de Ses Salines, a small town close to the airport.

Marina Botafoch is a glamorous area by the port, also in the southern section of Ibiza.

You can find new developments, modern villas and also apartments in the central part of the island, home also to traditional villages like Santa Gertrudis de Fruitera. Given the area’s strategic location, both rent and property prices have increased in recent years. Residents and tourists here enjoy the views of hills and valleys and relatively easy access to the other parts of the island.

Preparing to buy your home

Whatever the reason for your desire to buy property in Spain, Ibiza, and despite the current property conditions on the island, being a homeowner has considerable advantages as houses can most often be sold for a profit and summer rental prices are consistently high.

The process does vary to that in the UK, so make sure that you have all relevant purchasing information and you have made the corresponding checks, both financial and structural, on the property. Lastly, make sure that you understand all of the legal complexities that come with buying a home in Spain.

By doing your due diligence and working with a trusted team of local experts, the experience will be a positive one.