More and more Americans are moving to Spain and paying high real estate prices

More and more Americans are flocking to Spain for extended periods, whether as so-called digital nomads working abroad or to enjoy a new life in retirement.

According to a report by the General Council of Notaries in Spain, the number of Americans residing in Spain increased by 13% from 2019 to 2021, and home sales to Americans increased by 88% from H1 2019 to H1 2022.

Among expat groups buying in the sun-drenched country, Americans paid the second highest after Danes, paying up to €2,837 or $3,119 per square meter. Additionally, according to the report, the home prices that rose the most over the same period were paid for by Americans.

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Buying or living in a home abroad requires a certain level of wealth when you consider not only the cost of real estate but also the cost of traveling abroad, said Alex Ingrim, a Florence, Italy-based private wealth manager and senior investment analyst at Global Financial services firm Chase Buchanan.

According to the General Council of Notaries report, American buyers are focused on urban areas like Madrid — like any big city, people are drawn to the job opportunities and amenities, Ingrim said.

While the southern coastal region of Andalucia has always been a popular spot for Americans, there is “strong word of mouth” for the city of Valencia, a beachfront urban area further north on the Mediterranean coast with a large expat community, including many Americans, Ingrim said.

However, Americans who want a different retirement or remote work Experiences and an adventure through moving to Spain should take a few factors into account.

Most taxes on property purchased in Spain are paid in advance in the form of a stamp duty or “AJD” in Spanish, rather than annual property tax payments as in the US

“Stamp duty can be anywhere from 1% to 2.5%, and then there’s another [value-added tax] on new construction or transfer tax on used homes,” said certified financial planner Jude Boudreaux, partner and chief financial planner at The Planning Center in New Orleans. “It’s all considerably more than in the States.”

It must be paid by the buyer within 30 working days of the purchase of the property to the tax office of the relevant autonomous community in Spain.

“You’re paying a lot of the taxes up front and not on an ongoing basis, so the cost of buying and the buying process is very different,” says Ingrim, who advises interested buyers to check with local real estate agents and real estate attorneys early on.

If you’re planning to retire in Spain, you should consider the financial and tax implications and enlist the help of an advisor before embarking on the idea, he added.

Also, make sure your taxes are in order. While the same income is rarely taxed twice, look at the different income and wealth streams you may have to understand “who gets to tax what first, whether it’s Spain or the US.”.‘ said Ingrim.

For example, an American citizen working in Spain will have a higher tax rate, but those taxes become a deduction when they file their federal tax return in the United States, said Boudreaux, who is a member of CNBC’s Financial Advisor Council.

On the other hand, the US taxes your global income. So if an American has income from rental properties in Spain or anywhere else in the world, “the US is happy to tax your income from Spain,” he added.

Ingrim, for his part, noticed this “While you may be liable to both systems, you rarely pay tax twice on the same income stream or asset base.”

It’s important to remember that moving abroad doesn’t just make US debt go away, he added. “You still need to have a plan for managing your American liabilities while living abroad.”

Some countries, such as Portugal, may require foreign residents to provide a credit report from their home country if they so choose Get a mortgage or try to get a loan. Keep track of your debt and plan to keep up with your payments.

“Keep paying off your student loans, your car payments, your mortgage, whatever it is, and keep trying [keep up] Your US credit history, as this may affect your future in your new country [of residence]’ said Ingrim.

Before you move, have an American bank account linked to a U.S. address so you can pay your bills through automatic transfers from that account, Boudreaux said, to save on exchange rates and monthly transfers.

In addition, you may need a Spanish bank account to pay for your daily living expenses in euros and not be at the mercy of constantly fluctuating exchange rates. The US government mandates bank reporting requirements for every bank that does business with US citizens. Find a Spanish bank that adheres to these rules “so they can do the proper reporting when needed,” Boudreaux added.

Spain launched its digital nomad visa earlier this year, making it easier for foreigners to move and work there. The visa is tailored for “international teleworkers” and applicants must meet a number of requirements, such as accreditation or at least three years’ work experience.

“Before I got this visa it was difficult to work in Spain because the tax rates were so high and besides that there was no clear immigration regime ‘“Golden Visa” that allowed you to move to Spain and work,” said Ingrim.

The golden visa, which can only be obtained by buying a property for more than €500,000 – or about $550,000 – allows one to live, work and earn a wider range of rights once in Spain resides, he said.

Non-profit visas, on the other hand, are intended for people who are no longer employed, including retirees, who can rely on passive income. This type of visa allows you to live in a new country but prohibits you from working. “The first step would be to contact a Spanish immigration lawyer and find out if you meet the requirements,” Ingrim said.

However, before bidding on a property, you should first consider renting to see if the area suits your likes and needs, Ingrim added.

Some Americans already living in other countries, particularly Portugal, are aware that regulations like the golden visa can exacerbate locals’ housing problems. That should be a consideration for buyers in Spain, he said.

In Ingrim’s experience, new US buyers are raising concerns about the problem, saying, “We don’t want to be a part of it.” So, as a precaution, many prefer to rent first.