If you are already living in Barcelona or planning to move to this cosmopolite and vibrant city, you must ask yourself a question: is it more interesting to Rent or Buy a house?
To answer the question whether to rent or buy a property in Barcelona, it is necessary to evaluate your own situation, to assess the current market condition, and to analyze the advantages and disadvantages of each option.
Now, let’s break down this buying vs. renting decision and explain you all the advantages and disadvantages of each option.
RENTING A PROPERTY:
GENERAL ADVANTAGES OF RENTING A HOUSE:
- You have access to a better location and a larger accommodation
- The Administrative procedures are minor and faster, without the need to hire a notary
- It gives you more flexibility; If you make a mistake, it is less problematic, you can change your home and neighborhood more easily.
FINANCIAL ADVANTAGES OF RENTING A HOUSE:
- You don´t need to have significant savings since the initial investment is less than for a real estate purchase
- The upfront costs of renting a house in Barcelona are minimal compared to a purchase : two months rent as a deposit + first month rent + real estate agency fees which are usually one month rent
- You will not have to pay all the expenses related to a property purchase (notarial fees and Property Registry fees), nor the mortgage application fee
- You do not have to pay taxes such as the property tax (IBI in Spain) nor the community fees, which are usually paid by the owner
- You avoid a long-term financial commitment with a banking institution
DISADVANTAGES OF RENTING A HOUSE:
- Staying in the premises depends on the lease renewal and on the owner’s decision to recover the property
- The increase in the rental price when renewing the contract can be significant, although it can be negotiable
- The owner can prevent you from doing any renovation to the property even if you assume all costs
- If you make any improvement to the property, you lose the investment
- You must respect the owner’s requirements (ex: possibility to have a pet, change the furniture if the accommodation is rented furnished …)
- If you decide to leave the premises before the mandatory deadline, you will have to pay a compensation to the owner for non-compliance (6 months minimum stay for a 5-year contract in Barcelona)
However, the rental market is currently getting more difficult in Barcelona due to a lack of housing supply and a significant increase in the rental price in the last years.
BUYING A PROPERTY:
GENERAL ADVANTAGES OF BUYING A HOUSE:
- Being a homeowner offers more security and stability
- You can make all the reforms and renovations that you which
- You can arrange, decorate and furnish your home according to your own taste
- You do not have to respect the owner’s requests
- If your situation changes, you can always rent out your property and earn a profit
FINANCIAL ADVANTAGES OF BUYING A HOUSE:
- The mortgage payment might be less or equivalent to your current monthly rent
- The reforms or renovations that you carry out increase the value of the property
- You build equity
- As a homeowner, you can benefit from tax deductions
- The mortgage interest rates reached historically low levels (2.75% on average for a fixed-rate mortgage for a 25-30 year period in Spain)
DISADVANTAGES OF BUYING A HOUSE:
- The decision is much more complex
- The initial investment is more significant: you must provide a minimum of 20% of the property value as the banks finance up to 80% of the home value
- The purchase involves high upfront costs in Barcelona: VAT or ITP (10% of the selling price in Catalunya), notary and property registration fees (between 0.5% and 2% of the selling price) and the mortgage application fee (between 0.5% and 2% of the loan)
- The administrative process is more complex: the agency, the bank, the appraiser, the notary, the lawyer, etc.
- You must pay the property tax (IBI)
- You must bear the community fees and the co-ownership costs, such as the maintenance of the common areas, facade renovation…
- It gives you less flexibility in case you have to change housing for professional or social reasons, although the current market in Barcelona allows you to rent your home quickly
- In Spain, it is important to get assisted by a Lawyer or a Real Estate Consultant who will defend your interests thorough the purchasing process, which may involve additional costs
- Regarding the bank loan; If you choose a variable-rate mortgage, if the interest rate decreases, your monthly payments will decrease, but if the interest rate increases, your monthly payment will also increase. Therefore, we suggest you to choose a fixed-rate mortgage to avoid any possible and unpleasant surprise.
As we have seen, there is no single answer to whether rent or buy a house in Barcelona, as it depends on many personal, professional and social factors as well as your financial capacity. Therefore, we advise you to deeply analyze the advantages and disadvantages of each option in order to choose the one that best suits your needs.
Do you need advice? Contact us. At BARCELO PROPERTY INVEST, we offer a personalized service to assist you with your real estate project in Barcelona.