LIFE IN SPAIN – CHRISTMAS IS A RATHER ODD EXPERIENCE!

This Christmas has been the seventh that we have experienced since moving to Spain permanently and it has been as oddly unsatisfactory as the others. We cannot quite ‘place our finger’ on why? It may be because our children are older and that therefore Christmas has lost its ‘magic’ - or it could have a lot to do with Spain and the life in Spain of ex-pats.

Certainly, Christmas in Spain ‘feels’ different and with some justification. The day itself is unquestionably important to the Spanish although they tend to open their presents on Christmas Eve. However, no Boxing Day is celebrated - thus leaving Christmas feeling brutally short as many people return to work immediately afterwards.

It is also true to say that Spain is avowedly a secular state with the vast majority of the population (contrary to popular myth) irreligious. This means that the ‘objective’ of Christmas is as lost to commercialisation as it is in the UK. Indeed, I suspect that church attendance in Spain is now probably close to its nadir at the beginning of the twentieth century when there were fewer church-goers in Spain than any other European country.

The odd thing is that it is not as if the overall Chrismas period in Spain is, in itself, short. It lasts until the 6th January with the all-important celebration of ‘Three Kings’. This appears to us to be as critical as Christmas day itself with the day a national holiday, widespread formal street processions and, to the delight of Spanish children, another round of presents! Meanwhile, New Year’s Eve is as important in Spain as elsewhere in the world and just as replete with riotous parties welcoming the start of the new year.

The trouble, I think, is that Christmas as an ex-pat is hard to get right because of the absence of an extended family during the holiday period. The very nature of being an ex-pat means that close family and life long friends are (obviously) not close and, as a consequence, the ‘nuclear’ family 'bit' of Christmas is inevitably missing. This may be why our Christmas’ have been so unsatisfactory despite our best efforts. Indeed, whilst I have no regrets about leaving the UK, I do wonder whether our children will have missed out on an important part of their cultural and family heritage.

Of course, the weather (in a curious way) also militates against a British ideal of Christmas. This year (in Valencia) the sun was out on a glorious day that made us all feel somewhat preposterous whilst we remained in front of a rather pointless (but attractive!) blazing fire. In our minds, of course, we imagined ourselves looking out onto snow – or, at least, a chill day of freezing drizzle and lashing wind.

I guess, at the end of the day, Christmas is always going to be different when you live in a foreign country. But then I may be looking back at Christmas in the UK, during times past, with ludicrously pink glasses! If I am not - then it is one of the very few negatives to moving to Spain.

I should also say that any maudlin thoughts as to the benefits of a British Chrismas are usually rapidly dispelled. Yesterday, I was rock climbing in shorts and a tee shirt with some British climbing friends who had just arrived from the UK. Needless to say, when not climbing, we revelled in a picnic of turkey sandwiches whilst regaling each other with stories about how wonderful it was to be warm and able to climb (a dry weather sport – if ever there was one!) despite it being the end of December.

Of course, it is impossible to get everything right when you move to another country. However, mulling all of this over with my wife, we both came to the conclusion that our life in Spain is, in almost every way, preferable to what we had in the UK. It is sad that Christmas is a bit unsettling and disappointing - but the other advantages to living in Spain more than compensate us for a it!1

ESTATE AGENT'S SALES COMMISSIONS IN SPAIN

Last week, I noticed an article in a major UK daily paper commenting upon the fact that estate agent’s commissions in Spain are ‘much higher than in Britain’. Indeed, the article pointed out that an ‘agent selling a property in Spain could earn up to five per cent of the sale value’.

I doubt that I was alone amongst expatriots living in Spain who expressed surprise at the moderation of the article writer. 5% sales commissions may seem exhorbitant in UK terms but in Spain they are far from exceptional. In fact, sales commissons of 10% are not unknown and a couple of times I have been offered sales commissions of 18%! The latter were by developers selling new build apartments around golf courses along the south east coast of Spain.

Incidentally, there was nothing underhand or secretive about the offers of 18% sales commissions. On both occasions the offers came formally by e-mail and an e-mail that would have been circulated to many other people in the industry, few of whom would have been unduly surprised by the amount. The offers were genuine and would have been honoured had a buyer been introduced and bought a property.

Of course, few buyers would be comfortable knowing that possibly some 5 % -18% of their Spanish property purchase value comprised (effectively) a sales commission. Indeed, I suspect that many British buyers would refuse, on principle, to buy a property on that basis.

In fact, property sales commisions vary considerably throughout Spain with the least amount normally around 3% of a given sale price (albeit that this is sometimes made up by both the buyer and seller paying 1 ½ % each to an estate agent). Alternatively, sales commissions for cheap properties can be commonly a straight 6,000 Euros (which equates to around 1,000,000 old pesetas) - sometimes irrespective of whether a property’s sale price is 25,000 Euros or 150,000 Euros.

Finally, some sales commissions are dependent entirely upon what an agent can obtain over a given minimum sale price. So, for example, a seller may say he wants 250,000 Euros from the sale for his property and allow the agent to sell the property for anything above that figure that he can make. If the property sells for 280,000 Euros - then the commission for the agent will be 30,000 Euros.

To some extent, estate agent’s commissions on Spanish properties can be likened to any business transaction where the businessman (the estate agent, in this case) tries to get the maximum possible out of the deal before him. There is nothing intrinsically wrong with this - although neither buyers nor sellers tend to ‘like’ the thought of (in UK terms) sometimes outrageously high sales commissions.

Certainly, if you are a buyer you should be alert to the way that estate agents work within Spain and the possibility that (on occasions) their sales commissions may distort the true value of a property. Equally, it is only commonsense to be wary of Spanish properties where high sales commissions exist. This can be an indication that something may be ‘wrong’ with the property concerned. If something is easy to sell - then it follows that there is little logic or need for a seller to offer a broker or estate agent a very high commission!

Of course, it is is not always easy to find out the sales commission being offered on Spanish properties. However, it is not impossible and a little probing can often reveal something close to the truth – even if it means, for example, contacting a development company (possessing a property in which, perhaps, you are interested) and pretending to be a potential agent. With private sellers, the answer can be to ask the seller directly. They may tell you and - in fairness - many estate agents will do the same, if requested. By no means, is an estate agent’s sales commission always a darkly held secret.

In fact, in my book ‘How to Sell your Spanish Property in a Crisis’ I urge desperate sellers to offer high commissions, well beyond the norm, to their Spanish estate agents. It is the best possible way of incentivising the sale of a particular property and is neither underhand - nor meant as a way of cheating a buyer. In this case, no moral criticism can be cast at a seller - who is just, understandably, exploiting one of the most effective tools in his sales armoury.

At the end of the day, as a buyer, you need to assess the value of a property on its intrinsic worth compared to other similar properties - irrespective of the sales commission element. Finding out later that a large sales commission made up a significant proportion of the overall price of your Spanish property should not matter if your purchase (all things being equal) was bought at the correct overall market price.

The only caveat to all of this is that the stakes for estate agents in Spain can be very high indeed compared to similar priced properties in the UK. To state the obvious, the sales commission on a 300,000 Euro property @ 5% is 15,000 Euros and @ 10% is 30,000 Euros. With 30,000 Euros p.a. being a good middle management salary in Spain, it is easy to see how a Spanish estate agent’s objectivity can be quickly lost in the temptation to make terrific money quickly...1

FINANCIAL DISCIPLINE IN SPAIN - 6 CRITICAL GUIDELINES

When it comes to finance, the secret of moving to Spain is to:
1. Under-spend on any Spanish property.
Set a budget and make it less than you can afford and then keep to this figure. Be disciplined and remember that long term an inanimate object (even a lovely Spanish villa) will not guarantee you happiness. Financial problems, on the other hand, are absolutely certain to provide you with heartbreak and intolerable stress.
2. Avoid any borrowing - whether mortgages or otherwise.
Keep your fixed costs and overheads to a minimum. For someone relocating ‘cash is king’ – unless you are financially very sophisticated.
3. Budget for the worst possible income return on existing investments or pensions.
As 2008 showed, Sterling can crash (in 2008 almost by a third to the value of the Euro compared to a few years previously). Equally, the value of pensions and other investments can drop as radically as they can rise. Nothing is absolutely certain and you must build in a conservative factor to your anticipated long term income. Make sure that you can survive comfortably should your predicted income drop by 20% - 30%
4. Be precise about the Spanish property you buy.
Make sure that your new home will be right for you and that you will not have to move again. The costs of buying property in Spain are considerable (around 10% of the purchase price) and Capital Gains Tax is payable (with exceptions) on the sale of your Spanish property whether it is your main and primary residence or a second home. If you buy a property in Spain that is not suitable for some reason and then sell up and buy again in Spain then you will have lost:
- At least 20% of the gross value of the properties bought (2 x 10% purchase costs).
- Any money payable as a consequence of Capital Gains Tax.
- The fees due to any estate agent.
- The ancillary costs of moving (removals etc.).
This is a fine way of wasting a lot of money very quickly.
5. Allow at least three years for any work in Spain or new business to start providing a satisfactory income.
Businesses are invariably much slower (irrespective of the country!) to produce a proper income than ever first anticipated. There are exceptions, of course, but be very pessimistic on your predictions about the expenditure involved and the time it will take to receive a viable income.
6. Put aside a contingency budget for unexpected problems
Unanticipated difficulties occur when living in Spain (as if with any country) as surely as ‘night follows day’ and just as certainly they involve expense beyond that ever considered. So, always ‘ring-fence’ several thousand Euros as a contingency budget - to be used only in cases of emergency.1