Which sellers are currently seeking Equity Release in Spain?

Are wealthy Spanish seniors really selling their expensive homes to free up equity?

A recent article in El Pais newspaper highlighted a growing trend: More and more Spanish pensioners are struggling to make ends meet.

The cost of living is rising, health care is a worry (in Spain public health care is excellent, considered one of the best in the world in fact), and elderly Spanish people are looking for cash. Not able to re-mortgage as we can back in the UK, they are putting their properties on the market at lower prices.

The condition: the property owner may continue to live there forever!

Recent example

We recently listed this property for sale on an Equity Release basis: 

Piso amplio en La Manga con vistas al mar mediterraneo!

“A rough translation tells me this is a magnificent apartment overlooking the sea in La Manga, one of the most prestigious developments in all of Spain.”

I called Janet, (real owner’s name) and we dug a bit deeper. The property is 100m2, she has owned it since 2002. It is a second home (they come from Madrid). It is located on the famous La Manga golf club, and all the usual perks are included- Views, golf, communal pool, parking and some famous neighbours! Sean Connery, The Barcelona Football team, Gloria Estefan and Julio Iglesias have all been seen around the clubhouse. 

Janet is selling her stunning apartment under a bare ownership system. This means she can enjoy the fruit in the “usufruct”. What does that mean? Well, Janet can live there, and the client buys the property on the condition that she can continue to do so until she dies. Janet is 72, in good health and not ready to head off to the sunny golf resort in the sky just yet. This idea is now increasingly popular with wealthy homeowners, especially the Spanish, who want to maintain their upmarket lifestyle until their death. Janet explained that she loves spending four months of the summer here. Her grandkids come to golf here in La Manga throughout the year and this will all continue. 

What Janet needs right now is cash in the form of equity release. Having lived and worked in Spain all her life, she is stunned at how unwilling the Spanish banks are to work with her. 

“I chased my own bank, now called Bankia, for months to come to value my property,” she says. “They made it perfectly clear that without my son or my daughter putting the money into a bank account, they would not allow me to take equity from my home. Why would I do that? It is insane. If we had 250,000 euro we would not have this issue in the first place”. 

What about investors?

The idea makes perfect sense to Equity release investors too. These investors tend to be private individuals who can sense a bargain. We have investors buying small portfolios of property which will mature over the next 10-15 years. It is a perfect medium-term investment, with ZERO risks, once handled properly. 

The price of bare ownership property, like Janet’s, is reduced according to the age of the seller. We’ve done deals where the sale price could be reduced by 40%, (As in Janet’s case) and last week we signed for an Equity release deal in Valencia with an owner of 80 years and a discount of 30%.

Eduardo Molet, a Spanish estate agent has seen a 300% rise in the number of enquiries for this type of deal. “In Madrid, the neighbourhoods with the greatest demand for equity release are the most expensive ones, like Salamanca, Chamberí and Chamartín. It is good news for the investor although Molet strictly only deals with Spaniards in Madrid, it is good news to see the market evolve. 

Currently, JJC Capital Partners are the only firm that operates on both mainland Spain, and the islands. We have closed deals all along what Molet calls the “foreigners” areas such as Costa Del Sol, Costa Blanca, especially around Torrevieja and also in Palma, Lanzarote, Tenerife etc. 

Molet continues that as Spain is a country of property owners with a large part of family wealth is in the property. Equity release investing is a way to avoid becoming the cliché of the old monarchy drinking cheap cider from a wine glass in a palace that is falling apart because he does not have enough money in cash. We know how he feels having listened to the tales of our clients who we have helped free up equity in their own palace!

Equity Release Sellers

For sellers, (ie those seeking Equity Release) in Spain the advantages of bare ownership include never having to move. Other bonuses include not having to pay land value tax (IBI) or building homeowner association fees. The costs of upkeep are shared with the investor, depending on the deal we structure for both parties and their insurance premiums also go down. 

Finally, for Janet, she intends to gift or donate a large part of her selling price to her four grandchildren.

“I’d rather give them the money now tax-free than knowing the taxman will first get his hands on their money after my days have passed”.  

There are always property buyers!

The buyer is maybe the big winner. He or she is able to buy a home considerably below market value and, according to law, has a right to receive it in a good condition on the maturity of the arrangement. 

If you are interested in investing in Equity Release in Spain or indeed you are looking to free up some cash from your home, please get in touch with JJC capital partners. We can in some cases advise or reversion mortgages, reverse mortgages and even private lending.

Assessments are free, quotes are quick and we are here to take care of all the details. 

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