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    Spain and Portugal
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    Spain & Portugal

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A special focus on HNW and UHNW clients from the USA buying in Spain

In The Sunday Times of 27 November 2022, Liz Rawlinson wrote an interesting article titled ‘Coming from America’, highlighting the surge of HNW US-based property buyers looking for high value properties around Dublin and London.

At MD Premier, we’ve seen very similar tendencies with US clients snapping up ultra-luxury holiday villas, investment properties and, in many cases, their main residences in Spain and Portugal, taking advantage of generous visa requirements. 

It’s no surprise that the huge shift in FX rates is the main driver behind this trend with the EUR/USD market rates recently hitting an all-time low of 1.03.

Hannah Johnson, from a leading UK-based, regulated FX company, shares her insight into what’s been happening in what has been an extremely busy USD/EUR FX market this year and the benefits to US buyers:

“EURUSD is the most traded currency pair accounting for 30% of global FX conversions. The past 5 years have been a very uncertain period for the currency market, with Covid, the Russia/Ukraine conflict and recent talk of global recession creating heightened volatility.

Over this period, the highest level we have seen EURUSD was in Jan 2018 (1.25) and the lowest was achieved in September of this year at 0.96 (a $290k cost variance on a property worth €1m).  

Even if we were only to take into consideration 2022, a client purchasing a property today would save $140k based off a purchase price of €1m, when compared to January 2022”

Lifestyle – The Mediterranean effect

Like many of us, US clients are drawn to central Europe by the laid-back Mediterranean lifestyle, especially for those able to continue to work remotely. On recent business trips to Barcelona, I was stuck by the number of cafés, digital workplaces, remote meeting and office spaces all over the city, full to the brim with remote workers. There’s also the 22@ district that is transforming an old industrial part of the city into a digital hub for tech firms, remote workers and large US tech firms such as Google, Meta and Apple, that are buying and renting office space at a higher rate than ever before. The same is happening in Valencia and Malaga.

Earlier this year, the Spanish government also announced digital nomad visas to encourage digital workers from outside the EEA to set up in Spain.

Barcelona is recognised as having a well-developed, solid real estate market with HNW clients well catered for and excellent transport links. We’ve also seen an influx of US-based clients exiting companies or having sporadic liquidity events and choosing Spain as their preferred global destination to work and bring up their families.

Transport Connections

Palma, Mallorca has this year joined Barcelona, Madrid and Malaga with direct flights to the US and the success of these flights have even generated the odd rumour that more direct flights are on the way from other US cities! We are not only seeing the impact in these markets though, but also an overspill into places like Ibiza, Menorca, Marbella and Valencia.

Finance products in Spain for US HNW Clients

We often highlight the differences in Spain between Retail Bank mortgages and Private Bank mortgages. Unfortunately, Private Bank mortgages (products up to 100% LTV and 10 years interest only with AUM) are more difficult to come by for US clients due to FACTA (reporting obligations placed on banks), meaning that most private banks are currently unable to take custody of financial investments for US based clients. It’s worth noting though that US clients based abroad or tax resident in other countries may not be affected, so it’s worth getting in touch if you would like to check your own eligibility for a Private Bank mortgage.

We’re pleased to confirm that despite a continued push from the banks towards variable rates (with margins as low as 0.99% above Euribor) we are still able to secure competitive long term fixed rates mortgages in Euros for US clients from as little as 3.2%, fixed for up to 25 years for up to 70% LTV. Lending conditions are therefore still attractive compared to interest rates in the US. 

It’s also worth noting that we have negotiated excellent conditions and have direct access to mortgages denominated in USD for USD earners, buying in Spain. These mortgages are referred to as foreign currency mortgages and can be fixed for the whole term, from 4.85% at the time of writing. There are a lot of advantages and it may be a very attractive solution in the current FX climate; and indeed also a preferred option for some banks due to the mortgage law in Spain regarding currency conversion.  However, we would advise you to think very carefully before taking a mortgage in a currency other than euros due to exchange rate risks. Although monthly repayments would be stable and in the same currency as your earnings, if you need or decide to sell the property you will most likely receive funds from the sale in euros which will need to be converted into USD to repay your mortgage at the exchange rate applicable at the time of cancellation. If you have any doubts, please speak to your MD Premier broker.

We hope this has been a helpful guide for our US clients and we look forward to assisting many more in the near future.

Contact Howard (English & Spanish) who is based in Ibiza on howard@mortgagedirectsl.com or +34 669 694 589 (Spain), +44 7984 166 704 (UK). More about Howard on: /in/howardsteel/

For further FX market information and how to maximise on your property purchase, please contact Hannah (hjohnson@privalgo.co.uk; 020 8132 6556) and her Team at Privalgo 

Mortgages taken out in currencies other than the currency in which you earn are considered Foreign Currency Mortgages. Changes in the exchange rate may therefore increase the equivalent value of your debt. Under the Mortgage Law 5/2019 banks in Spain have introduced mechanisms to protect consumers from exchange-rate risk. For more information, please speak to your broker.

Mortgage Direct, S.L. is a company registered in the Registro de Intermediarios de Crédito Inmobiliario del BdE with the nº D108.