Bare ownership sales in Malaga: how you can snap up a property at half the market value
What are the pros and cons of such a transaction that is a popular option in other European countries, such as France and Belgium, but are still in the minority in Spain
A year ago, it was announced that the famous Spanish TV producer José Luis Moreno was putting up for sale the bare ownership to his mansion in Boadilla del Monte (Madrid). This type of financing scheme occasionally appears among the numerous listings posted on real estate websites in Spain. It combines the interests of the buyer, who purchases below market price in exchange for having to wait to enjoy their property until the seller dies, with those of the vendor, who obtains liquidity and retains the right of usufruct, meaning they can live in and enjoy their home for as long as they live.
You only have to take a look at the web portal Idealista to see some examples where, under the heading of 'Ideal for investors', there is bare ownership property for sale at prices far below their current value: "In El Ejido (Malaga), a 90-square-metre property valued at 290,000 euros in exchange for a lump sum payment of 141,000 euros. The usufructuary, a 65-year-old man, will continue to use the property until his death", reads the advert.
This is an option with pros and cons for both parties. Normally, the seller (usufructuary) is an elderly person, with no direct descendants to inherit the house and who is looking to supplement a modest pension. For the buyer (bare owner,) the house can be an investment for the future, as it would otherwise not be possible to obtain it at such a reasonable price. In some cases, it can be up to 50% or 60% cheaper. The savings are greater the younger the seller, as the buyer will likely have to wait longer to enjoy it.
In return, the property, if in a sought-after area, will probably appreciate in value over the years. Furthermore, maintenance and service costs are borne by the usufructuary until his or her death, although this depends on the agreement reached between both parties.
Longer life expectancy
A recent report on how such 'wealth liquidation products' are perceived by the elderly in Spain, conducted by Fundación Edad y Vida and Fundación Mapfre, comments on how the cultural and demographic changes of recent years are leading to the emergence of money-making schemes such as this one. "Longer life expectancy is leading to the need to pay for care that is almost essential in later life," stated the report. Furthermore, the authors explain, another sociological trend currently evident is the intention of many people not to reduce their consumption habits during retirement and to continue to enjoy activities such as travel or leisure. "Circumstances that imply the need to raise financial resources as they often exceed those paid out by the public pension system."
Therefore, the report points to products that are used in practice for this purpose of wealth liquidation: the sale of bare ownership in a property with the transferor reserving the usufruct for life, also the transfer of property ownership in exchange for a life annuity or a maintenance allowance, reverse mortgages or, lastly, the sale of the home in exchange for a lifetime lease. While the report acknowledges that this is still a small market in terms of size and highly localised in certain urban areas, the forecasts for future growth "are undeniable".
Specifically, bare ownership sales are a widespread option in European countries such as France and Belgium, but are still in the minority in Spain. Despite the increase in these operations following the pandemic, they came to a screeching halt last year, going from 1,845 in 2023 to 1,817 in 2024, as stated in the annual report from Spain's land registry.
The report recognises that everything seemed to indicate that the upward trend would continue, however, "the recovery in prices and favourable expectations regarding the evolution of this variable seem to have cooled this growth".
Decline in Malaga
In Malaga, this financing option, which rebounded in 2021 and returned to the pre-Covid trend (28 deals were recorded compared to 14 in 2020), has not quite caught on, as, according to the latest figures provided by Spain's property registrars, it has fallen again to 17 transactions.
Despite the initial benefits, it remains a controversial option in the current real estate market, especially in prime areas. "In general, the sale of bare ownership with usufruct is not always attractive for sellers due to the very low bids that do not compensate for the loss of family inheritance or the difference in the property's real value", said notary Ramón Blesa.
In the notary's opinion, the context of high prices in the real estate market and long life expectancies reduce the perceived value of bare ownership by buyers, making the offers "uncompetitive and the transactions barely worthwhile". To all this, Blesa added a third determining factor to the equation: the cultural tradition in Spain of leaving any property to one's children, thus further contributing to the low proliferation of these deals.
On the other hand, and from a tax perspective, if the seller is over 65, there is no capital gains tax in the IRPF (personal income tax), "only on the municipal capital gains", said Blesa. The buyer, on the other hand, would pay the 7% transfer of ownership tax on the value of the bare ownership, "which is calculated by subtracting the value of the usufruct from the property's value".
Reverse mortgages, a pension supplement?
According to the Bank of Spain, a reverse mortgage is "a credit or loan secured by a mortgage on the primary residence (also on other residences), granted, either as a lump sum or through periodic payments, to a person who must be over 65". "It functions as a supplementary income, allowing the holder to receive periodic payments without immediately relinquishing the property, making it more attractive for those without heirs or those in need of extra income," explained notary Ramón Blesa. After death, the heirs have three options: pay off the debt and acquire the property, sell the property to pay off the mortgage or have the bank foreclose on the mortgage loan. "In general, banks do not usually approve these operations unless the property has a high value and, even then, they offer a low percentage of the property's value," warns Blesa.
Likewise, reverse mortgages are poorly promoted, which limits take-up. Furthermore, the Spanish tradition of leaving property to one's children discourages both the sale of bare ownership and reverse mortgages. One only has to look at the statistics to see their limited impact in Malaga: only 25 reverse mortgages were signed in 2024 in Malaga (17 in the province and eight in the capital). So far this year, 18 are now a done deal (12 in the province and six in Malaga city).
