European pension program in Spain becomes permanent - new pension plan

Every year in the UK, France, Italy and Belgium, €4 billion worth of naked property and reverse mortgages are transacted. This is the "retirement plan" of many European retirees who are capitalizing their savings - in the form of real estate - over a lifetime to enjoy their final years of life without leaving their homes until they die.

In Spain, the sale of real estate in the form of naked ownership is not as common as in the European countries mentioned, but more and more retirees are turning to this option. Thus, data from the Spanish National Institute of Statistics in recent years reflect this trend: in 2020, 1,046 naked property transactions were closed; in 2021''s number of transactions totaled 2,500 and, according to industry sources, the number is expected to reach 5,000 this year.

Carmen and Andres

Carmen and Andrés are two retired septagenarians, without children, who a few months ago sold their apartment in the center of Madrid under the naked ownership system. Both have been self-employed for 40 years and their pensions are not very high. "We are quite healthy, we have no heirs, so with the money we got for the property we can afford a few fads, to live without worries, to travel...", Andrés explains. "Obviously, we got a lot less money for the apartment than it is really worth, but we will stay in our house until our death, which will hopefully be many years from now," adds''Carmen. The property they sold has 110 m2 with a garage and is valued at 500,000 euros and they received 250,000 euros from the sale.

"We are in a period of active naked property development," says real estate consultant Eduardo Molet. "Older people are monetizing their houses and apartments to extract liquidity from the savings they have invested in buying their homes throughout their lives." It is known that in Spain there are more than 9 million people over 65 years of age, 90% of whom own the housing in which they live. In these cases, housing represents 85% of the savings of these retirees, 70% of whom receive only the state pension and 65% of whom live on less than 1,300 euros per month. In fact, the accumulated savings for housing of people over 65''nearly six times the total of all private pension plans. But what is naked ownership? Basically, it is a type of sale in which a person, usually elderly, sells their home to a third party without leaving their home until their death.

Ownership allows you to get "up to 125,000 euros for a medium-sized home (about 70 m2 in the city)," claims Molet. "It is a solution in front of an ageing population and the need to supplement the sometimes insufficient pension, and an opportunity for young people with money for''investments. Currently, the main sites for these investments or disinvestments are major cities such as Madrid, Barcelona, Malaga, Valencia or Alicante". As explained from the real estate sector, a person aged 80 years old with a property worth 400,000 euros when selling a naked property will receive a one-off of about 280,000 euros. In the case of younger owners, aged 68-70 years, for a property worth €240,000, they can get about €130,000 when selling a naked property.

These deals have all the legal guarantees

These transactions have all legal guarantees, as they are formalized at a notary and, like any sale and purchase, the full amount of the price set for the sale of the naked property is received at the notary'. 'act. Thus, the user continues to enjoy their property and receive a one-time monetary compensation. After the property is sold, the user only has to pay water, light, gas and utility bills, while the investor pays property tax, assessments and other unexpected expenses. Even if the user does not want to stay living in their home, they can rent it out without the owner's permission. This usually happens if the user, for example, moves into a boarding house or lives with a family member.

Besides naked ownership, there are other similar "real estate products" that allow retirees to capitalize their savings in the form of real estate, such as reverse mortgages, which''is that seniors can sell their property and at the same time enter into a lifetime lease, allowing the pensioner to remain in their home indefinitely, becoming a tenant instead of an owner. Or a reverse mortgage, which has been regulated in Spain for 25 years.