Pedro Sánchez proposes taxing up to 100% on the purchase of real estate by non-resident non-EU foreigners to combat the housing crisis in Spain.
The Spanish Prime Minister’s wish to tax up to 100% on the acquisition of real estate by foreigners from countries outside the European Union and who do not reside in Spain has a strong symbolic significance, even if its concrete consequences are difficult to assess.
The measure announced by Pedro Sánchez, intended among others to combat the housing crisis and which has yet to be adopted by Parliament, echoes the already announced abandonment of “Golden visas” granted to foreign nationals making an investment of at least 500,000 euros in real estate or a business.
How many homes are affected?
According to the socialist Prime Minister, “in 2023, non-residents outside the European Union bought around 27,000 houses and apartments in Spain”. That year, 638,552 real estate transactions were recorded, including 123,159 carried out by foreigners, whether residents or not, and originating from the EU or not, or 19.3% of the total, according to figures from the Ministry of Accommodation.
“You are making it more difficult for non-Europeans to buy houses but that will not automatically make housing cheaper, because the percentage of purchases coming from this public is not very high”points out Joan Carles Amaro, professor specializing in real estate at the Esade business school, based in Barcelona.
In certain regions, however, and more particularly in the coastal areas or archipelagos of the country, the percentage of housing acquired by foreigners (without distinction) is significantly higher than at the national level: in 2023, it reached 31.5% in the Balearics, 29.2% in the Valencia region or 28.6% in the Canaries. On the other hand, this rate stood at 6.3% in the community of Madrid, where the real estate crisis is also very serious.
Who are the foreign buyers?
According to data from the real estate register, the British, non-EU nationals since Brexit, were in the lead among foreign buyers of real estate in 2023, with 9.5% of total transactions carried out by foreigners. Behind them, the Germans (7.2%) and the French (6.7%), de facto excluded from the measures envisaged by the government due to the membership of their countries in the EU, then the Moroccans (5. 4%) and other Europeans (Belgians, Italians, Romanians, Dutch).
Does a similar system exist in other countries?
Today in Spain, in addition to notary fees and legal costs, you must pay a transfer tax of 6% to 11% of the purchase price for the purchase of an old home or a VAT of 10% for a new good, without distinction according to the origin of the buyer.
Presenting his measure, Pedro Sánchez explained that he wanted to draw inspiration from similar systems existing in Denmark and Canada. The Canadian government prohibits the purchase of housing by non-resident foreigners in order to “to use all possible means to make housing more affordable”according to the Ministry of Finance. The measure, implemented at the start of 2023, was extended at the start of the year until January 1, 2027.
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In Denmark, buying a property for a non-resident foreigner is almost impossible: access to property is reserved for people who have lived in the country for at least five years and who have obtained special authorization from the chancellery — conditions, however, are reduced for EU citizens.
How is the measure received?
In one of the areas where the share of foreign buyers is the highest, in Mallorca, in the Balearic Islands, Bernd Kunze, partner in a real estate agency, is skeptical: “This law would not help Spanish citizens because they need cheap spaces to rent”and not luxurious goods in which his agency specializes, he summarizes.
“On the side of the owner or the developer who sells these homes to these buyers, I don’t think they will say to themselves ‘Well since I’m not going to be able to sell it to a non-European, I’m going to put it up for affordable rental’ “agrees economist Joan Carles Amaro.
In the United Kingdom, where some 100,000 retired nationals are based in Spain, according to figures put forward by Richard Donnell, a director of the British real estate classifieds site Zoopla, Pedro Sánchez’s announcement did not go unnoticed.
“Hundreds of thousands of British people, retired and still working, are leaving the UK for warmer climes in Europe”recalls Stephen Abletshauser, lawyer at the Spencer West firm.
And beyond the difficulties for them to choose Spain as their destination if the measure came into force, Pedro Sánchez’s plan may raise other concerns: “The mere introduction of such a draconian tax suggests the possibility of additional taxes on property owners already in Spain, particularly those from outside the EU”he fears.
spain real estate housing crisis
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