Spain is proposing a bold new measure aimed at addressing its housing crisis by targeting non-EU residents purchasing property in the country. Prime Minister Pedro Sánchez has announced plans to impose a tax of up to 100% on the value of homes bought by non-EU residents, including from nations such as the UK. This significant policy proposal aims to prioritise the availability of homes for Spanish residents amidst a growing housing emergency.
An 'Unprecedented' Measure
Speaking at an economic forum in Madrid, Sánchez described the proposed tax as an "unprecedented" measure that is necessary to combat the division of society into wealthy landlords and struggling tenants. He pointed out that in 2023 alone, non-EU residents purchased around 27,000 properties in Spain, primarily for investment rather than personal use.
"Which, in the context of shortage that we are in, obviously cannot allow," Sánchez declared. By placing the tax on non-resident, non-EU buyers, Sánchez hopes to make more homes available to those who live and work in Spain.
While the announcement has made headlines, detailed plans on how this tax would be implemented are pending. The prime minister's office has indicated that the tax burden would increase up to 100% of the property's value, similar to measures in Denmark and Canada. However, specifics on the taxation mechanism and a timeline for its introduction remain elusive, with a legislative history showing difficulty in securing the necessary votes in parliament.
Housing Market Snapshot
Foreigners, including those from within the EU, account for around 15% of the Spanish housing market. In 2023, out of 583,000 property transactions in Spain, 87,000 involved foreign buyers. The proportion of purchases by non-EU residents has sparked considerable debate among property experts and potential buyers.
Mixed Reactions from Property Professionals
The response from property professionals has been varied. Experienced agents in selling homes to non-EU buyers in Valencia describe the proposal as extreme and likely to deter potential buyers. Currently, non-residents and Spanish citizens alike pay around a 10% transfer tax on property values in Valencia, varying by region.
The new proposal is not seen as favourable for non-resident buyers but may increase the buying power of EU citizens. Some experts doubt that the 100% tax would solve the housing affordability problem and instead emphasise the need to increase housing supply to meet the demands of migration to major cities like Madrid, Valencia, and Malaga.
Potential Buyers Reconsider
Prospective British buyers are rethinking their plans as a result of the new proposal. There are concerns about the uncertainty and difficulties in reselling properties if they can no longer sell to non-residents, particularly in touristy areas.
Some prospective buyers are now exploring alternative options in other countries, feeling that the policy makes Spain a riskier investment.
Housing Initiatives
This proposed tax is part of a broader set of housing initiatives unveiled by Sánchez's administration. Other measures include tax exemptions for landlords providing affordable housing, transferring over 3,000 homes to a new public housing body, and implementing tighter regulations and higher taxes on tourist flats.
Further efforts include abolishing Spain's "golden visa" scheme, which offered fast-tracked residency for those investing €500,000 (£428,000) or more in property, starting in April.
The Spanish government's proposal to impose a 100% tax on properties purchased by non-EU residents has sparked significant discussion and debate among property professionals, potential buyers, and the broader public. While aimed at prioritising housing for Spanish residents and addressing the housing crisis, the measure's effectiveness and fairness remain points of contention. Potential buyers are now reconsidering their plans, and industry experts are urging a focus on increasing the supply of affordable housing as a more sustainable solution.
The government's broader initiatives aim to tackle the housing problem from multiple angles, but only time will tell whether these efforts will achieve the desired results in making housing more affordable and accessible for all.
It is unlikely that tax incentives or penalties alone will solve the housing problem in Spain. The underlying issues of housing affordability and availability are more deeply rooted in systemic problems, such as the inadequate supply of new housing, rising construction costs, and urban planning challenges. Simply deterring foreign investors without addressing these core issues may result in unintended economic consequences, such as decreased investment in the property market and reduced overall property values, which in turn could negatively impact the broader economy. Additionally, the policy may not directly benefit the most vulnerable segments of the population who face the greatest barriers to accessing affordable housing. As such, comprehensive strategies that include boosting the supply of affordable housing, improving rental market regulations, and incentivising sustainable urban development are crucial for a lasting resolution to Spain's housing crisis.