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Spain is planning to impose a 100 per cent tax on real estate for buyers from non-EU countries such as the UK in a bid to improve housing affordability by deterring foreign purchases.
Prime Minister Pedro Sánchez announced the plan for the punitive property tax, which would apply to non-EU citizens who are not residents of the bloc, as part of a raft of measures aimed at tackling a “grave” housing crisis.
Spain is one of many European countries where public anger is mounting over the difficulty of finding affordable housing to buy or rent as property prices soar and new construction lags far behind demand.
“The west faces a decisive challenge: to not become a society divided into two classes, the rich landlords and the poor tenants,” said Sánchez as he unveiled a set of 12 measures.
Spain has long been a popular destination for holiday home buyers and people seeking to move permanently to a sunnier climate, who have helped to push up property values steadily over many years.
The government’s proposals come as prices in places ranging from Madrid to Mallorca are boosted by a new wave of well-off foreigners from the US, Mexico and Venezuela. They are supplementing Britons, who are pillars of the property market on some parts of the southern coast and are no longer EU citizens due to Brexit.
Sánchez’s Socialist-led government said it would “restrict” property purchases by non-EU citizens who do not live in the bloc by mandating that they pay tax of “up to 100 per cent of the value of the property”.
Property buyers in Spain are potentially subject to several taxes depending on whether they are buying a new-build or an existing home.
The rates vary by region, but as a rough guide real estate agents say the total tax bill can be anywhere between 7 per cent and 12 per cent of the property value. Sánchez did not specify which tax he was referring to.
The prime minister said non-EU residents purchased 27,000 houses a year in Spain, adding that they were “mainly for speculation”.
The government said its proposal would be finalised only “after careful study”. To become law it would also need to be approved by Spain’s parliament, where Sánchez faces a permanent struggle to cobble together the votes he needs to reach a majority.
Antonio de la Fuente, managing director at real estate group Colliers, said the proposal was unlikely to ease “tensions” in the housing market, noting that 27,000 annual property purchases by non-EU residents compared with Spain’s total of 26mn homes. “It’s a drop in the ocean,” he said.
He expressed doubt over whether the measure would ever become law, but predicted that the “uncertainty and noise” generated by the proposal would prompt some individual and institutional property investors to turn away from Spain and look elsewhere.
In the third quarter of 2024, non-Spaniards including EU citizens bought 24,700 properties in Spain, accounting for 15 per cent of all real estate purchases in the country.
The largest group of non-Spanish buyers were Britons, who made up 8.5 per cent of all foreign deals. They were followed by Germans, then Moroccans, then Poles and Italians, according to data from Spain’s Association of Registrars.
Underscoring the continental extent of the housing problem, Sánchez said house prices in Europe had surged 48 per cent in the past decade, almost double the increase in household income over the same period.
“We are facing a serious problem with enormous social and economic implications, which requires a resolute response from society as a whole with public institutions at the forefront.”
The other measures Sánchez proposed include higher taxes on Airbnb-style holiday rentals; the transfer of 3,300 homes to a new public housing body; a programme to refurbish vacant housing; and public guarantees for landlords who provide “affordable” rentals.
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