Spain announces 100% tax for properties bought by non-EU residents

Spain is planning to impose a tax of up to 100% on properties purchased by non-residents from countries outside the European Union, such as the United Kingdom. Prime Minister Pedro Sánchez announced this "unprecedented" measure as part of a broader strategy to address the nation's housing crisis and improve affordability.

In 2023, non-EU residents acquired approximately 27,000 properties in Spain, often for investment purposes rather than personal occupancy, according to the government. Sánchez emphasised that, given the current housing shortage, such practices are unsustainable. The proposed tax aims to prioritise housing availability for residents and deter speculative purchases by foreign investors.

While the prime minister did not provide specific details on the implementation or timeline for this tax, his office indicated that the proposal would be finalised after thorough analysis. The measure will require parliamentary approval, where the government has previously faced challenges in securing sufficient support for legislation.

This initiative is one of twelve measures introduced by Sánchez to supposedly enhance housing affordability in Spain. Other proposals include tax exemptions for landlords who offer affordable housing, the transfer of over 3,000 homes to a new public housing entity, and stricter regulations with increased taxes on short-term tourist rentals. Sánchez highlighted the disparity in taxation between short-term rental owners and hotels, advocating for a fairer system.

The announcement has elicited varied reactions. Real estate professionals express concern over the potential impact on the market, particularly in regions popular among foreign buyers. Simon Creed of Azahar Properties noted that the proposal has been a significant topic of discussion among property professionals, emphasizing the longstanding interest of British buyers in Spain. He questioned the fairness of targeting non-EU buyers exclusively and described the measure as extreme. Additionally, prospective buyers from the UK have expressed apprehension, with some reconsidering their plans to invest in Spanish property.

Experts like Antonio de la Fuente, managing director at Colliers International Spain, are sceptical about the effectiveness of the proposed tax in resolving housing issues. De la Fuente suggested that increasing housing supply would be a more effective solution to accommodate the growing demand in major cities.

The government's proposal also references similar measures in countries like Denmark and Canada, which have implemented policies to restrict foreign property purchases in efforts to stabilise housing markets.

As Spain grapples with rising property prices and a shortage of affordable housing, the proposed tax represents a bold approach to curbing foreign investment and ensuring that housing remains accessible to its residents. The success of this measure will depend on its design, implementation, and the government's ability to navigate the legislative process to bring it into effect.