Spain proposes 100% tax on homes bought by non-EU residents

Spain has announced plans to impose a tax of up to 100% on real estate bought by non-residents from countries outside the EU, such as the UK, in an aim to tackle the country’s housing crisis.

The measure was one of a dozen unveiled Monday by the country’s prime minister, Pedro Sánchez, as the government seeks to quell mounting anger over housing costs that have soared far beyond the reach of many in Spain.

Sánchez sought to underline the global nature of the challenge, citing housing prices that had swelled 48% in the past decade across Europe, far outpacing household incomes.

“The west faces a decisive challenge: to not become a society divided into two classes, the rich landlords and poor tenants,” he told an economic forum in Madrid.

The proposed measures include expanding the supply of social housing, offering incentives to those who renovate and rent out empty properties at affordable prices and cracking down on seasonal rentals. In Spain just 2.5% of housing is set aside for social housing, a figure that lags drastically behind countries such as France and the Netherlands, said Sánchez.

But it was the government’s plans to crackdown on foreign, non-EU buyers that grabbed headlines around the world. Spain has long been a popular destination for non-EU holiday home buyers, with residents of the UK, US and Morocco flocking to buy properties in places such as Ibiza, Marbella and Barcelona.

Sánchez described the tax of up to 100% as “unprecedented” in Spanish history. “Just to give an idea, in 2023 alone non-European Union residents bought around 27,000 houses and flats in Spain. And they didn’t do it to live in them, they didn’t do it for their families to have a place to live, they did it to speculate, to make money from them, which we – in the context of shortage that we are in – obviously cannot allow.”

He did not offer more details on how the plan would work or when it would be finalised and sent to parliament for approval. Given his government’s longstanding struggles to pass legislation, one analyst suggested to the Financial Times that the government’s aim was to deter foreign property investors by creating “uncertainty and noise” with a proposal that has slim chances of becoming law.

The government’s slate of measures also took aim at tourist flats, which have long been blamed for shrinking the rental supply and leaving locals priced out of the market.

Sánchez said regulations on these rentals would be tightened while the taxes they pay would be hiked. “It is not fair that those who own three, four, five apartments for short-term rental pay less tax than hotels,” said Sánchez.

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He argued that the measures were necessary to tackle what he described as an “unbearable” mismatch between rising housing prices and household incomes.

“We are facing a serious problem, with enormous social and economic implications, which requires a decisive response from society as a whole, with public institutions at the forefront,” he added.

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