Spain is at the centre of a heated debate after announcing a proposal to impose a 100% tax on property purchases by non-EU residents. The Spanish government, led by Prime Minister Pedro Sánchez, believes this drastic measure is necessary to improve housing affordability.
The policy aims to address concerns that foreign buyers, many of whom purchase homes for investment rather than residency, have contributed to rising property prices and a lack of available housing for Spanish citizens. While the proposal is still in its early stages, it has already raised questions about its potential impact on investors, property markets, and Spain’s overall economy.
This proposal has created significant concerns for homeowners, mainly for non-EU residents who have invested in Spanish property. Take, for example, a British couple who purchased a second home in Mallorca five years ago after saving for years to afford their dream holiday retreat. Now, they face a difficult decision: should they sell before the tax takes effect, or hold on to the property and risk a potential drop in value?
The uncertainty stems from the fact that if they were to sell now, finding a buyer could be challenging. Under the proposed tax, a property valued at €250,000 would effectively cost a non-EU buyer €500,000, making it significantly less attractive to potential investors. On the other hand, if they choose to keep the property for retirement, they run the risk of seeing a substantial decline in its market value, potentially leading to financial losses. This dilemma highlights the broader concerns among foreign property owners, who must now carefully assess their options amid an evolving regulatory landscape.
Housing affordability has become a growing challenge in Spain, property prices on average across the country have increased by 29.9% over the past decade. At the same time, vacancy rates across the whole country are at 14.41% — which is 3.83 million homes. Fuelling concerns that homes are being purchased as financial assets rather than a place for someone to live permanently.
Therefore, the proposed 100% tax on property purchases by non-EU residents could significantly benefit local Spanish residents by making more homes available for year-round living. Many properties in popular tourist areas are currently used as holiday homes or short-term rentals, sitting empty for much of the year while locals struggle with housing shortages. By discouraging speculative foreign investment, the measure could help shift the housing market’s focus back to residents, increasing the supply of homes available for long-term occupancy. Additionally, with reduced demand from foreign buyers, property prices could stabilise or even decrease, making homeownership more attainable for Spanish citizens who have been priced out of their own communities. This policy could lead to stronger, more sustainable local communities rather than seasonal ghost towns that only thrive during peak tourism months. This policy also promotes neighbourhood stability, as fewer properties will be left vacant for most of the year, creating a more vibrant, year-round local economy. Additionally, with fewer homes being converted into short-term tourist rentals, the quality of life for permanent residents could improve, as issues like overcrowding, rising rents, and loss of community identity are addressed.
In 2023, non-EU residents purchased approximately 27,000 properties in Spain, accounting for 5% of all transactions. The government argues that restricting foreign ownership will help stabilise the housing market and make homeownership more accessible for locals. The proposal follows similar foreign buyer restrictions in countries such as Canada and Denmark.
However, the details of how the tax will be implemented remain unclear. The government has yet to specify an enforcement timeline, and the policy must first be approved by Spain’s parliament, where previous real estate regulations have faced political resistance.
For UK nationals, who have traditionally been among the most active buyers in Spain’s property market, the introduction of this tax could significantly alter investment strategies. If the proposal moves forward, many may reconsider purchasing property in Spain and look to alternative locations.
While the Spanish government anticipates that the tax could generate up to €3 billion annually, critics warn of potential market distortions. If foreign investors withdraw, the market may experience a wave of selloffs, potentially leading to property value declines in certain areas. Furthermore, landlords who might have previously rented out properties could hold back on new investments, leading to a reduction in rental supply and a possible rise in rental costs.
Spain’s move may also set a precedent for other nations facing housing shortages. If this policy is successfully implemented, other countries may follow suit, meaning international investors must stay alert to potential regulatory changes worldwide.
Given the uncertainty surrounding Spain’s proposal, foreign investors should take a strategic approach to protect their assets and explore new opportunities.
Monitoring policy developments is crucial. Since the tax has yet to be approved or fully defined, staying informed about legislative updates will be essential for making well-informed decisions.
With Spain’s property market undergoing potential changes, having a well-diversified portfolio will be key to managing risk and capitalising on emerging opportunities.
Spain’s proposal to impose a 100% tax on non-EU property buyers could mark the beginning of a broader global trend in real estate regulation. The measure is intended to stabilise the housing market and make homes more accessible to residents.
For many Spanish locals frustrated by rising property prices and limited housing availability, this proposal represents an opportunity to enter the property market and restore a sense of community year-round.