Why does Spain plan to impose a 100% tax on homes purchased by non-EU residents?

Spain plans to impose a 100% tax on homes purchased by non-EU residents in a bid to tackle the country's deep-rooted housing crisis.

Spanish Prime Minister Pedro Sanchez on Monday proposed a series of measures aimed at easing a nationwide housing shortage, high rents and rising house prices, with foreign homebuyers and mass tourism seen as exacerbating housing pressures.

Socialist leader Sanchez, speaking at a forum on the issue, said access to housing was one of the main challenges facing Spanish society and there was a risk of divisions between communities.

“The West faces a decisive challenge: not to become a society divided into two classes, rich owners and poor tenants,” he said, noting that house prices in Europe have risen by 48% in the past decade, almost double. as household income.

“We are facing a serious problem with huge social and economic implications that requires a decisive response from all of society, with public institutions at the forefront,” he said, according to comments issued by the government.

Sanchez, who announced 12 reforms aimed at tackling the crisis, said the government's proposals include a plan to ensure tourist apartments are taxed “like businesses” and a proposal to impose a 100% tax on the value of homes bought by non-EU residents .

He said the changes would help make housing more accessible and affordable across Spain.

“Non-EU residents bought 27,000 apartments in Spain (in 2023). They did it not to live in, but to speculate, to make money with them, which we cannot afford given the lack of resources,” Sánchez told Spain Financial Times. Comments reported by El Periodico and translated by Google at the forum “Housing, the fifth pillar of the welfare state” held in Madrid on Monday evening.

He added: “The Progressive Coalition Government has always welcomed foreign investment, but we want foreign investment to be productive, encourage innovation and create new jobs, not be used for speculation, as if it were a financial asset or a bank deposit. “

Other measures proposed by Sánchez, leader of the left-wing Spanish Socialist Workers Party and a coalition government that includes the far-left Soumare party, include plans to provide tax breaks to landlords, provide affordable rents and provide financial support for current residents. Having a tenant provides more protection.

He announced plans to build more public housing and ensure existing social housing remains state property. He said a program would also be launched to renovate vacant houses and rent them out at affordable rates.

The Prime Minister did not provide any further details on how the tax on non-EU homebuyers would be implemented, nor when such a proposal could be put to parliament for approval.

Housing shortages, rising prices – and a strong perception that holiday home owners and vacation rentals are exacerbating the problem – are causing a strong public reaction in Spain and in tourist hotspots including the south coast, the Canary Islands and Sparked riots in Barcelona and Alicante.

Incidents of tourists being told to “go home” and foreign tourists being sprayed with water cannons continue to emerge, with locals urging authorities to tackle “overtourism”.

However, the Spanish economy relies on tourism to drive growth and employment, with the industry accounting for more than 13% of GDP and creating approximately 3 million jobs. The number of international tourists arriving in Spain reached an all-time high in the first 11 months of 2024, with more than 88.5 million arrivals, according to Spanish statistics agency INE.

“Not only is tourism driving consumer spending, high accommodation occupancy rates are also driving record investment in hotels,” Maartje Wijffelaars, senior euro zone economist at Rabobank, said in an analysis last September.

“We expect Spain’s GDP growth to moderate somewhat as tourism growth is expected to lose some momentum. However, growth is expected to remain strong over the coming quarters and years and above the Eurozone, reaching 2.7% in 2024 ), 1.9% in 2025, and 1.5% in 2026,” she said.