Spain proposes 100% property tax on non-EU buyers

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Spain plans to impose a 100% property tax on buyers from non-EU countries such as the UK in a bid to improve housing affordability by discouraging foreigners from buying.

Prime Minister Pedro Sánchez has announced plans for a punitive property tax that will apply to non-EU citizens who are not EU residents, as part of a package of measures aimed at tackling a “severe” housing crisis.

Spain is one of many European countries where public anger is growing 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: not to become a society divided into two classes, rich landowners and poor tenant farmers,” Sanchez said when unveiling the 12 measures.

Spain has long been a popular destination for holiday home buyers and people looking to permanently relocate to sunnier climes, helping to steadily drive up property values over the years.

The government proposal comes as prices in places from Madrid to Mallorca are being driven up by a new wave of wealthy foreigners from the United States, Mexico and Venezuela. They are in addition to Brits who are the backbone of the property market in some parts of the south coast but are no longer EU citizens due to Brexit.

The Socialist government led by Sanchez said it would “restrict” the purchase of real estate by non-EU citizens who do not live in the EU, requiring them to pay “a tax of up to 100% of the property value.”

Home buyers in Spain may need to pay a number of taxes, depending on whether they are buying a new build or an existing home.

Tax rates vary by region, but as a rough guide, real estate agents say the total tax could currently range from 7% to 12% of the property's value. Spain's Ministry of Housing said the new measures would be implemented through changes to stamp duties or special taxes.

The Prime Minister said that non-EU residents buy 27,000 homes in Spain every year, adding that these homes are “mainly used for speculation”.

The government said its proposals would only be finalized “after careful study”. To become law, it will also need approval from Spain's parliament, where Sanchez faces a long struggle to cobble together the votes he needs to secure a majority.

Antonio de la Fuente, managing director of real estate group Colliers, said the proposal was unlikely to ease “tensions” in the property market, noting that 27,000 properties were purchased annually by non-EU residents. The total number of housing units in Spain is 26 million. “It’s just a drop in the ocean,” he said.

He expressed doubts that the measure would become law but expected the “uncertainty and noise” generated by the proposal would prompt some individual and institutional property investors to abandon Spain and look elsewhere.

In the third quarter of 2024, non-Spaniards, including EU citizens, purchased 24,700 properties in Spain, accounting for 15% of total real estate purchases in the country.

The largest group of non-Spanish buyers are British, accounting for 8.5% of all foreign transactions. They are followed by Germans, then Moroccans, then Poles and Italians, according to the Spanish Association of Registrars.

Sánchez highlighted the seriousness of the continent's housing problem, saying that house prices in Europe have soared 48% in the past decade, almost twice the increase in household income over the same period.

“We are facing a serious problem with huge social and economic implications that requires a resolute response from society as a whole and from public institutions.”

Other measures proposed by Sanchez include higher taxes on Airbnb-style vacation rentals; handing over 3,300 units to a new public housing agency; a program to renovate vacant homes; and providing public guarantees for landlords who offer “affordable” rents.