Spain proposes 100% tax on property purchases for non-EU buyers

Spain is planning to introduce a tax of up to 100% on the value of properties purchased by non-residents from countries outside the European Union, such as the UK.

Prime Minister Pedro Sánchez announced the proposal, calling it an "unprecedented" measure to address the country’s housing crisis.

“The West faces a critical challenge: avoiding the creation of a society divided into wealthy landlords and struggling tenants,” Sánchez said.

He revealed that non-EU residents purchased 27,000 properties in Spain in 2023, often not to live in but to generate profit. "Given the housing shortage we are experiencing, this is something we simply cannot allow," Sánchez stated at an economic forum in Madrid.

Prioritizing Housing for Residents

The proposed tax aims to make housing more accessible for local residents. Sánchez did not elaborate on how the tax would be implemented or provide a timeline for its introduction to parliament, where he has frequently faced difficulties securing enough support for legislation.

A statement from the Prime Minister’s office described the measure as a way to limit property purchases by “non-resident non-EU foreigners.” In Spain, individuals are classified as non-residents if they live in the country for fewer than 183 days in a year.

The statement added that the tax could increase the purchase cost up to 100% of a property’s value, citing similar measures in countries like Denmark and Canada. The government emphasized that the details of the proposal would be finalized after thorough study.

Impact on Spain’s Housing Market

In 2023, foreigners, including EU citizens, accounted for 15% of the Spanish housing market, purchasing 87,000 of the 583,000 properties sold, according to the Spanish property registry.

Protests over housing shortages and overtourism have erupted across Spain, with locals demanding more affordable housing and restrictions on foreign ownership.

Industry Reactions

The proposal has sparked significant debate among property professionals. Simon Creed, of Azahar Properties in Valencia, has been selling homes to non-EU buyers for over two decades. He noted that currently, all buyers in Valencia—whether residents or non-residents—pay a 10% transfer tax on property purchases, a rate that varies across regions.

“Who would want to pay a 100% purchase tax to buy a property here?” Creed told BBC News. “Brits have always been a significant market for Spanish property, but this could shift the advantage to EU citizens, which doesn’t seem fair.”

While acknowledging the need to address housing supply, Creed called the tax “an extreme proposal.”

Antonio de la Fuente, managing director at Colliers International Spain, expressed skepticism about the tax’s effectiveness in solving the housing crisis. “We need to focus on increasing housing supply, especially in cities like Madrid, Valencia, and Malaga, where demand is high,” he said. “This measure will likely have minimal impact on the broader market. Other solutions could deliver more significant results.”

As the debate continues, the Spanish government’s final decision will be closely watched by residents, foreign buyers, and industry experts alike.