With its long warm summers and mild winters, and a relaxed and affordable lifestyle, Spain has long been a popular place to buy property. Originally it was a popular retirement destination for expats from the UK, Germany and Scandinavia, but more recently it has proved increasingly appealing to investors from all over the world buying properties for holiday rentals.
With this growing demand from foreign buyers, Spain finds itself in a tricky housing situation with increasingly higher prices to buy and rent for its own people. To buck this trend, the country’s Prime Minister, Pedro Sánchez, is planning to impose a 100% tax on property bought by non-EU residents.
What will a hefty new property tax and end of Spain’s Golden Visa in May 2025 mean for the country’s property market?
Spain’s long popularity with foreign property buyers
Spain has traditionally been particularly popular with buyers from the UK. Property is relatively affordable compared to the UK market and the country enjoys a good climate especially in the popular areas of Costa Brava, Costa del Sol and the Balearic Islands, making an outdoor-focused lifestyle very attractive. For retirees, Spain offers a good lifestyle with attractive cost of living and has a good healthcare system.
Being an EU member, Spain appeals to residents from other EU countries as they can buy, move and live in Spain easily. Spain’s stable political scene and strong legal system add to its attraction.
Even though the UK is no longer in the European Union, Spain has remained their top destination. Other non-EU residents including buyers from the United States, Dubai and China have also begun to invest in Spanish property.
In a recent documentary, BBC stated that 15% of Spain’s housing market is now sold to foreigners. In 2023, according to the Spanish Property Registry, this percentage equated to 87,000 properties. Of this number, 27,000 properties were sold to buyers from the UK.
A new type of foreign investor has been emerging
There has been a recent shift in the type of buyer investing in Spanish property. In the last few years, a percentage of buyers have been buying a number of Spanish properties purely for investment and to speculate. The holiday rental market has now been flooded with apartments and studios for short-term lets.
An increasing number of investors have come from non-EU countries such as the United Arab Emirates, Saudi Arabia and Morocco. The high-demand for property has pushed prices up and these are now out of the reach of many Spanish families. There have been numerous protest marches and other measures by the Spanish who are very aggrieved at the situation.
In addition to making property prices unobtainable, many villages and towns are losing their character because so many properties are now only being used during the tourist season. Interestingly, property owners who have a number of apartments, currently pay less in Spanish taxes than the owner of a small hotel.
Why both a hefty new property tax and end of the Golden Visa?
The Prime Minister has had to act fast to quell discontent. On Monday January 13, 2025, Mr. Sánchez announced 12 new measures aimed at improving the availability and affordability of all kinds of property and the creation of a new public housing department. Mr. Sánchez also announced his proposal for the new property tax.
The new 100% tax would be levied on the 100% value of a property, whereas currently the property tax and other expenses for foreign buyers equals 10-15% of the property’s value. He described the current situation with many property sales – ‘ The properties are not to live in, but to make money from them’. He continued by explaining – ‘’In the context of the shortage we are in, we obviously cannot allow this’.
As yet, he has not given any time frame for the changes he proposes for limiting the purchase of property by non-residents and non-EU foreigners. In Spain, you are a non-resident if you live there for less than 183 days in a year. When he made his proposals a few weeks ago, Mr. Sánchez also explained that similar legislation to what he plans to introduce is already in place in Canada and Denmark.
Is the timing right for these measures?
While the new tax will apply to non-EU nationals. The proposed introduction of the hefty new property tax could coincide with the end of Spain’s popular Golden Visa program. Together, they will deter many foreign investors, but could strengthen the buying power of EU nationals from countries such as France, Germany, Belgium etc.
Many Spanish property professionals feel that the 100% tax will not solve the country’s housing crisis which has been exacerbated by the increasing number of young people relocating from rural communities to the capital Madrid and other cities in search of work.
The Prime Minister’s announcement has caused great concern among prospective property buyers in both the UK and United States. Many are working quickly to find a suitable property. They want to buy before the new tax measures are introduced. Many expats from the UK who own a retirement property in Spain are concerned about the proposed tax change. They feel that finding a buyer for their Spanish property in the future could be harder.
The end of of the Golden Visa program
Spain’s popular Golden Visa program is currently in its final stages and will end in April 2025. The program was first introduced in 2013 to attract wealthy foreign investors. Foreign buyers have been required to buy property valued at €500,000 or more (£428,000, $515,000). Under the Golden Visa program, this has given them tax incentives and speedy Spanish residency after five years. This has proved particularly popular with non-EU investors.
Since the Golden Visa program began, more than 10,000 visas have been issued. The program has been criticized for causing a hike in property prices and an increase in property speculation. Figures issued by the Ministry of Housing show that in 2022, 2,017 visas were issued. This figure increased to 3,273 in 2023. Isabel Rodriguez, the country’s Minister of Housing announced in April 2024 that the program would be scrapped in April 2025.
Certainly these two points are causing great debate at present, although the end of the Golden Visa program is certain. To raise the property tax to 100%, Mr. Sánchez’s proposals must be debated and approved by parliament. There certainly there needs to be constraints on foreign investors buying property. The issue of licences on new holiday rentals also needs to be urgently reviewed.
The average non-EU property buyer uses money earned outside Spain. They spend the same type of money every time they are in the country in local shops and restaurants.. Many Spanish communities rely on money generated by non-EU property owners. Without money from foreign property owners, the Spanish cannot afford to buy their own properties. It’s truly a catch 22 situation…
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