Spain’s Bold Move: 100% Property Tax for Non-EU Buyers

A Radical Plan to Tackle Spain’s Housing Crisis

Spain’s Prime Minister, Pedro Sánchez, has proposed a controversial 100% tax on property purchases for non-EU buyers. This measure aims to curb soaring property prices and address the nation’s housing affordability crisis. Non-EU citizens, including Britons, would face significant restrictions, making Spain less attractive to foreign investors and holiday home seekers.

Housing Crisis Drives Government Action

Spain, like many European nations, faces mounting public discontent over rising property prices and limited housing availability. Prime Minister Sánchez has outlined a comprehensive 12-point plan to address these issues, stating, “The west faces a decisive challenge: to not become a society divided into two classes, the rich landlords and the poor tenants.”

Key factors contributing to the crisis include:

• Foreign Demand: Wealthy buyers from the US, Mexico, and Venezuela, alongside long-standing interest from Britons and Germans, have inflated property prices.
• Supply Shortages: New construction lags behind demand, leaving many Spaniards unable to find affordable homes.

Details of the Proposed Tax

Under the plan, non-EU buyers who do not reside in the bloc would face a tax equal to the full value of the property they intend to purchase. This tax would be implemented through amendments to stamp duty or a new special tax.

Currently, property taxes in Spain range from 7% to 12% of a property’s value, depending on the region and whether the property is new or existing. The proposed 100% tax marks a dramatic increase, aiming to deter speculative purchases.

Mixed Reactions from Experts

While the government claims the measure targets speculative buyers, experts are sceptical about its effectiveness:

• Antonio de la Fuente, Managing Director at Colliers, described the plan as “a drop in the ocean,” noting that non-EU buyers account for only 27,000 of Spain’s 26 million homes annually.
• Critics argue the proposal could drive away institutional investors and create uncertainty in Spain’s real estate market.

Broader Measures to Address Housing Issues

The tax proposal is part of a broader strategy to improve housing affordability. Other initiatives include:

• Higher taxes on short-term holiday rentals, such as those listed on Airbnb.
• Creation of a public housing body to manage 3,300 homes.
• Refurbishment programmes for vacant properties.
• Public guarantees for landlords offering affordable rentals.

Sánchez also highlighted the wider European housing crisis, noting that house prices across the continent have risen by 48% in the past decade, outpacing household income growth.

Conclusion

Spain’s proposed 100% property tax for non-EU buyers represents a bold attempt to tackle its housing crisis, but its success remains uncertain. While the measure aims to curb speculation and promote affordability, it risks deterring investors and disrupting the property market. As the proposal heads to parliament, its potential impact will be closely watched both within Spain and across Europe, where housing challenges continue to demand innovative solutions.

Source: (BBC.co.uk, FT.com)