Spain is to introduce a 100% property tax for expats buying in the country in an attempt to cool down the overheating housing market. By Eugene Costello
Spain is to introduce a 100% property tax for expats buying in the country in an attempt to cool down the overheating housing market. Prime minister Pedro Sanchez has announced a raft of measures aimed at reducing house prices and improving access to housing for Spaniards.
This is one of 12 measures and the 100% tax on properties bought by non-resident Britons and Americans especially is likely to cause chaos among those wishing to relocate to Spain. “In 2023 alone, non-residents from outside the European Union bought 27,000 houses and flats. Not to live in them, but mainly to speculate. To make money out of them. Something that, in the context of the shortages we are experiencing, we cannot afford’, said Sanchez said.
Spain is battling a massive housing shortage and what appears to be a populist move will stymie the plans of many non-residents including Britons and Americans. Other measures include the creation of a public housing company to provide thousands of homes for affordable rents.
‘Let’s get to work,’ says Sanchez
Here is the list of 12 measures to facilitate access to housing in Spain, announced today by Pedro Sanchez.
1. The State has transferred more than 3,300 homes and almost 2 million square metres of residential land to the recently created Public Housing Company, to build thousands of protected flats for affordable rent.
2. Throughout the first half of the year, the Public Housing Company will begin to incorporate the more than 30,000 homes currently held by SAREB, 13,000 of them immediately.
3. It is intended to approve a legal mechanism so that the new Public Housing Company will have priority in the purchase of housing and land, and another to guarantee that all housing built by the State will remain in public ownership indefinitely.
4. The purchase of housing by non-resident non-EU foreigners will be limited, which will be done by increasing the tax burden to 100% of the value of the property.
War on holiday rentals
5. The regulation will be tightened to prosecute fraud in seasonal rentals and a fund will be created so that regional and municipal governments can reinforce inspections.
6. Tax reform will also be taken to Congress to ensure that tourist flats are taxed as a business, promoting, within the framework of the new European directive on VAT, the application of a tax on tourist rentals that puts them on a par with other economic activities.
7. In addition, the aim is to change the system of tax advantages that SOCIMIS have so that they only apply to the promotion of affordable rental housing.
8. A system of public guarantees will applY to protect owners and tenants who participate in affordable rentals.
9. An aid programme will lAUNCH for the rehabilitation of empty homes to make them available for affordable rent.
10. The Government will propose to the Congress of Deputies the approval of a 100% personal income tax exemption for homeowners who rent their homes according to the Reference Price Index, without the need for them to be in areas under stress.
“The west faces a decisive challenge: to not become a society divided into two classes, the rich landlords and the poor tenants,” said Sánchez as he unveiled the set of 12 measures.
Spain is one of many European countries where public anger is mounting over the difficulty of finding affordable housing to buy or rent as property prices soar and new construction lags far behind demand, said the Financial Times.
The newspaper quoted Antonio de la Fuente, managing director at real estate group Colliers. He said the proposal was unlikely to ease “tensions” in the housing market, noting that 27,000 annual property purchases by non-EU residents compared with Spain’s total of 26 million homes.
“It’s a drop in the ocean,” he said. He expressed doubt over whether the measure would ever become law, but predicted that the “uncertainty and noise” generated by the proposal would prompt some individual and institutional property investors to turn away from Spain and look elsewhere.