Q: What exactly is happening?
A: Spanish PM Pedro Sánchez announced a series of measures on Monday January 13th, aimed at solving the problem of Spain’s housing crisis. One of these was to limit non-resident, non-EU nationals from buying property in Spain.
"We have decided that we are going to limit the purchase of properties by non-EU foreigners from outside the EU," the Socialist leader told the Spanish Congress on Monday.
Q: Why is Spain trying to do this?
A: As mentioned above it’s all aimed at trying to solve the country’s housing crisis.
There is an estimated housing deficit of more than 100,000 homes in Spain, according to EAE Business School and thousands are unable to afford spiralling rental prices or save up enough money for a deposit to buy one.
Spain is a popular destination for non-EU holiday property buyers, such as Britons, US nationals and more recently Moroccans, as well as tens of thousands of EU buyers.
According to Sánchez, "in 2023 alone, non-EU residents bought 27,000 houses and flats."
“Not to live in them, they did it mainly to speculate. To make money from them. Something that we cannot afford in the context of scarcity we are experiencing".
The Spanish government believes that if they limit non-residents from buying holiday homes, it will mean more homes on the market for local residents, and foreigners won’t be driving up housing prices either.
Q: How will Spain stop non-resident foreigners from buying property in Spain?
A: It’s unclear yet how the Spanish government plan on doing this exactly, but Sánchez said that for non-resident, non-EU foreigners “the tax burden will be up to 100 percent of the value of the property," the Spanish Prime Minister said”.
It could be through property transfer tax, VAT, capital gains, stamp duty or in all likelihood a new type of tax aimed specifically at non-residents from third countries.
Q: Does this mean that if I’m not from an EU country I can’t buy a holiday home in Spain anymore?
A: Not necessarily, it just means that it won’t be financially viable for most people to buy one in Spain as the tax burden will be so high it will be way too expensive.
Q: Why is it only aimed at non-EU non-residents?
A: Spain's EU membership makes it impossible for the government to limit other EU citizens from buying a holiday home here, even if they don't reside in Spain, due to rules relating to the free movement of good, people and capital.
Q: I'm a non-EU, non-resident and I own a property in Spain, what will happen to my holiday home?
A: Likely nothing at all. If you’ve already bought your property then you’ve already paid all the necessary taxes when you purchased it and so won’t be affected by the new tax hikes. Spain won’t be able to take your holiday home away from you, however, they could add extra capital gains taxes when it comes to selling it, so that’s worth keeping in mind.
Q: When will it happen?
A: It is unclear yet when. The Socialists rushed to bring out a raft of new measures on Monday January 13th after the opposition right-wing Popular Party unveiled its own housing crisis solutions for its regions over the weekend.
Sánchez has said this draft legislation would be finalised only “after careful study”.
Then the proposed legislation has to be approved by Spain’s Congress, the Senate and then go back to Congress again for final approval.
The ruling Socialists have a slim parliamentary majority which made it particularly difficult for them to pass other laws in 2024.
In the case of the abolishment of the golden visa, which was initially announced in April 2024 by Sánchez, it took eight months of political rigmarole and canny law-making for the scheme’s end to be confirmed.
Q: Will it actually happen?
A: Spanish property experts such as Sean Wooley of Cloud Nine Spain have told The Local that they see the proposed limit on non-EU non-residents from buying as “a scare tactic to deflate the market and it is already spooking some potential buyers that we are talking to.”
Antonio de la Fuente, managing director at real estate group Colliers, told The Financial Times that Sánchez's primary purpose is to create “uncertainty and noise” with the proposal rather than to introduce actual fiscal barriers for third-country buyers.
There are also the legal implications of 'discriminating' against non-EU nationals. EU legislation makes a total ban on property purchases almost impossible. The prohibition of all restrictions on the movement of capital between Member States and third countries, which includes the purchase of real estate, means that any EU citizen essentially has the right to purchase property in any member state without significant restrictions.
There may more leeway when it comes to putting obstacles in the way of non-resident non-EU nationals, in terms of introducing conditions or restrictions relating to the purchase of second homes, but these may be frowned upon by Brussels.
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