Spanish Prime Minister Pedro Sánchez on Monday shocked many after announcing that his government intends to dissuade non-resident non-EU nationals from buying homes in Spain by taxing them more.
It’s one of 12 measures proposed by the ruling Socialists as a means of addressing the country’s housing crisis, but the fact that foreign buyers have been singled out as one of the reasons for the country’s property problems has made headlines internationally.
READ MORE: How and why does Spain want to stop foreigners from buying property?
"In 2023 alone, non-EU non-residents bought 27,000 houses and flats", Spain’s PM argued.
“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 the (housing) scarcity we are experiencing".
The 27,000 sum may seem high but when compared to the total number of property purchases in Spain, it’s not so much.
For example, official data for the third quarter of 2024 (July to September) shows that of the 165,000 houses sold in Spain, only 8 percent (around 13,500) were bought by non-EU foreigners.
There isn’t recent data on the percentage of these non-EU buyers who are also non-residents but the figure is obviously going to be even lower than 8 percent of the total.
The reaction from economists, lawyers and real estate experts to this measure has been largely negative, going from questioning its legality to arguing whether it’s more about political posturing than actually solving the country’s crippling housing issue.
It is similar to how commentators reacted to the news that the Spanish government was also going to scrap the golden visa scheme, another move by Sánchez which targeted non-EU property buyers.
ANALYSIS: Is Spain's decision to axe golden visa about housing or politics?
The property-for-residency deal will soon be a thing of the past, and now the focus is on a plan to limit non-EU non-residents from buying in Spain.
“This measure would flagrantly violate EU law,” lawyer Alejandro del Campo, of law firm DMS Consulting, told The Local Spain.
“Specifically the free movement of capital, since Article 63 of the Treaty on the Functioning of the European Union prohibits all restrictions on the movement of capital between Member States and also between Member States and third countries, and it is clear that investment in real estate involves a movement of capital.
Del Campo, who has a large portfolio of foreign clients, appealed to the European Commission in 2018 for discriminatory Spanish laws relating to non-resident income tax (IRNR) to be addressed.
“Spain was condemned in the Court of Justice of the European Union for imposing a higher tax on inheritances and donations on non-residents, and for not allowing the application of regional tax benefits to non-residents.
“That is why it would be incomprehensible if non-residents from non-EU countries, for example the United Kingdom, who want to invest their capital in the acquisition of properties located in Spain were now discriminated against.”
For Maryem Essadik, CEO of Barcelona-based Marfour International Law firm, the Spanish government’s idea of limiting non-EU non-residents from buying homes in Spain seems to be “a totally absurd policy”.
“They’re only looking to take advantage and bring in more money as they know Spain will always have people looking to invest in the country,” she told The Local Spain.
“Although the planned measure of course complicates the situation and makes Spain a less competitive country compared to others, it won’t stop the arrival of new buyers."
For Essadik, whose law firm specialises in immigration, real estate, corporate and tax law, this “isn’t the right solution to the housing problem faced by lower-income buyers”.
“Investors are not interested in the same property as them. There are no policies for creating housing or facilitating construction for the private sector.
“Everything is aimed at regulating current housing, but in the long run this will not provide any solution because there is a need for constant construction of housing in Spain to be able to cover the great demand that we have.”
“The foreign investor has only brought wealth and jobs to the locals,” Essadik concluded.
In 2022, foreigners with a second home in Spain contributed €6.35 billion to Spanish GDP and generated more than 105,000 jobs in the tourism sector, according to the study "The economic impact of residential tourism in Spain" done for the Spanish Association of Developers and Builders (APCE) by PricewaterhouseCoopers (PwC).
In the eyes of Sean Wooley, CEO of Marbella-based Cloud Nine real estate agency, the move is “a scare tactic to deflate the market and it is already spooking some potential buyers that we are talking to.”
“The reason being given is to deal with the country’s housing emergency and prioritise that the available homes are for residents, not for investment," Wooley explains.
“But there needs to be a smarter balancing act rather than a severe knee-jerk reaction like this. After all, Spain needs to be careful what it wishes for, bearing in mind that tourism is its number 1 export, and the country has attracted a huge amount of tax revenue from people who have relocated to Spain for a better quality of life.”
Comments (6)