Are non-EU property buyers really to blame for Spain's housing crisis?

There have been extensive reports in the media about Spain’s new proposal to either raise taxes for non-EU, non-resident property buyers, or ban them completely from buying if they have no ties to Spain.

While the measure has been dubbed as well-intentioned but flawed by experts in Spain and overseas, lots of Spain-based foreigners in fact support the move, including many of our readers when we sent out a survey to.

Much of The Local Spain's readership agrees that locals should come first and that solving the housing crisis is the priority over holiday homes and investments.

However, how much impact will restricting non-resident Brits, Americans and other non-EU nationals from purchasing Spanish homes actually have on the country's property market?

Will it really help ordinary Spaniards by increasing availability and decreasing prices?

During a speech on January 13th, Prime Minister Pedro Sánchez said that 27,000 homes were purchased by non-residents from outside the EU in 2023, but there is no evidence that this stat is accurate.

“(They bought homes) 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," Sánchez argued.

According to property expert Mark Stucklin, who runs the website Spanish Property Insight, data from the Spanish Notaries’ Association shows that non-resident buyers from outside the EU only bought 18,648 homes in Spain in 2023. This represents a seven percent year-on-year decline.

The Spanish Notaries’ Association oversees all the signing of property deeds in the country, of which there were a total of 623,000 in 2023. 

According to their data, non-EU citizens (resident and non-resident) only represent 14 percent of the total number of foreigners who bought property in Spain in 2023.

And what percentage do the 18,648 homes bought by non-EU non-residents in 2023 account for as part of the grand total of properties purchased that year in Spain (623,000)? Only 3 percent.

READ ALSO: Why does Spain now want to totally ban some foreign home buyers? 

So would limiting this small percentage of third-country non-resident buyers have such a big impact on the market as a whole?

Let’s first take a look at where these non-EU, non-resident buyers come from and who is buying the most.

Data from the Spanish Notaries’ Association shows that during the first six months of 2024, Brits were the most common buyer in this group, representing 37.9 percent (3,480 properties). The USA was the second-largest nationality, with 695 purchases. They were followed by the Ukrainians (489), Norwegians (480) and then the Swiss (416), with Russian and Chinese nationals only buying 414 and 257 homes respectively.

According to Spanish Property Insights, the data shows that British buyers are the only group that are significant enough to have an effect on the market.

While Brits do purchase property all over Spain, the majority of buyers head to the coastal areas mostly along the Costa Blanca in Valencia, the Costa del Sol in Andalusia and in Murcia. In fact, data shows that 90 percent of British buyers purchase in Alicante, Málaga, coastal Murcia, the Balearics, the Canaries, and Almería.

READ ALSO: How would Spain's 100% tax on non-EU home buyers work?

Admittedly, some of these areas have housing shortages, such as the islands of the Balearics and the Canaries, and in both these regions foreign buyers accounted for around a third of the total in the third quarter of 2024. But these foreigners are not mainly non-resident non-EU; EU non-residents, non-EU residents and EU residents there make up a bigger proportion of the foreign buyers.

According to Mark Stucklin, who has been studying the Spanish property market for over a decade and writes a column in the matter in the Sunday Times, “The number of non-resident British buyers in the Canaries and the Balearics is too small to move the needle, and their purchases tend to involve villas or second homes on the coast, not affordable housing stock in the city”.

In fact, data from CaixaBank shows that the areas with the greatest housing shortages are Catalonia and Madrid, as well as Murcia city, La Coruña and Vigo in Galicia and Zaragoza in Aragón.

This would indicate that banning non-EU non-resident buyers like the British is unlikely to affect the housing market in the places that are suffering the most.

Who are the other 'culprits' in Spain's housing crisis?

The real question is if these limits and bans will put a stop to big investment companies and vulture funds, as these may have a much greater impact on the market than individual buyers and their holiday villas on the coast.

Data from the Cadastro registry from the Ministry of Finance reveals that in Spain there are more than one million homes (1,046,188) in the hands of big companies. Additionally, there are 27,000 landlords in Spain own more than a dozen properties for residential use.

READ MORE: Blackrock and Blackstone - The 'unknown' multinationals controlling Spain

Real estate investment firm CBRE Group also shows that large investment funds own 110,000 rental homes in Spain, which is around five percent of Spain's total rental stock. And this is just rental properties, not the whole number they own.

For example, American investment giant Blackstone dominates the property market in Spain and is the second biggest landlord in the entire country after CaixaBank.

Over the past few years, tenants renting Blackstone flats in Madrid have faced rent hikes of up to 60 percent and evictions for those who can't afford it.

If the Spanish government can limit or ban these big foreign investment companies from buying up property, this may have a much greater impact and help the local population by not continually driving prices up or buying up the available housing stock.

READ ALSO: Rent caps in Spain convince vulture funds to leave (but there's a catch)

But are these so-called vulture funds the only problem? Perhaps not. Data from the Bank of Spain shows that 92 percent of rental homes in Spain belong to small owners and individuals, while only eight percent are in the hands of big companies such as investment funds and other private legal entities.

There are 3.6 million rental homes Spain where owners gain an average annual profitability of 7.5 percent. 

So even Spanish landlords with just one property may also be contributing to driving up the rental prices and making it so unaffordable for the rest, although many of them would argue higher rents is the only way they can deal with rising interest rates on their mortgages, home insurance, other costs and the prospect of having to evict squatters or tenants who stop paying. 

Another issue which is exacerbating the housing crisis is the number of empty homes in Spain that are not being put on the market and are not being used. The latest report published by the National Institute of Statistics (INE) on population and housing censuses for 2021, reveals that by electricity consumption for a full year, 3.8 million properties remained empty.

Getting these houses back on the market so that people could rent or buy them at affordable prices could go a long way to helping too.

Then there's the matter of the huge lack of social housing in Spain, which although the ruling Socialists have promised to address, construction is going nowhere fast, largely due to bureaucracy.

What not many people know is that subsequent Spanish governments from 1982 until 2023 have allowed 2.7 million public housing units to be bought up by private firms, or allowed private construction companies to first build public housing only for it to then fall into their hands, filling their pockets even further.

The truth of the matter, however, is that all of these groups are adding to the housing crisis.

In part it's the foreigners driving up the prices in certain areas, but it's also the international investment funds, Airbnb-type companies making it a better return on investment to rent to tourists than long-term tenants, higher earning foreign digital nomads paying over the odds for rents, the Spanish landlords themselves who also want a piece of the pie or of course a lack of government action over the years.

READ ALSO: Who really owns all the Airbnb-style lets in Spain?

Spain's 100 percent tax or potential ban of non-EU non-resident homebuyers was in fact one of 12 measures proposed by Spain's Prime Minister Pedro Sánchez, but it is the arguably the most punitive, especially considering that they, not foreign property buyers as a whole, only represent 3 percent of the total of Spain's total property buyers.

Skyrocketing rents and housing prices are a global issue with governments all over the world trying to tackle the problem.

Spain may have to assess if the targeting of third-country second-home buyers is really worth the bad press, in other words, will it do more harm than good in the context of its specific housing crisis.

READ ALSO: Is there a solution to Spain's housing crisis? Here's what the experts say