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Spanish Government Propose 100% Tax On Foreign Property Purchases

Spanish Government Propose 100% Tax On Foreign Property Purchases

20.01.25

OK...my rant of frustration begins and it couldn't be simpler. Playing politics with residential tourism in Spain is putting the country's dinner plate on the line.

The Spanish government's preposterous proposed 100% tax on property purchases by non-EU non-resident buyers is framed to address housing shortages, but there is woefully scant evidence to suggest this policy would ever achieve this intended goal.

Properties typically acquired by international buyers are usually located in areas with low population density, such as Málaga province, Tenerife, and Ibiza - places where the local population isn't seeking primary residences due to their tourism-oriented nature. These properties are invariably at a significantly higher price point per square metre than the market average and are often purpose-built as second homes or high-end investments. For example, the average US or UK luxury buyer searches for a property of €2.5m, 350 square metres, priced at €7,000 per square metre.

Instead of creating scarcity in the residential market, these investments have historically contributed positively to Spain's economy, which already taxes real estate at double the share of GDP compared to the EU average. This investment pool stimulates local industries, from real estate development to construction, and supports tourism by adding high-quality housing to the rental pool. HNW international buyers also bring significant indirect economic benefits through local spending and job creation.

That said, this proposed tax is part of a broader package of measures to address Spain's housing crisis. While the effectiveness of this specific tax remains questionable, other proposals within the package could have a more direct impact on housing availability. For instance, increasing taxes on tourist rentals or limiting short-term rental activity in urban centres and high-demand neighbourhoods could all help alleviate pressure on the residential rental market. We know that reports consistently show that short-term rentals have driven up housing costs in cities like Barcelona and Madrid, where they compete directly with long-term residential demand.

In general, targeted regulations incentivising affordable housing development and rehabilitating unused properties for long-term rental use would provide a far more sustainable approach to addressing housing shortages. Policies encouraging collaboration between public and private sectors - such as subsidising affordable housing projects or repurposing underused properties -will likely have a more meaningful impact in areas where housing demand is most acute.

The Spanish government is at a political impasse at present and as such, this tax reform is still in the early stages of 'discussion'.

Spain has long been a welcoming market for global property buyers. Collaborative solutions that balance affordability with economic growth will hopefully effect a secure a sustainable housing future.

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