Spain Plans 100% House Tax on Foreigners: Will It Fix the Housing Crisis? | News about residential buildings

Last week, Spain’s Socialist Prime Minister Pedro Sanchez announced several measures, including a 100-percent tax on the value of homes bought by foreigners, to combat the country’s housing crisis.

Sanchez wants to dissuade non-EU residents from buying homes in the country. “Spanish housing should be for Spanish people to live, as well as for migrants who come here to work and build a life and contribute to the development and prosperity of our country,” said Sanchez, referring to people who provide housing as an investment vehicle.

Housing shortages and rising prices have prompted people to protest against tourists in several cities such as Barcelona and Seville, as foreign buyers and mass tourism are seen as contributing factors to the crisis.

So how serious is the housing crisis and will the new measures solve an issue that successive governments have failed to solve?

What is the new property tax proposal in Spain?

Sanchez proposed 12 steps to address the country’s tight housing market, which saw some of the highest prices in Europe last year at 8.3 percent.

The 100 percent tax will affect foreign buyers, who bought 27,000 apartments in the third quarter of 2024. In the third quarter of 2024, foreigners bought about 15 percent of all real estate properties, according to the Association of Registrars.

“They [overseas buyers] he did not do it, but to speculate, to make money with them, something that in the context of scarcity we cannot afford “, said Sanchez at the forum,” Housing, the fifth pillar of the social welfare state “, in Madrid on Monday .

The Spanish leader has also proposed a higher tax on holiday rentals to ensure that apartments rented out to tourists are taxed “like a business”. “It’s not fair that those who own three, four, five short-term rental apartments pay less tax than hotels,” Sanchez said.

Other proposals include tax breaks and incentives for landlords to provide affordable housing, particularly to younger people, and to cap rents in areas of high demand.

What other measures did he announce?

Sanchez, who leads a left-wing coalition government led by his Spanish Socialist Workers’ Party, also plans to amend laws to speed up the construction of new homes and expand the availability of land for private development.

Around 600,000 new homes are needed by the end of 2025, but around 90,000 homes are being built each year, according to the Bank of Spain.

Sanchez emphasized that housing is his government’s top priority, but warned that there is no “magic wand” to solve the problem. Spain’s prime minister has announced the transfer of two million square meters of land to a new public company to build “thousands and thousands” of affordable social housing units.

Social housing is subsidized by the government and owned or managed by local or central government or non-profit organisations.

Sanchez said social housing makes up just 2.5 percent of the Spanish market, far below the space in other major EU countries, such as 14 percent in France and 34 percent in the Netherlands.

Without detailing the plan, Sanchez also said the government plans to crack down on vacation rental scams, such as those on platforms like Airbnb.

Fraud in the holiday rental market in Spain includes fake property listings and unauthorized settlement of properties to tourists without owner consent and unlicensed rentals that do not meet legal or safety standards.

In December 2024, Spanish authorities launched an investigation into Airbnb for failing to delete thousands of misleading rental listings on its platform.

Meanwhile, the Golden Visa, introduced in 2013, would be eliminated. This program allowed wealthy non-EU investors to obtain residency by purchasing real estate projects worth at least €500,000 (about $513,000).

Which properties and people will be most affected?

The tax will apply to individuals who are neither citizens nor residents of the European Union and often use the properties as vacation or investment homes.

UK buyers top the list of buyers of foreign property in Spain, making about 10 percent of all acquisitions by non-residents in the last quarter of 2023.

A housing shortage and high rents mean people are being priced out of the market, with the homelessness rate rising 24 percent since 2012 to 28,000 people, according to Official figures.

Spain’s new measures are aimed at helping residents, particularly those in cities and coastal areas such as the Balearic Islands and the Canary Islands, where rents have risen due to high demand and limited supply.

When will it come into effect?

The exact timeline for the implementation of the tax on foreign buyers and other proposed measures was not specified.

The proposals require approval in Spain’s fragmented parliament, where Sanchez’s minority coalition may face a challenge in passing the legislation.

How affordable is housing in Spain?

Housing in Spain has become particularly expensive in urban centers or tourist hotspots such as Madrid, Barcelona and cities on the Mediterranean coast.

Rents in the country will increase by 11 percent in 2024, according to the Real Estate Portal.

A one-room apartment in the center of Barcelona costs on average $1,313 per monthand $989 per month outside the city center. The average rent in Barcelona has increased 53 percent Over the past decade.

However, Spanish cities remain cheaper than several Western European cities, where high rents and housing prices have added to the cost of living through the crisis.

In London, which has also faced a housing crisis, the average rent for a one-bedroom apartment was $2,738 a month in December 2024.

AND to report London City Hall has shown that the city’s high rental costs have fueled its status as a global economic hub, attracting a large workforce and student population, which increases demand for housing. This demand is coupled with a significant drop in the supply of rental properties from 2020, pushing rents to record levels.

Sanchez pointed out that housing prices across Europe have risen by 48 percent in the last 10 years, which is almost double the increase in household incomes over the same period.

“The West faces a decisive challenge: not to become a society divided into two classes, that of rich owners and poor tenants,” he said.

“We are facing a serious problem, with huge social and economic implications, which requires a decisive response from society as a whole, with public institutions at the forefront,” he said, according to comments released by the government.

Is tourism the only factor influencing the housing crisis?

Spain is the second most visited country in the world with more than 94 million tourists in 2024. Tourism generated about 200 billion dollars in revenue, or 13 percent of the country’s gross domestic product (GDP).

Residents in Spain have complained about mass tourism, including gentrification, increased living costs and a spike in party-seeking behavior from foreigners.

However, tourism is not the only factor contributing to Spain’s housing crisis.

The Spanish housing bust of 2008 and the subsequent financial crisis also exacerbated the problem. Between 2008 and 2014, Spain experienced a major financial crisis, which also included a prolonged real estate slump.

“By 2015, house prices had fallen by a third from their peak in 2008, and basically no new houses were built,” according to the working document of the European Central Bank.

The Coid-19 pandemic has also added to the crisis as construction costs have risen significantly since then.

High youth unemployment of 26 percent means that young people live with their parents for longer periods of time, slowing down new housing projects. Almost two-thirds of young Spanish people between the ages of 18 and 34 live with their parents.

Other factors include complex regulations that have slowed land development and a lack of bank and public budget financing for real estate projects.