Government minister wants to ban foreign non-residents from buying in Spain

Spanish government minister Ione Belarra says her party will exclude “non-residents” (many of them foreigners) from local housing markets wherever they hold power because “houses are for living not for speculating”. Apart from smearing all foreigner buyers as simply speculators driving up the cost of housing for locals, her plan begs the question: How much impact do foreign non-residents (FNRs) really have on housing markets around Spain?

First, a bit of background. Ione Belarra is Minister for Social Rights and leader of the Podemos party, the hardline left-wing junior partner in Spain’s coalition government led by Socialist President Pedro Sánchez. Her party is in favour of rent-controls country-wide (in ‘strained’ markets), on the side of squatters against owners, and tends to see all housing investors as speculators and vulture funds.

Read a summary of the Podemos housing manifesto for Europe (click to expand/close)

Belarra announced her party’s plan to exclude non-residents from ‘strained’ housing markets at an election rally in Madrid last Sunday in advance of municipal elections across Spain this weekend, and a general election later this year. In her opinion, “one can come to Madrid to live and work, but not to speculate,” which chimes with the Podemos world-view that all investors are just no-good speculators. For good measure she also said that “we need bold governments that believe in the Housing Law we have passed and implement it to the last comma, and stand up to the speculators.”

Let’s unpack her plan a bit

‘Strained’ markets are defined in Spain’s new Housing-Law of 2023 as municipalities where housing costs (mortgage repayments or rent plus other housing-related costs) are greater than 30% of the average household income, or where purchase or rental costs have increased 3% or more above inflation in the last five years. You could argue these criteria for ever but what they boil down to are ‘hot’ markets where demand exceeds supply. Prices rise where demand exceeds supply pushing housing costs above the 30% of income threshold and driving house-price inflation, and fall where the opposite is true.

What does Belarra mean by “Non-residents“? I assume she means anyone who doesn’t live in the area (municipality, province, region? – it’s not clear) where they buy, including Spaniards, but all the Spanish press reports I’ve read interpret it as meaning foreigners who don’t live in Spain. Let’s go with my generous interpretation and assume she means all out-of-towners including Spaniards whilst bearing in mind she might mean just foreigners. In Q4 2022 60% of sales involving a buyer not living in the same province as the property were bought by people living in Spain, whilst 40% were bought by FNRs, according to figures from MITMA. So even if she means all out-of-towners when she talks about banning ‘non-residents’ from buying in Spain, Belarra also has foreign investors firmly in her sights.

Where do foreign non-residents buy property in Spain?

If you look at where FNRs buy property in Spain, you find they are only significant in about five regions and eight provinces out of Spain’s 17 and 50 respectively. The table below showing higher impact areas in red illustrates that FNRs are not relevant to most housing markets in Spain. And most of the places where they do buy – urbanisations on the coast, and villages inland – would not count as ‘strained’ markets where locals are struggling to afford housing. In most cases the municipalities were FNRs buy desperately need them to keep the housing market afloat, keep the housing stock from falling to bits, keep local government from insolvency, and keep the economy from imploding.

So what about ‘strained’ or ‘hot’ markets? The two biggest ‘hot’ markets in Spain are Madrid and Barcelona. According to my calculations based on MITMA figures, non-residents were just under 6% of buyers in Madrid in Q4 2022 and FNRs were just 0.8% of buyers. In Barcelona non-residents were 9% of buyers and FNRs 2.2%. FNRs were higher in Barcelona ten years ago when the economic crisis crushed local demand, and foreign buyers came to the rescue, but that time has passed (for now). Will banning non-residents including foreign buyers make housing more affordable in Barcelona and Madrid when they are such a small percentage of the market? I doubt it. And anyway, many of them will be people buying a home they plan to move to. Under Belarra’s plan, you won’t be able to buy a home anywhere unless you’ve been resident for there some time. Imagine that. You need to move from Barcelona to Madrid but you’re not allowed to buy a home there before you move.

What about banning just FNRs, if that’s her plan? It would have zero positive impact in Barcelona and Madrid.

It is true that FNRs are more significant in markets with lots of holiday-homes like Alicante province (36% market share in 2022), Malaga province (30%) and the Balearics (28%) but market segments are also important. FNRs are mainly buying holiday-homes on urbanisations that have no impact on the affordable-housing segment in cities like Palma de Mallorca. Although there is a bit of cross-over between segments (FNRs buying second-homes in Palma de Mallorca), excluding non-residents will not solve the housing crisis in the Balearics or anywhere else in Spain.

None of this really matters because Belarra is just firing up her resentful base in advance of elections, and because Podemos will never have the power to exclude non-resident buyers anywhere in Spain. Her party is sinking in the polls, and excluding non-resident buyers is forbidden by the Spanish constitution and the EU. The Balearic islands’ regional government has been calling for powers to ban foreign buyers for some time now with no success beyond putting off foreign investors (down 30% in Q1). It only matters insomuch as it reveals the mentality behind Spain’s new Housing Law (which Podemos claims credit for) that will aggravate the problem of housing access in ‘strained’ markets, and energise the search for scapegoats like non-residents who can’t vote.

Take a deep dive into the data for FNR and expat demand for property in Spain, and many other types of Spanish housing market data.