Home » Spanish government floats radical tax plan targeting British and other non-EU property buyers

Spanish government floats radical tax plan targeting British and other non-EU property buyers

Isabel Rodríguez, Minister of Housing and Urban Agenda, inaugurating the forum “Housing, the fifth pillar of the welfare state.” Picture credit: Housing Ministry

In a surprising twist at a housing conference on Monday, Spain’s Socialist PM Pedro Sánchez proposed a radical plan to deter non-EU property buyers, particularly British second-home seekers, by slapping them with punitive taxes. Labelled as speculators by the PM, these buyers were accused of driving up housing costs for locals. However, Sánchez was thin on details, and the plan looks more like political theatre than a viable policy.

Housing as the fifth pillar of the welfare state

Sánchez’s remarks came during the closing speech at the conference titled “Housing, the fifth pillar of the welfare state.” The PM argued that high taxes on non-resident property buyers from outside the EU could help make housing more affordable for Spain’s working and middle classes. “Non-EU residents are buying properties in Spain not to live in, not for their families to live in, but to speculate and make money,” he claimed.

But are these accusations fair? And how would such a policy work in practice?

Who are these so-called speculators?

Spain proposes 100% tax on property purchases for non-EU buyers

Non-EU resident buyers—foreign non-residents (FNRs) from outside the EU—make up a small yet visible part of the Spanish housing market. Based on the latest figures from Spanish notaries for the first half of 2024, British buyers dominate this segment, accounting for 38% of non-EU property purchases (3,480 homes). Americans, the second-largest group, purchased 695 properties—a mere fraction of the British total. So this idea mainly has British and American buyers in mind. These numbers are illustrated in the chart above.

Where do they buy? Unsurprisingly, Brits favour the Costa del Sol, Costa Blanca, and Murcia—regions with coastal urbanisations where they pose no competition to locals hunting for affordable housing. The housing affordability crisis, meanwhile, is concentrated in urban areas like Barcelona, Madrid, Valencia, and the Balearics. In these strained markets, British FNRs play a negligible role, comprising just 2-3% of the Balearic housing market in 2023, mainly buying villas on the coast.

To put it into perspective, non-EU buyers accounted for only 9,166 purchases out of a total of 340,281 in the first half of the year—just 2.7% of the housing market. Moreover, their activity was concentrated on the Costas, well away from areas experiencing the housing crisis.

A misguided narrative

Targeting British and other non-EU buyers as the culprits behind Spain’s housing woes is, to put it kindly, misguided. These buyers primarily purchase holiday homes and villas in areas that are far removed from Spain’s affordability hotspots. Suggesting they are a significant factor in driving up housing costs for locals is not supported by the data.

Also, Sánchez asserted that non-EU non-residents purchased 27,000 homes in Spain in 2023. However, notary data paints a different picture, putting the figure closer to 18,607—a significant discrepancy. His estimate overshoots the actual number by nearly 50%.

Why float such a radical idea?

This proposal seems more about politics than housing policy. Here’s why Sánchez and his government might have floated it:

  1. Countering the opposition’s narrative: The weekend prior, Spain’s opposition PP party announced its own housing strategy in the Asturias Declaration. By introducing a dramatic policy, the Socialists aim to regain control of the conversation.
  2. Appeasing coalition partners: The Socialist government’s hard-left allies revel in the idea of taxing investors heavily and painting them as speculators. This announcement will get them trembling with excitement.
  3. Distracting from past failures: The government’s housing policies have been underwhelming. Blaming foreign buyers is an easy way to deflect criticism and win public support.

Likelihood of implementation

The chance of this plan becoming law? Very slim. Sánchez’s government, reliant on a fragile coalition, struggles to pass significant legislation. Even if a version of this policy were implemented, it would likely be watered down, targeting only areas declared as “strained” markets—so far, limited to Catalonia. Local authorities in popular coastal regions, like the Costa del Sol and Costa Blanca, are unlikely to shoot their own housing markets in the foot.

Potential consequences

Though unlikely to materialise, the announcement could still have ripple effects:

  • Buyers rush or reconsider: Some British buyers might bring forward their purchases to avoid potential taxes, while others may abandon Spain altogether in favour of countries like Portugal or Italy.
  • Damage to coastal markets: If enacted, the policy would decimate demand on the Costa del Sol, Costa Blanca, and Murcia, affecting property prices and hurting local economies. These regions, however, are PP strongholds—perhaps a calculation the Socialists are willing to make.
  • Perception of instability: The international attention garnered by Sánchez’s remarks could harm Spain’s reputation as a stable and welcoming destination for foreign investment.

Conclusion: all talk, no action?

While Sánchez’s proposal has generated headlines, it’s unlikely to result in any concrete measures that affect British and American buyers on Spain’s costas, at least not anytime soon. Instead, this appears to be a political manoeuvre aimed at deflecting criticism and scoring points with left-wing allies.

For now, British and American buyers can relax—but the spectacle serves as a reminder of the unpredictable landscape of Spanish property politics. If you’re considering buying a property in Spain, it might be wise to act sooner rather than later, just in case the rhetoric escalates into something more tangible. Or perhaps it’s a good reason to abandon the idea of buying in Spain altogether, now you know what the Spanish government thinks of you and your dreams of a holiday-home in Spain, perhaps somewhere to retire to.

Speech by Pedro Sánchez, Spanish Prime Minister

Watch the segment of Pedro Sánchez’s speech where he addresses this controversial policy. An English translation of his remarks is provided below.

“And finally, I inform you that, after carrying out very thorough work by the Government of Spain, we have decided to limit the purchase of housing by non-resident foreigners from outside the European Union. We will achieve this by increasing the tax burden they will have to pay upon purchase to up to 100% of the property’s value.

This is an unprecedented measure in the history of our country but one that is already being implemented in other economies and democracies, such as Denmark and Canada. We believe it is appropriate and very necessary in the current housing emergency in our country.

To put it in perspective, in 2023 alone, non-residents from outside the European Union purchased around 27,000 houses and apartments in Spain. They did not buy them to live in, nor for their families to live in. They did so primarily to speculate, to make money from them, something that, in the context of residential scarcity we are experiencing, we simply cannot afford.

Therefore, the progressive coalition government—let me be clear—we have always welcomed and will continue to welcome foreign investment. Spain has been recording record levels of foreign investment since I had the honour of becoming President of the Government. But we want that investment to be productive, to promote innovation, businesses, and the creation of new jobs—not to speculate on our housing. Homes in Spain cannot serve as financial assets or bank deposits; they must serve as places for Spaniards, as well as migrants coming to our country to work and build a life, to live in. These people also contribute to the development and prosperity of our country.

That is why we are taking this measure, and we trust that the other parliamentary groups will support it when we present it in the Congress of Deputies.”