Spain plans 100% housing tax for foreigners: Will it solve the housing crisis? | Housing news

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 address the country's housing crisis.

Sanchez aims to deter non-EU residents from buying homes in the country. “Housing in Spain must be designed for Spaniards 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,” Sanchez said, referring to the people who use 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 tackle the problem that successive governments have failed to solve?

What is Spain's new property tax proposal?

Sanchez proposed 12 steps to tackle the country's strained housing market, which saw some of the highest price increases in Europe last year at 8.3 percent.

The 100 percent tax will affect foreign buyers who bought 27,000 apartments in 2023. In the third quarter of 2024 about 15 percent of all real estate is purchased by foreigners, according to the Association of Registrars.

“They (overseas buyers) did this not to live, but to speculate, to make money with them, something that, in the context of the shortage, we cannot afford,” Sanchez said at the forum “Housing, the fifth pillar of the welfare state, in Madrid on Monday.

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

Other proposals include tax breaks and incentives for landlords to provide affordable housing, especially to younger people, and capping rents in high-demand areas.

What other measures did he announce?

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

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.

Sánchez stressed that housing was his government's top priority, but warned there was 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.

Social housing buildings are subsidized by the government and owned or managed by local or central government or not-for-profit organisations.

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

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

Scams in the holiday rental market in Spain include false property listings and unauthorized subletting of properties to tourists without the owners' consent, as well as unlicensed rentals that do not meet legal or safety standards.

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

Meanwhile, the golden visa introduced in 2013 will be abolished. 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 it affect the most?

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

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

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

Spain's new measures aim to help residents, particularly those in cities and coastal areas such as the Balearic and Canary Islands, where rents have soared due to high demand and tight supply.

When will it take effect?

The exact timetable for the introduction of the tax on foreign buyers and other proposed measures has not been specified.

The proposals require approval in Spain's fragmented parliament, where Sanchez's minority coalition could face a challenge to pass 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 have increased by 11 percent in 2024, according to real estate portal Idealista.

A one bedroom apartment in the center of Barcelona costs on average approx $1,313 per monthand $989 per month outside the city center. The average rent in Barcelona has risen by 53 percent in the last decade.

However, Spanish cities are still cheaper than several Western European cities, where high rents and house prices have added to the cost-of-living crisis.

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

A report from The City of London has shown that the city's high rental costs are due to its status as a global economic hub, attracting a large workforce and student population that increases demand for housing. This demand has been coupled with a significant drop in the supply of rental properties since 2020, pushing rents to record levels.

Sanchez pointed out that house prices in Europe have risen by 48 percent over the past 10 years, 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 landlords and poor tenants,” he said.

“We are facing a serious problem with huge social and economic consequences that 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 generates about $200 billion in revenue, or 13 percent of the country's gross domestic product (GDP).

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

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

Spain's housing crash of 2008 and the subsequent financial crisis also exacerbated the problem. Between 2008 and 2014 Spain experienced a major financial crisis that included a prolonged real estate crash.

“Until 2015 home prices have fallen by a third from their peak in 2008. and essentially no new houses were built,” according to an European Central Bank working paper.

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

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

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