Spanish Prime Minister Pedro Sanchez announced on the 13thof January that they are planning to impose a tax of up to 100% on properties bought by non-EU residents.
The detail is vague on what this really means, and these policies still need to go through various stages of legislation within the Spanish parliament in order to meet approval, which will be no easy feat in the absence of a meaningful majority for the PM. The reason being given is to deal with the country’s housing emergency and prioritise that the available homes are for residents, not for investment. We see it as a scare tactic to deflate the market and it is already spooking some potential buyers that we are talking to.
The difficulty in making decisions based on this announcement, is that there is very little detail around the proposed policies. There has been a recent, targeted attack by the socialist government on overseas wealth – the abolition of the Golden Visa and now proposing huge fiscal barriers to deter overseas investment. The government is under increasing pressure from Spaniards who are finding it harder to afford to buy or rent their own homes during this cost-of-living crisis. The scenario of rich foreigners buying up their country’s real estate does not sit well with this left-wing government’s ideals.
My view is that there needs to a be a smarter balancing act rather than a severe knee-jerk reaction like this. After all, Spain needs to be careful what it wishes for, bearing in mind that tourism is its number 1 export, and the country has attracted a huge amount of tax revenue from people who have relocated to Spain for a better quality of life.
For sure, they need to take care of their own, but they need to be careful that they don’t alienate those foreigners that have helped to create wealth for those everyday Spaniards who are now demanding change.
Another angle to note is the mention of non-EU buyers being targeted. Of course, as members of the EU bloc, there is very little Spain can do to deter buyers from Ireland or Holland for instance, but it’s going to be the non-members of the club who stand to suffer, and that means predominantly the British, North Americans and Middle Eastern buyers.
It also seems that it’s only the speculative purchasers who are being targeted, so I would expect any crackdown to be aimed solely at those non-EU buyers who have no intention of seeking permanent residence in Spain, and who are thereby adding very little everyday value to Spanish society (i.e. a property left vacant for 10 months of the year and only contributing negligible tax revenues). How they intend to police this particular issue will be interesting.
The timing of this announcement, comes just a few weeks after the government set the date of the 3rd of April for the end of the Golden Visa scheme. This new proposal makes it difficult for those buyers who are trying to make a quick decision and purchase a property to take advantage of the Golden Visa before it is too late and is once again causing concerns. However, it is unlikely that any fiscal change will be able to be brought in quickly, therefore if you want to benefit from the Golden Visa, you need to be aiming to purchase your property in January, to give time for completion and preparation of the application for the visa.
Any applications for new Golden Visas must be submitted by the 3rd of April 2025. After that point, no new visa applications will be accepted, however applications which have been submitted but not approved will continue to be processed and existing Golden Visas will be renewed.
We hope that clarity will be given quickly of what it really means in practice, to enable potential buyers to make an informed decision.
Sean Woolley is the Founder and Director of leading real estate agency Cloud Nine Spain.