Why is Spain planning a 100% tax on homes bought by non-EU residents?

Spain plans to introduce a 100% tax on homes bought by non-EU residents in a bid to tackle the country’s entrenched housing crisis.

Spanish Prime Minister Pedro Sanchez on Monday proposed a package of measures aimed at easing a shortage of houses, high rents and rising house prices across the country, with foreign home buyers and mass tourism seen as contributing to housing pressures.

Speaking at the forum on this issue, the leader of the Socialists Sanchez said that access to housing was one of the main problems facing Spanish society and that there is a risk of division between communities.

“The West faces a serious challenge: not to become a society divided into two classes: rich owners and poor renters,” he said, noting that house prices in Europe have risen by 48% over the past decade, almost doubling. as family income.

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

Announcing 12 reforms aimed at tackling the crisis, Sanchez said the government’s proposals included a plan to tax holiday apartments “like a business” and a proposal to levy 100% tax on the value of homes bought by non-EU residents.

Such changes, he said, would help make housing more accessible and affordable across Spain.

“Non-residents of the European Union bought 27,000 apartments in Spain (in 2023). They did it not to live, but to speculate, to make money from them, which we cannot afford in the conditions of the deficit,” said Sanchez. forum “Housing, the fifth column of the welfare state” in Madrid on Monday evening, in comments reported by El Periodico and translated by Google.

“The progressive coalition government has always welcomed foreign investment, but we want it to be productive, encourage innovation and create new jobs, not serve for speculation, as if it were financial assets or bank deposits,” he added.

Other measures introduced by Sanchezwho leads Spain’s left-wing Socialist Workers Party and a coalition government that includes the far-left Sumar party, included plans to cut taxes for landlords, offer affordable rents and more protections for existing tenants.

He announced plans to build more public housing and ensure that existing social housing remains in state ownership. A program will also be launched to refurbish vacant houses to rent them out at affordable prices, he said.

The Prime Minister did not give any further details on how the tax on non-EU home buyers would work, nor did he say when such proposals might be brought to parliament for approval.

The government has already signaled its intention to try to limit foreign home ownership, announcing last year the scrapping of the Golden Visa program introduced in 2013, which granted residency to foreigners who invested at least €500,000 in Spanish property. (about $513,000).

The housing shortage and rising prices – and a strong view that holiday home owners and holiday rentals are exacerbating the problem – have sparked strong public backlash in Spain, with riots in tourist hotspots on the south coast, the Canary Islands and cities including Barcelona and Alicante.

Reports a tourists are told to “go home” and there have been cases of foreign visitors being sprayed with water guns, and locals have called on the authorities to crack down on what they see as “over-tourism”.

Spain’s economy relies on tourism to drive growth and create jobs, but the sector accounts for more than 13% of GDP and about three million jobs. In the first 11 months of 2024, the number of foreign tourists arriving in Spain reached an all-time high of over 88.5 million, This is evidenced by the data of the National Institute of Statistics of Spain, INE.

“Tourism is not only driving consumption spending, but strong occupancy rates are also driving record investment in hotels,” Martje Waifelaars, Rabobank Senior Eurozone Economist – says the analysis last September.

“We forecast that GDP growth in Spain will moderate somewhat going forward as growth in the tourism sector is forecast to lose momentum slightly. But growth is expected to remain strong and outpace the Eurozone in the coming quarters and years, accounting for 2 .7% (in 2024), in 2025 — 1.9%, in 2026 — 1.5%,” said she

In the first 11 months of 2024, the largest number of visitors to Spain was tourists from the UK – 17.5 million, followed by travelers from France (12.2 million) and Germany, INE noted.

The number of tourists using ‘market’ accommodation (such as a hotel, hostel or holiday rental apartment) as their primary accommodation increased by 8.0% year-on-year, with hotel use up by 5.7% , and rental housing – by 24.5%. %.

Take-up of “off-market accommodation”, such as private homes and rooms rented out through home-sharing sites such as Airbnb, rose 18.8% in the 11 months to November.