Housing as a Pillar of Welfare

In a move that has sent ripples through the Spanish real estate market, Spain's Prime Minister Pedro Sánchez proposed a new tax plan targeting non-EU property buyers during the housing conference "Housing, the Fifth Pillar of the Welfare State." This controversial proposal aims to curb property purchases by non-EU residents, who Sánchez accused of driving up housing costs for locals. While the announcement has garnered significant attention, experts question its feasibility and potential impact.

Who Are These Non-EU Buyers?

According to Spanish notary data gathered by Spanish Property Insight for the first half of 2024, non-EU residents accounted for 2.7% of the housing market, purchasing 9,166 homes out of 340,281 total transactions. British buyers made up the majority, followed by Americans. Popular areas for these buyers include coastal regions like the Costa del Sol, Costa Blanca, and Murcia, which are not typically affordability hotspots for locals.

“These buyers are concentrated in high-end markets far removed from urban centers where housing shortages are most acute,” says Katya Moshnikova, senior consultant at Urbane International Real Estate.

Why Propose Such a Policy?

Critics argue that the proposal is more about political strategy than housing accessibility. According to Mark Stucklin of Spanish Property Insight, this announcement appears to have several objectives:

• Shift the Narrative: Days earlier, the opposition Partido Popular (PP) announced its own housing strategy. Sánchez’s proposal may be a way to recapture media attention.
• Appease Left-Wing Allies: Coalition partners have long called for stricter measures on property investors, and this policy plays to their base.
• Deflect Blame: With previous housing policies falling short, blaming non-EU buyers shifts focus away from government shortcomings.

Although Sánchez's proposal has made headlines, it is unlikely to lead to any significant changes affecting British and American buyers along Spain's costas, at least in the near future. Instead, this appears to be more of a political move designed to deflect criticism and gain favor with left-wing allies

What If the Policy Were Implemented?

Even if watered down, the proposal could have notable consequences:

• Rush to Buy: Non-EU buyers may expedite purchases to avoid potential taxes.
• Market Impact: A drop in demand could hurt coastal regions like the Costa del Sol, where foreign buyers drive significant economic activity.
• Perception of Instability: International investors may view Spain as less welcoming, potentially diverting interest to countries like Portugal or Italy.

Conclusion: Political Theater Over Policy

The Spanish government’s proposal appears more like political maneuvering than a realistic policy. With a fragile coalition and regional resistance, its chances of passing are slim. However, the rhetoric could still create uncertainty for non-EU buyers.

For those considering investing in Spanish property, acting sooner rather than later might be wise, says Moshnikova: “Despite the political noise, Spain remains an attractive destination for real estate investment. But being proactive can help mitigate risks if these discussions gain traction.”

Sources - Mark Stuchlin Spanish Property Insight.