After the recent 100% Tax proposal, Spain announced a new housing crisis bombshell that was worse than the tax! What has Spain’s Prime Minister Pedro Sanchez proposed now?

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Remember the recent shocking announcement of measures to solve the housing crisis by Spain’s Prime Minister, Pedro Sánchez? Well, he once again stunned potential property buyers from the UK, USA, and beyond with a bold proposal to ban non-EU citizens from purchasing homes in the country unless they hold legal residency. 

This is a new and even more drastic move, aimed at tackling Spain’s spiralling housing affordability crisis, and it could profoundly reshape the country’s real estate market and deter foreign investments in prime vacation spots like the Costa del Sol, The Canary Islands, the Balearic Islands, and Valencia.

Sánchez unveiled the proposal during a speech to his Socialist Workers’ Party (PSOE) in the Extremadura region, declaring, “We are going to propose to ban non-EU foreigners from buying houses in our country if they or their families do not reside here and are simply speculating with those homes.”

100% Tax and Strict Regulations

This new blow to people wanting to buy holiday homes in the sun follows Sánchez’s proposals recently when he announced a tax of up to 100% on property purchases by foreigners who don’t reside in Spain. 

That plan, according to Sanchez, was inspired by similar measures in Denmark and Canada, and is supposed to curb skyrocketing demand and cool down the soaring property prices.

Actually, it sounds like the newest proposal is nearer to Canada’s & Denmark’s situation. Canada recently extended its own foreign-buyer ban to 2027, while Denmark only allows non-residents to buy homes after living in the country for five years or obtaining a special permit. 

So Sánchez’s proposal aligns with this, but adds a distinctly Spanish twist with additional proposals, including additional taxes and tighter regulations for tourist apartments, which many people blame for reducing housing stock and driving up rents.

Targeting Foreign Buyers

So is targeting foreign buyers going to make a big difference?

Well, foreign property buyers made up 19% of all real estate transactions in Spain in 2023, with Brits leading the pack, accounting for 9.5% of all purchases by non-Spaniards. 

The Balearic Islands, Canary Islands, and Valencia region have been particularly affected, with foreign buyers accounting for nearly one-third of transactions in these areas.

All in all, non-residents from outside the European Union bought about 27,000 houses and apartments in Spain in 2023. 

Sánchez accused the right-wing People’s Party (PP) of exacerbating the crisis with lax policies during the 2008 financial meltdown. The PP fought back by fiercely criticising Sánchez’s plan, branding it “xenophobic” and accusing him of offering a “smokescreen” rather than real solutions.

Interesting that the right is calling the left Xenophobic there. What do you think of that? Tell me in the comments.

A Blow to Wealthy Foreign Investors

The latest set of proposals follows Spain’s 2023 decision to scrap its Golden Visa program, part of which allowed non-EU nationals to gain residency by investing over €500,000 in property. While existing Golden Visa holders remain unaffected, the termination of this scheme in April of this year and the proposed ban on non-EU buyers marks a seismic shift in Spain’s real estate policies.

The housing affordability crisis really has reached a tipping point, with Sánchez unveiling that 12-point plan that we unpacked on a Saturday live Q&A. His proposals included building more social housing, regulating the rental market, and limiting speculative investments. 

Foreign Buyers Brace for Fallout

Potential property buyers from the UK and USA who dream of owning a slice of Spain’s paradise may now face insurmountable barriers. With Sánchez seeking to restrict non-resident access to Spain’s property market, many aspiring homeowners may have to look elsewhere for their Mediterranean escape. Or they may decide to move here before they buy, which is something I’ve advised many times on YouTooSpain. Only time will tell what the fallout will be.

Analysis

As usual there’s a caveat to all of this news, I usually call it an ‘it depends!’ Because at this stage, it’s not even an official proposal, it’s just a declaration of the intent to propose these measures before arguing the ideas through Congress, voting, putting it to the Senate, and only then publishing the new laws which will probably look nothing like what we’re hearing right now. Sanchez is, as you might know, leading a minority government of parties with their own agendas, which doesn’t bode well for getting proposals voted in. 

You just need to look at how Sanchez himself has changed his mind in a week from 100% tax to a total ban to be sure that things can change swiftly in politics. However, the housing crisis is here and it’s big political news, and I’m certain that there will be legislation, and some of it quite bold, in the near future. Some of it has begun already.

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Article by Skatz