The Spanish government has announced a major tax hike on housing in a hit to Brits buying properties in Spain.
As part of a new proposal, property taxes for non-EU citizens in Spain would be equivalent to 100 per cent of the value of a home.
The tax increase aims to limit the purchase of property by non-EU residents without legal residence in Spain.
Spanish prime minister Pedro Sanchez unveiled the proposal for 12 new housing measures in Madrid on Monday (13 January).
Mr Sanchez said: “The tax rate that non-Europeans who do not reside in our country must pay when buying a home in Spain will be increased to 100 per cent, prioritising that the available homes are for residents.”
In the last year, Spain has seen a wave of demonstrations against overtourism and holiday rental properties as a result of the mounting housing crisis for residents struggling to find available homes.
Soaring rents in popular cities, including Madrid, have caused locals to feel they are being priced out of the Spanish market.
One in five homes sold in Spain are bought by foreigners, with many of them non-residents.
Currently, the tax rate for non-residents of the EU is around 24 per cent of the price of the house, depending on location.
Official figures show that the number of Brits registered as living in Spain increased from 276,089 in 2017 to 284,037 in 2023, with 12,470 Spanish property sales involving a British buyer the same year, reported The Times.
According to Mr Sanchez, non-residents bought 27,000 houses last year “mainly for speculation”.
The 12 proposed measures also include strengthening the regulation of seasonal rentals to prevent fraud, a tax reform project so that tourist apartments are taxed as businesses and a programme to rehabilitate vacant homes into affordable rentals.
"It isn't fair that those who have three, four or five apartments as short-term rentals pay less tax than hotels or workers," said Mr Sanchez.
The Bank of Spain recommended that authorities intervene in the rental market in 2024 due to the number of households overstretching to pay their rents compared to other EU countries.
Spain’s parliament will now debate the proposal, however the minority Socialist government has often struggled to pass legislation.
Simon Calder, travel correspondent of The Independent, said: “If any British buyer ever has to pay 100 per cent tax on a property purchase in Spain, I will eat my sombrero. The Spanish prime minister’s comments are squarely for domestic consumption.
“Is there a housing crisis in Spain? Yes. Are some foreign investors buying up urban properties to punt out on Airbnb? Yes. But the average Brit who wants a place in the sun is most unlikely to be part of the problem.
“Typically, UK buyers are looking for properties on an urbanizacion in southern Spain, where colonies of foreigners are actually an important part of the local economy.
”A potentially bigger problem for Spain is that this market has tanked because of Brexit – in particular the restrictions on stay – and the plunging pound. The emerging picture is of Brits desperately trying to offload properties abroad. But the locals won’t be much interested in a property on a barren hillside near the coast where there are few jobs.
“And a reminder that tourism makes up about one-eighth of the Spanish economy, and probably creates an even higher proportion of jobs in Spain.”
For more travel news and advice, listen to Simon Calder’s podcast
