Spanish PM proposes up to 100% tax rate for non-resident non-EU nationals buying property

Spanish Prime Minister Pedro Sánchez has unveiled his government's plan to improve access to housing and reverse the rise in house prices.

The plan announced on Monday includes twelve measures, one of which aims to limit the purchase of homes by non-resident non-EU nationals by raising the property transfer tax to as much as 100% of the property's value.

Other proposals include a legal amendment to establish a 100% tax exemption on IRPF (Personal Income Tax) for owners who rent according to the Reference Price Index, the application of VAT to tourist flats in so-called tense housing areas, and the creation of a system of public guarantees to protect owners and tenants who participate in the affordable rental system.

Right to housing

Sánchez has repeatedly stated that the current government term must be the legislature of the right to housing.

During the electoral campaign for regional elections, he announced measures to build thousands of social homes and promote affordable rentals. However, the rise in the sale price of previously owned homes remained unchanged in 2024 (7.1%), and the government is now seeking ways to reverse the situation.

On Monday, the Spanish PM appeared at the forum 'Housing, the Fifth Pillar of the Welfare State', alongside the senior leadership of his government, representatives from the construction sector, and social stakeholders, to present the main points of a plan inspired by models from countries like Denmark and Canada.

The PM emphasized that the West faces the challenge of avoiding a division into a two-class society of "rich owners and poor tenants." He pointed out that the average price of housing in Europe has increased by 48% in the past decade, a rise that is "unbearable" as it outpaces household income growth by double.

"Access to housing has become the greatest issue for the middle and working classes and a barrier to the independence of young people," he stated, adding that it is a key driver of inequality and wealth disparity among citizens.

According to Sánchez, the consequences of the "real estate bubble" policy "still fester," and a "bold, social, and committed" policy is needed.

Sánchez criticized the opposition conservative People's Party (PP), arguing that the "neoliberal housing policies" of the Aznar and Rajoy governments have had "disastrous" consequences.

He stated that this situation requires a "decisive response" from the administrations, emphasizing that "much remains to be done."

"The situation is critical," Sánchez said, adding that "more work and more forceful measures are needed."

Twelve measures

Sánchez has divided the objectives of the plan into three main areas: "More housing, better regulation, and more significant aid."

More housing, the PM said, involves creating "more social housing," in particular.

The first measure is the transfer of more than 3,300 homes and two million square meters of residential land to the recently created public housing company. These two million square meters, according to Sánchez, will be used to build "thousands and thousands of social homes for affordable rental, primarily for young people."

He also announced that, during the first half of 2025, the public housing company will begin to incorporate over 30,000 homes from (Spain's bad bank) Sareb, 13,000 of which will be immediately available.

The second measure is the creation of a legal mechanism to ensure that the public housing company "has priority in purchasing housing and land."

The third measure is a legal reform to guarantee that all housing built by the central government "remains permanently in public ownership," ensuring that what is constructed or renovated with public funds "remains the property of Spaniards" and "does not end up in the hands of vulture funds or major speculators."

The fourth measure is the creation of a plan to "modernize and innovate in the construction sector and its industrialization," particularly in modular construction to build homes "quicker and less costly."

Three unprecedented measures

Sánchez stated that the plan also includes three "unprecedented" measures. The fifth measure is the creation of a public guarantee system to protect both property owners and tenants participating in affordable rental schemes.

The central government will "provide the necessary funding and guarantees so that citizens can rent, and owners can do so with security and without taking on risks."

This system, "successfully tested in Spain," will begin this year with owners renting to individuals under 35 years old.

The sixth measure is a new program to rehabilitate vacant homes for affordable rental purposes. Until now, the Spanish government co-financed owners who renovated homes to improve energy efficiency. Starting in 2025, a new aid program will be added for those who renovate homes to rent them at affordable prices for at least five years.

The seventh measure is, subject to Congress approval, a 100% exemption from IRPF (Personal Income Tax) for owners who rent their homes according to the reference price index, even if they are not located in so-called tense housing areas.

The eighth measure involves fiscal reform to ensure that tourist apartments are taxed as businesses, thereby applying VAT "in areas with housing access difficulties or tourist saturation." According to the Spanish PM, "there are too many Airbnbs and not enough homes."

The ninth measure is a reform of the tax advantages for SOCIMIs (listed real estate investment companies) so that these benefits only apply to the promotion of affordable rental housing.

The tenth measure is limiting property purchases by non-resident non-EU foreigners. The government will increase the tax burden on such purchases, up to 100% of the property's value.

This is "an unprecedented measure in our country's history, already applied in other democracies like Denmark and Canada, and highly appropriate given the housing emergency situation," Sánchez said, adding that in 2023, non-residents bought 27,000 properties in Spain, primarily for speculation.

The eleventh measure is a tightening of regulations to combat seasonal rental fraud and the creation of a fund to allow municipal and regional governments to strengthen inspections of illegal tourist housing and other fraudulent uses of properties.

The twelfth and final measure is the new Spanish housing plan, which will come into effect in 2026. This plan will expand aid for housing access and will "pay special attention" to young people, the elderly, and people with disabilities. "The government is committed and will do everything in its power to make housing accessible," Sánchez said.

Criticizing the PP's housing proposals, Sánchez highlighted how in Catalonia rental prices in tense housing areas have dropped by 3 to 5% as a result of the housing law's implementation.

"Empirical evidence, data, and facts show that price controls work when accompanied by structural measures applied consistently over time," he said.

Tenants' Union: 'It solves none of the problems'

The Tenants' Union criticized Sánchez's plan. "It fails to address any of the current housing problems," lamented spokesperson Carme Arcarazo.

"The rich continue to accumulate more properties, while ordinary people are shut out of the housing market. When you search for a rental, all you find are seasonal rentals and substandard contracts. None of the twelve measures announced tackle this issue," Arcarazo said, emphasizing the absence of any measures aimed at reducing prices, regulating seasonal rentals, or curbing speculative purchases.

"They say they will raise taxes on non-resident, non-EU foreign investors without specifying the rates," Arcarazo said.

"This means that the main investors here, who are French and German, will still be able to buy properties as they did before. It's a measure that sounds good, but in reality, it doesn't change much."