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Plans for an “extreme” hike in property taxes in Spain will be a blow to buyers from the UK and could prompt them to consider alternatives such as Cyprus and Greece, experts have said.
Measures being proposed in Spain to ease pressures on its housing situation include an up to 100% tax on properties bought by non-European Union residents.
Toby Leek, president of property professionals’ body NAEA Propertymark, said: “Many Brits may take the news of heightened property taxes in Spain as a blow considering moving to such a location could well have been a lifelong ambition, especially with the convenient location and, of course, the improved weather it provides.”
Many Brits will likely be put off by this extreme hike in property taxes and will be looking to other countries such as Cyprus and Greece with lower property tax levels for their dream home move
Toby Leek, NAEA Propertymark
He said that, while it can be appreciated that Spain is addressing its own housing emergency and looking after Spanish citizens, the proposal is “quite an extreme increase”.
Mr Leek added: “Many Brits will likely be put off by this extreme hike in property taxes and will be looking to other countries such as Cyprus and Greece with lower property tax levels for their dream home move.”
Spain’s Prime Minister Pedro Sanchez has been quoted as saying the overall goal is to provide “more housing, better regulation and greater aid”.
Non-EU residents bought 27,000 properties in Spain in 2023, “not to live in” but “to make money from”, he said.
Like the UK, Spain has been dealing with pressures on housing costs.
Rents are seen as a particular issue in major cities such as Barcelona and Madrid, while house prices have also been rising.
Levels of tourism and short-term lets have been seen as compounding problems.
There are many other jurisdictions looking to attract wealthy retirees and investors. For example, Dubai has been called the ‘new Marbella’
Seila Sanches Lucas, lawyer
Seila Sanches Lucas, a lawyer at international law firm Broadfield, who helps clients buy and sell property in Spain, said: “The proposal by the Spanish Prime Minister will be concerning for those that have already chosen to retire in Spain and for those considering a retirement in the sun.
“It is just a proposal at this point in time and is not guaranteed to make it onto the Spanish statute books.
“Even if adopted, the legislative process in Spain is tortuously slow and it is perhaps a little early for UK nationals to worry about this proposal.
“If adopted, there are many other jurisdictions looking to attract wealthy retirees and investors. For example, Dubai has been called the ‘new Marbella’.”
Isobel Neilson, director at law firm and global immigration specialists Fragomen, said that if the proposals for a 100% tax on home ownership for non-EU nationals were to be introduced, “our clients would most likely look to rent instead of buying or alternatively explore other more favourable EU jurisdictions”.
She said people may look towards Portugal or Italy, for example.
Stephen Abletshauser, private client partner at Spencer West LLP, said: “This populist move by the Spanish government may well prove to be a long-term own goal.
It could encourage people to rush to sell up before the rate of tax ramps up, which could force prices down even before the new tax rate is introduced
Sarah Coles, Hargreaves Lansdown
“The likes of Turkey, Italy, Malta, Cyprus and even France will welcome this decision in a fiercely competitive market for wealthy non-residents retiring in the sunshine.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, highlighted the potential impacts for those who already own homes in Spain.
She said: “For those who currently own, the question is what this will do to the resale value of their home. The aim is to make these homes more affordable, which effectively means a price cut for those who already have a holiday home in the country.
“It could encourage people to rush to sell up before the rate of tax ramps up, which could force prices down even before the new tax rate is introduced.”
Richard Donnell, executive director at property website Zoopla, said: “Data shows there are over 100,000 Brits drawing their state pension living in Spain, a number that has remained broadly constant in recent years.”
He added: “It is unclear what the proposed tax would be aimed at but it appears to be aimed at investors rather than homeowners. The taxes for overseas buyers have increased for those buying in Britain in recent years, especially as part of a company structure.”
Kate Everett-Allen, head of European research at Knight Frank, described details of the proposals as “sparse”.
She said: “Restrictions on foreign buyers are not new. Countries like Switzerland, Singapore, New Zealand, and Canada have implemented various measures, including higher taxes, outright bans, and limiting property purchases to new homes only.”
