real estate market is experiencing a major boom. In the first nine months of the year, property prices rose by an average of 9%, according to the House Price Index from the INE statistics agency.
Average prices have doubled over the past decade, marking a much-welcome recovery following the banking and real estate collapse during the 2008/9 financial crisis. That downturn was fueled by years of overbuilding and property speculation, ultimately forcing Spain to seek a €100 billion ($103 billion) bailout from the to stabilize its banking sector.
The current surge in home prices and rents has reignited concerns over housing affordability. A report last July by real estate platform Idealista revealed that rents in and soared by 25% and 33% respectively over the past five years.
The issue has become politically charged, triggering public unrest and across Spain’s major cities.
In response, Prime Minister Pedro Sanchez has proposed a controversial measure: a 100% tax on property purchases by non-EU nationals without residency in Spain. Sanchez argues that this policy would curb speculation in the real estate market.
Where are the speculators?
However, critics have questioned whether the measure will address Spain’s housing shortage or improve affordability for locals as speculators make up a small proportion of buyers.
Mark Stücklin, who runs the Spanish Property Insight website, says there are “no speculators in the Spanish property market.” Citing high transaction costs, red tape and other obstacles facing property buyers, Stücklin told DW: “You can’t make money on property in Spain — it’s a mug’s game.”
Costs are typically 10-15% of the purchase price, while Capital Gains Tax of up to 24% on any profit is payable when the home is sold. Spain is also notorious for outdated planning records, with many properties remaining unregistered and some owners making illegal modifications to their homes — issues that lead to complex legal disputes that can take years to resolve.
Foreign buyers have helped push up prices
While speculators may be absent in large numbers, demand among foreigners for Spanish property has grown sharply since the pandemic, according to a report by Spain’s third-largest lender Caixa Bank.
Nearly a fifth of homes sold in the 12 months to the end of the third quarter of 2024 were bought by foreigners — a total of 125,857 properties, the report said, citing data from the Ministry of Housing and Urban Agenda (MIVAU).
“There is no doubt that foreign demand is a fundamental pillar in explaining the strength of housing demand,” Caixa Bank’s lead economist Judit Montoriol Garriga said. “Much of this demand comes from foreigners who reside in Spain — a group that has been on the rise in recent years with the influx of immigrants into our country.”
Montoriol Garriga noted that nonresident foreigners — led by British, German, Dutch, Belgian and French nationals — tend to buy holiday homes in tourist areas along the Mediterranean coastline and on the Canary or Balearic islands. In contrast, resident foreigners mainly buy in urban areas.
Coastal cities like Valencia and Alicante, along with the capital Madrid and Barcelona have fast-growing populations and limited property availability, so their housing stock is “under a lot of pressure,” noted Stücklin. He added that rent controls, introduced in Barcelona last March, helped “stabilize prices but the supply has collapsed.”
Tourist rentals mean fewer homes for locals
Rents have also been driven up by short-term contracts, through home-rental platforms like , mainly offered to tourists — a record 94 million of them holidayed in Spain last year. Several regions have clamped down on . The island of has threatened fines of €80,000 on anyone who illegally rents a property for tourist purposes.
While Sanchez thinks taxing speculators from outside the EU is the answer to the affordability issue, his plan won’t deter EU nationals and companies from buying in Spain.
The opposition conservative Popular Party (PP) wants to ease the tax burden on property sales and help buyers under 40 to avail of 100% mortgages. The party said recently it would also free up land for new affordable housing in areas with the most demand.
How other countries deter foreign buyers
Until now, is believed to be the only country to introduce a 100% tax on foreign property ownership. The levy effectively killed foreign interest in the Indian Ocean island and was repealed a decade ago.
Other countries have imposed less punitive measures. , for example, charges foreign buyers an additional 15% tax, which was further increased to 60% for some types of property last year. It’s currently the highest tax on foreign property ownership in the world.
has imposed an extra 15% stamp duty on foreign buyers, while two provinces charge an extra 20-25% tax on nonresidents purchasing residential property.
has annual quotas on how many homes can be sold to foreign nonresidents. Before buying in , foreigners need government approval, which is usually given only for primary residences or properties for business purposes.
“The days of making a quick buck from speculative property purchases have gone because of the regulations and the restrictions that are in place in many of these markets,” Kate Everett‑Allen, head of European residential research at the London-based real estate consultancy Knight Frank, told DW.
Foreign property owners were likely to be targeted by other countries moving forward, due to many governments facing high public debts. “Governments are trying to walk this tightrope of attracting investments, maintaining economic growth while ensuring that housing doesn’t get beyond the reach of their local populations,” said Everett-Allen.
On the plus side, she added, these measures mean that many countries are “less prone to boom and bust cycles that were evident before the financial crisis.”
Edited by: Uwe Hessler
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