Spain's 'extreme' 100% property tax hike for Brits - and where to buy to avoid it

A view of Madrid
-Credit:Anthony Devlin/PA


Spain's proposed "extreme" property tax rise could deter UK buyers looking for a sunny escape, with Cyprus and Greece potentially becoming more appealing alternatives, industry specialists suggest. The Spanish government has recommended a new tax policy that could see taxes on properties purchased by non-European Union residents surge by up to 100%, as part of its strategy to alleviate the country's housing strain.

Toby Leek, who heads NAEA Propertymark for property professionals, has expressed his concerns: "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."

He understands the necessity for Spain to confront its housing crisis to protect its residents, but considers the suggested tax increase to be "quite an extreme increase". Mr Leek further commented: "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."

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Spanish Prime Minister Pedro Sanchez aims to implement measures leading to "more housing, better regulation and greater aid". In 2023 alone, non-EU nationals bought around 27,000 Spanish properties, not as homes but as investments, according to the PM.

Much like the UK, Spain faces challenges with escalating housing costs, particularly with rent in big cities like Barcelona and Madrid, compounded by rising house prices. Tourism and short-term lets may be intensifying issues.

Seila Sanches Lucas, a legal professional with Broadfield, an international law firm, raised concerns about the potential impact of Spanish Prime Minister's proposals. She 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."

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Furthermore, she added: "It is just a proposal at this point in time and is not guaranteed to make it onto the Spanish statute books," hinting at the slow pace of legislative proceedings by noting: "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."

Dubai branded the 'new Marbella' attracting property buyers

She also suggested alternatives saying: "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, an executive at Fragomen, where they specialise in global immigration, commented on the likely consequences if Spain introduces a 100% tax on home ownership for non-EU nationals, saying: "Our clients would most likely look to rent instead of buying or alternatively explore other more favourable EU jurisdictions."

She opined that destinations like Portugal or Italy might become preferred choices among their clientele. Adding to the conversation, Stephen Abletshauser from Spencer West LLP weighed in, warning: "This populist move by the Spanish government may well prove to be a long-term own goal."

He predicted, "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, a personal finance expert at Hargreaves Lansdown, has raised important questions regarding the potential implications for British homeowners in Spain due to new tax measures.

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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."

Additionally, she suggested that the anticipated changes could cause a rush in sales as homeowners try to evade higher taxes, potentially leading to a drop in property values. She added: "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 from Zoopla weighed in on the British presence in Spain, mentioning: "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 also clarified the target of the proposed tax: "It is unclear what the proposed tax would be aimed at but it appears to be aimed at investors rather than homeowners."

Discussing the international context, Kate Everett-Allen of Knight Frank referred to similar regulatory approaches elsewhere, stating: "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."

These experts highlight how such policy shifts can cause ripples through property markets, affecting both current and prospective owners.

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