Valencia Property Blog

Earlier this week the leader of the Spanish government Pedro Sanchez announced various measures to ease the problems of the Spanish Property Market. Most of them were well thought out and reasonable, whether they will work or even be put in place is another matter. However one of them sent shock waves through our commnity here, not to mention our company. In this post we will take you through what may have been proposed and what effect it will have on you as a potential buyer of Spanish property along with what you can do to avoid having to face the potential consequences.

Before starting though let me say one thing very clearly. Nobody knows for sure. This is simply a proposal at the moment and a vague one at that. Everything that follows are possible outcomes and situations, nothing more. We will be updating this blog with more news in the future and of course as we always say, keep an eye on the blog. You can listen to my initial reaction below or here when I was interviewed on BBC Radio Five Live. My part starts around a minute in.

"100% Tax On Spanish Property Purchases"

Sanchez said that in the last year 27000 non-EU, non residents bought property in Spain. True. He also said that almost all of them bought it not to live in but for investment and to make money. A big fat lie. He cited the cases of Denmark and Canada where foreigners are forbidden from buying property in the country (though in Denmark you can but you need to have been a resident for five years). And then he said the line which has sent "Expat Forums" and international news reports into meltdown,

"Se incrementará hasta el 100% el gravamen fiscal que deben pagar los no europeos que no residan en nuestro país cuando compran una casa en España, priorizando que las viviendas disponibles sean para los residentes"

Literally the translation is:

"The tax rate that non-Europeans who do not reside in our country must pay when they buy a house in Spain will be increased to 100%, prioritizing that the available homes are for residents".

However there are doubts over what he meant when he said it and how it could be implemented. Let's explore the possibilities.

Possibility 1:

You Pay 100% Tax on Purchase

If this is the case then if you are a non-EU passport holder living outside of the EU then when you want to purchase a property in Spain then you would have to pay a tax equivalent to 100% of the value of the property. I say "you would have to pay" because nobody would do that.

The emphasis here is on Non-EU and non-resident because under the rules of the European Union, countries cannot discriminate against any person residing legally in a member state of the EU because of the four freedoms which include the freedom of movement and funds throughout the block. However, that doesn't stop any member country from discriminating against those from outside the EU in fiscal terms.

Possibility 2:

You Pay 100% of all Property Taxes

In their blog Just Law Solictors say that this will not be a tax on the purchase price of buying a property. They think it will be 100% taxes on all tax commitments of the property post sale. They may be right, they may be wrong. Personally I think they are the only place reporting this proposed measure in this way and I think they may well be wrong. As far as I see it non-residents already pay 100% of the taxes levied by central and regional governments as they don't get the discounts available to residents. I hope Just Law are right.

However, they also say that it will not apply to those coming to live in Spain from outside the EU on the Non Lucrative Visa or the Digital Nomad Visa because those people would become Spanish taxpayers and will be considered as such. Again it's an interpretation and it seems logical in this case. However it would preclude people from buying before coming over. They would have to wait until their visa was granted and they had established residency here meaning an extra pressure on rentals (See below in the effects section)

Implementation Issues

If the proposal were to be the first one, 100% tax on purchase price, then the implementation is difficult to see under current laws. The tax charged on purchasing second hand property in Spain is not a national government issue. Each region sets the tax rates according to their own criteria, it's called ITP, and it ranges from 6%-12% depending on where you buy. In Valencia it's 10%. If you buy a new property then the tax is 10% and it is national because it is VAT as opposed to ITP. The opposition parties in charge in certain regions would not implement a tax they are not in agreement with and equally they would use the lower tax rates to attract people into their regions rather than those charging 100%.

Effects on the Property Market

If there were a 100% tax on purchases by non EU nationals then we would expect those coming to Spain to rent instead piling even greater pressure onto an overheated rental market and pushing up prices even further. Once settled here as a resident then the non-EU national could buy, although as mentioned earlier in Denmark as an example they need to wait five years.

In terms of what it would do in the property market for purchasing then there would be little effect in most areas. However there could be a huge problem in the coastal areas where non EU buyers tend to buy more such as the Southern Costa Blanca near Alicante and the Costa Del Sol as many builders have a target market outside the EU for their new builds and all of their ongoing builds would lose their buyers if a 100% tax rate was implemented. Those builders would go bust either during construction leaving ghost buildings or on completion when they cannot sell. This may bring down prices on the coasts in the affected areas a little but more likely is a pivot by some developers away from the UK market towards the more profitable EU market of Germans, Dutch and Belgians for example and other developers going bust and leaving a mess.

What Nobody Talks About

The problems in the Spanish property market are not caused by foreigners from outside the EU buying property. Any measures taken against this will have a minimal effect as that portion of the market is under 5% on a national level. The biggest issues that need takling head on are:

Airbnb
Lack of Supply of New Build Property
Lack of Social Housing
The interminable planning and permit process
Speculation by Big Business and Investment Funds
Empty properties
Spanish people's multi property ownership

We will have further blogs about most of the above in future and we have talked on the blog in the past about these issues but let's look at the last one. It's the big unspoken issue. It's the Spanish themselves who have gone big into multi property ownership and it is they who push up the prices for their compatriots in large part. I wrote a thread on Bluesky where you can find and follow me about this. It went as follows;

Spoke to a teacher yesterday about the Spanish housing crisis and here is one issue never spoken of.

They have 40 colleagues at the school

20 have a second home.
5 have three or more properties.
15 live at home with mum and dad (or shared rentals)

All Spanish. The Spanish buy real estate as investments, not shares or other stuff.

They affect the ability of their colleagues to buy their own place of course.

And here’s the kicker. Many are Vox supporters (yeah teachers can be dumb too) and they blame immigrants for the problems of the housing market because of course they do

Oh, and of the 20 with second homes half of them at least rent them out only on Airbnb, not to their colleagues for example as that investment "doesn’t pay" (comparatively)

Unintended Effects

Investment in Spain by foreign capital might well plummet if this measure came into place as it would have to include investments in real estate by foreign companies too whether for residential or commercial purposes. If companies are given an exception then expect everyone who wants to buy a property to set up a company to purchase which is very easily done.

Equally, as a non resident you could buy an off the shelf Spanish SL company and use that as the vehicle to buy the property. You would lend the company money to make the purchase and then the company would "pay you back" over time as if it were a mortgage holder.

You could also find that it would be advantageous for sellers who wanted to deal with a foreign buyer to have their own properties in a company structure to "sell" the company rather than the property. The company's only asset would be the property. Hacienda, the Spanish taxman, doesn't like this

When Might This Happen?

The proposal will need to pass through parliament as all new tax raising powers do. If it is a new tax as opposed to raising the ITP which is difficult to implement for reasons stated above, then the government will have to bring a bill to parliament, get it approved by coalition partners and others who do not agree with the proposal and then get it passed through the Senate where they do not have a majority. That will not happen quickly. Even if it were to be taken through parliament as quickly as possible then I can't imagine it happening within the next year, so don't panic yet.

What Can You Do?

Simply put, buy now! Or at least bring forward your plans to buy as soon as possible just in case this proposal ever happens or looks like it may happen. If you need to sell your house first in your country of origin then get it sold and get the funds here to buy. Bring forward your residency in Spain so you are classed as a resident even if you are non-EU and avoid any potential extra tax burden.

This is a similar situation to the ending of the Golden Visa in one sense. When announced in April 2024 it didn't happen straight away, it took a year for it to finally disappear (See our blog here about the end date on 3rd April 2025) and that was easier to do as it didn't require a new law with all of the checks and balances involved in that, it just required one law to be struck off the statute books. This might be the first time ever people have been happy for Spanish bureaucracy to take hold.

Make sure to keep an eye on developments with regards to the proposal. The best way to do that is to ask to be on our mailing list or our Whatsapp alert group where we keep you bang up to date with everything to do with everything around Valencia and Spanish property issues (Along with updating you on blogs, podcast and price drops among other things).

And most importantly of all... fill in the form on our page here to let us know what you are looking for and get the process started to buy your own place in Valencia asap! You might be running out of time... or you might not be. We look forward to hearing from you and of course, if you have any further questions about this or any other issues to do with buying property in Spain then feel free to email us and we'll get back to you quickly.