Foreign Non-EU Buyers Spend Significantly More on Spanish Properties
In a notable trend, families from outside the European Union are investing heavily in the Spanish real estate market, paying an average of more than double the price per square meter compared to local buyers. This phenomenon is exemplified by the Baxter family from the United Kingdom, currently searching for a home in Alicante. With a budget of up to EUR700,000 in cash, they aim to expedite their purchase in light of potential new government regulations that could impose a tax surcharge of up to 100% on non-resident foreign buyers.
The Spanish government introduced this proposal to prioritize housing access for residents amid a reported deficit of approximately 600,000 homes in the country, according to the Bank of Spain. The intention is to deter speculative transactions, particularly in high-demand areas like Madrid, Barcelona, the Costa del Sol, and Mallorca. However, experts suggest that the actual impact of such measures may be limited, as foreign investors typically target properties that significantly exceed the national average price per square meter.
For instance, the Baxter family's situation mirrors that of a couple from New Orleans, USA, who are also looking to buy a house in the Basque Country with plans to relocate there in the coming years. Real estate agencies have noted an acceleration in searches among clients eager to finalize purchases before the new measures and the expiration of the golden visa program in April, which currently allows foreigners to obtain residency through property investments exceeding EUR500,000.
Statistics from the General Council of Notaries reveal a stark contrast in property prices. In the first half of 2024, domestic buyers paid an average of EUR1,659 per square meter, while non-EU foreigners spent EUR3,379, marking a difference of 103.7%. This gap has widened over the past five years, with overall foreign buyers averaging about EUR2,250 per square meter.
While the government's tax measures may target non-EU buyers, most of these transactions represent a small fraction of the overall market. Data indicates that non-EU foreign buyers accounted for only 2.5% of total home sales in the first half of 2024, amounting to just over 8,400 properties out of more than 340,000 transactions. The government claims a higher number of around 27,000 sales for 2023, which some analysts argue is inflated, as the notaries' figures suggest around 18,600 sales, reducing non-EU purchases to about 3% of total sales.
Experts like José García Montalvo, a professor at Pompeu Fabra University, believe that the impact of these new regulations will be minimal due to the limited representation of non-EU buyers in the market. He suggests that while specific areas such as Mallorca may experience some effects due to higher concentrations of affluent foreign buyers, the overall national housing market may not benefit from this approach.
Moreover, analysts from premium real estate firms argue that penalizing non-residents will not necessarily benefit local buyers seeking affordable housing, as these high prices are often out of reach for them. For example, the average price per square meter for British buyers reached EUR2,500 in the first half of 2024, while Americans paid up to EUR3,620 and Norwegians around EUR3,000. Venezuelans and Ecuadorians topped the list at EUR6,800 and EUR4,760, respectively.
Some experts view the proposed measures as insufficient, advocating for a comprehensive approach that also addresses the role of EU nationals, corporate entities, and large investors who contribute to housing speculation. They emphasize the need to reduce excessive investment returns in the Spanish real estate sector, which can exceed 10% in areas like short-term rentals. While a potential 100% surcharge on property transfer taxes could mitigate speculative buying in specific segments, a broader strategy focusing on affordable housing development is deemed essential for sustainable market health.
In locations such as Alicante, where over 50% of property purchases are made by foreign buyers, the proposed tax measures might adversely affect the market. However, around 65% of homes acquired by non-EU buyers are intended for personal or family use, with only 35% purchased as investment assets.
