Plans by Spain to impose a 100% tax on holiday homes could prompt Brits to turn to Greece and Cyprus instead, say experts.
Pedro Sanchez, Spain’s prime minister, has proposed the hefty levy on properties bought by non-European Union residents, as part of efforts to ease a housing crisis. In the wake of Brexit, any such tax hike would hit British buyers too. According to the prime minister’s speech, non-EU residents bought 27,000 properties in Spain in 2023. Brits make up around 8.5% of foreign property deals, followed by Germans.
Unveiling a package of measures, he said: “The west faces a decisive challenge: to not become a society divided into two classes, the rich landlords and the poor tenants.”
Prices in places from Madrid to Mallorca has also been driven up by a new wave of buyers from the US, Mexico and Venezuela.
Some experts have questioned whether Mr Sanchez has the political backing to push through the change. But it has unsettled the more than 300,000 Britons who already live in Spain, and will doubtless dent confidence among those who would love to snap-up a home in the sun to escape the UK weather.
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Toby Leek, of property professionals’ body NAEA Propertymark, said: “Many Britons 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 has been grappling with pressures on housing costs, with rents in major cities like Barcelona and Madrid being a particular concern, alongside rising house prices.
Tourism and short-term lets are aggravating housing issues, according to Seila Sanches Lucas, a solicitor at the global firm Broadfield. 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. If adopted, there are many other jurisdictions looking to attract wealthy retirees and investors. For example, Dubai has been called the ‘new Marbella’.”
Simon Creed of Azahar Properties, who has been selling homes in the Valencia region to Britons, Americans and other non-EU citizens for over 22 years, told the BBC: “Naturally who wants to pay 100% purchase tax for buying a property here..
“The Brits have always been big buyers here in Spain, but obviously it is going to increase the buying power of EU citizens like the German, French and Belgians, so it doesn’t appear to be very fair just to isolate non-EU buyers.”
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Yet it comes amid report that several EU countries are set to follow Spain’s lead and launch taxes on foreign buyers. Greece, France and Portugal are also suffering from similar housing problems and could impose similar taxes in an attempt to get a grip on the crisis. Last year France passed a long-awaited bill to tighten regulations on the short-term rental market. And the Greek government was pressed to act last year as Brits dreaming of retiring by the sea headed eastward in search of summer homes or medium-term investments.
Other proposals announced by Mr Sanchez include higher taxes on Airbnb holiday rentals. There have been protests by locals in a number of Spanish cities about the flood of tourists, and how short-term rentals are, they argue, making it impossible to afford a home.
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