British expats to Spain could be hit hard by a proposed new 100 per cent tax on property purchases. The measure was outlined by the Spanish PM, Pedro Sanchez, in a speech on Monday as part of a series of proposals to tackle his country’s acute housing crisis. If imposed, the policy would mean all non-EU nationals without residency would effectively have to pay double that of a native Spaniard to buy a house.

The Spanish housing market is running red hot, with house prices up 8.1 per cent in Q3 2024 alone, as growing demand outstrips supply. That surge has been blamed in part on the practice of foreign buyers buying houses and apartments and then renting them to tourists using online marketplaces like Airbnb, resulting in many Spaniards being priced out of the market.

While the proposed new property tax may be a well-meaning attempt to secure Spanish housing stock from exploitative practices, it also threatens to hit some of the 300,000 Brits who have made Spain their home, and the many thousands who would like to but haven’t yet. Speaking to the FT, John Westwood, chairman of Blacktower, said if enacted the new tax would “severely impact UK expats” and “Could deter investment from UK nationals, negatively impact the Spanish economy,”

What is Spain’s new property tax?

Spain’s proposed 100 per cent tax on non-EU house buyers remains a proposal for now. Analysts say that even if Spain’s ruling Socialist Party moves forward with the plans, they could face a raft of both legal and political challenges.

Conservative politicians in Spain have already voiced their opposition to the tax plans and as the head of a minority government, Prime Minister Sánchez is not in a position to pass legislation without support from rival parties. However, some Left-wing politicians have reportedly complained the plans don’t go far enough, opening the doors to a potential deal which could see the proposed property tax become a reality.

That would be bad news for the more than 10,000 Brits who buy property in Spain each year and would see them faced with a 100 per cent tax against the value of the property they purchase. As of 2024 prices, it was possible to buy a beachfront apartment in the Costa del Sol for Around £100,000. But if the Spanish government imposed a 100 per cent levy, the cost to the buyer could double to around £200,000.

That would represent an approximately tenfold increase in tax for Brits wanting to buy in Spain, who pay between 8 per cent and 11.5 per cent on purchases under the existing tax regime, depending on whether the property is a new build or an older property.

Do I have to pay the new Spanish property tax?

While it is important to remember that Spain’s proposed 100 per cent tax on property is a long way from becoming a reality, it could be useful to think ahead to help ensure you remain tax efficient. In an article for The Telegraph, property journalist Liz Rowlinson suggested one way to get ahead of the tax could be to buy property sooner rather than later:

“One way to beat the tax hike would be to buy a property now. Spain’s transaction process can be relatively quick, and can take as little as two weeks if you have the correct paperwork.”

Rowlinson added Brits looking to buy in Spain should consider acquiring residency, which would exempt them from having to pay the tax which only applies to non-resident non-EU nationals:

“The most obvious loophole for British buyers is if they have an EU passport – or a spouse with one – which means they can purchase (or get residency) in the name of an EU citizen. Many British nationals with Irish ancestry have taken advantage of this since Brexit.

“Another option is to become resident in Spain before you buy, as the tax rise being suggested is on non-resident buyers.

“You don’t have to buy a property to get residency. You can rent a property in Spain to get a visa and thus a residency permit – such as the non-lucrative visa (NLV) or the digital nomad visa.”

If you are considering moving to Spain, our comprehensive guide to living in Spain covers everything you need to know, from attaining residency to accessing your pension. However, prospective expats should know a popular route to residency, the so-called Golden Visa scheme, expires in April of this year, so if you’re thinking of making the move you could benefit from acting fast.

Other experts have advised Brits that the best way around a tax hike on Spanish property might be to consider alternative countries to invest in. In comments to The Independent, Toby Leek, head of the National Association of Estate Agents said:

“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.

“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.”

Also speaking to the news outlet, Spanish lawyer Seila Sanches Lucas said if enacted the property tax could drive investors toward alternative destinations such as Dubai. Commenting, 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.

“It is just a proposal at this point in time and is not guaranteed to make it onto the Spanish statute books.

“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.

“If adopted, there are many other jurisdictions looking to attract wealthy retirees and investors. For example, Dubai has been called the new Marbella.”

If you’re thinking of buying property in Spain and believe you may be impacted by new tax rules, it could pay to take professional financial advice to help you navigate the complex and ever-changing rules which characterise the landscape.

deVere Spain offers various financial planning solutions in Spain to cater for your personal financial security. Whether you would like to plan for a safe and secure retirement or you would like to start a savings plan to pay for your children’s future education fees, deVere Spain has a broad range of bespoke solutions to help.

Will the Spanish property tax impact me?

Spain’s proposal to impose a 100 per cent tax on property purchases by non-EU citizens, including British buyers, has generated concern among potential investors and expatriates. This measure, aimed at addressing Spain’s housing affordability crisis, seeks to deter foreign investment that is perceived to inflate property prices, making homes less accessible to local residents.

For British nationals, who have traditionally been among the most active foreign buyers in Spain’s real estate market, this proposed tax could effectively double the cost of purchasing property. Currently, buyers in regions like Valencia pay a 10 per cent transfer tax on the property’s value; under the new proposal, this could escalate to 100 per cent, rendering the Spanish property market significantly less attractive to British buyers.

The potential impact on Spain’s real estate sector is substantial. Foreign buyers constitute approximately 15 per cent of property transactions in Spain, with British investors leading this demographic. A sudden withdrawal of this investment could lead to decreased demand, potentially affecting property values and the broader economy, particularly in regions heavily reliant on foreign property investments.

In response to these developments, British buyers are exploring alternative strategies. Some are expediting their purchase plans to secure properties before any new tax is enacted, while others are considering different markets with more favourable conditions, such as Cyprus and Greece. Additionally, the impending termination of Spain’s “Golden Visa” scheme on April 3, 2025, which has facilitated residency for property buyers, adds urgency for those seeking to establish residency before the window closes.

Spain’s proposed 100 per cent property tax on non-EU buyers aims to address housing affordability for its citizens, and in so doing introduces significant challenges for foreign investors, particularly from the UK. The potential economic repercussions, coupled with political opposition and the end of the Golden Visa program, create a more challenging environment for prospective buyers. Those considering property investments in Spain should closely monitor these developments and seek professional advice to navigate the evolving landscape.