Last week, Spanish Socialist Prime Minister Pedro Sanchez announced several measures, including imposing a 100% tax on the value of homes purchased by foreigners, to address the country’s housing crisis.

Sanchez aims to deter non-EU residents from buying homes in the country. “Housing in Spain should be for Spaniards to live in, as well as for immigrants who come here to work, build a life and contribute to the development and prosperity of our country,” Sanchez said, referring to people who use housing as an investment. vehicle.

Housing shortages and rising prices have prompted people to protest against tourists in several cities such as Barcelona and Seville, where foreign buyers and mass tourism are seen as contributing factors to the crisis.

How serious is the housing crisis, and will new measures address the issue that successive governments have failed to address?

What is Spain’s new property tax proposal?

Sanchez proposed 12 steps to address the country’s strained housing market, which saw some of the highest price increases in Europe last year at 8.3 percent.

The 100% tax will affect foreign buyers, who bought 27,000 apartments in 2023. In the third quarter of 2024, about 15% of all properties were purchased by foreigners, according to the registrars’ association.

“they [overseas buyers] “They did it not to live, but to speculate, to make money from them, which is something we cannot afford given the scarcity,” Sanchez said at the “Housing, Fifth Pillar of the Welfare State” forum in Madrid on Monday. .

The Spanish leader also proposed higher taxes on holiday rentals to ensure that apartments rented to tourists are taxed “like a business”. “It is not fair that those who own three, four or five apartments for short-term rental should pay less in taxes than hotels,” Sanchez said.

Other proposals include tax breaks and incentives for landlords to provide affordable housing, especially for young people, and capping rents in high-demand areas.

What other measures have been announced?

Sanchez, who heads the leftist coalition government led by Spain’s Socialist Workers’ Party, plans to amend laws to speed up the construction of new homes and expand the availability of land for private construction.

About 600,000 new homes are needed by the end of 2025, but only about 90,000 homes are built each year, according to the Bank of Spain.

Sanchez stressed that housing is his government’s top priority, but warned that there is no “magic bullet” to solve this issue. The Spanish Prime Minister announced the transfer of two million square meters of land to a new public company to build “thousands and thousands” of affordable social housing units.

Buildings subject to social housing are subsidized by the government and owned or managed by local or central government or non-profit organizations.

Sanchez stated that social housing constitutes only 2.5 percent of the Spanish market, which is much less than the area in other major EU countries, such as 14 percent in France and 34 percent in the Netherlands.

Without outlining a detailed plan, Sanchez also said the government plans to combat fraud in vacation rentals, such as those found on platforms like Airbnb.

Fraud in the holiday rental market in Spain includes fake property listings, unauthorized rental of properties to tourists without the consent of the owners, and unlicensed rentals that do not meet legal or safety standards.

In December 2024, Spanish authorities launched an investigation into Airbnb for failing to remove thousands of misleading rental offers on its platform.

At the same time, the Golden Visa, which was introduced in 2013, will be abolished. This program allowed wealthy investors from outside the European Union to obtain residency by purchasing real estate projects worth at least 500 thousand euros (about 513 thousand dollars).

What characteristics and people will influence it the most?

The tax will apply to individuals who are not EU citizens or residents, and often use properties as holiday homes or investment.

UK buyers top the list of foreign property buyers in Spain About 10 percent of all acquisitions by non-residents in the fourth quarter of 2023.

Housing shortages and rising rents mean people have fallen out of the market, with the homelessness rate rising by 24 percent since 2012 to 28,000 people, according to 2012 estimates. Official numbers.

The new measures taken by Spain aim to help residents, especially those residing in cities and coastal areas such as the Balearic Islands and the Canary Islands, where rents have risen due to high demand and limited supply.

When will it take effect?

The exact timetable for implementing the tax on foreign buyers and other proposed measures has not been determined.

The proposals require approval by Spain’s divided parliament, where Sanchez’s minority coalition may face a challenge in passing the legislation.

How expensive is housing in Spain?

Housing in Spain has become particularly expensive in urban centers or tourist hotspots such as Madrid, Barcelona and cities on the Mediterranean coast.

Rents in the country rose by 11 percent in 2024, according to the “Idealista” real estate website.

A one-bedroom apartment in Barcelona city center costs approx $1,313 per monthand $989 per month outside of downtown. The average rent in Barcelona has increased by 53 percent Over the past decade.

However, Spanish cities are still cheaper than many Western European cities, with rising rents and housing prices adding to the cost of living crisis.

In London, which is also facing a housing crisis, the average rent for a one-bedroom apartment was $2,738 per month in December 2024.

A Report from London City Hall showed that the city’s rising rental costs were driven by its status as a global economic centre, attracting a large workforce and student population, which increases demand for housing. This demand is coupled with a significant decline in the supply of rental properties since 2020, pushing rents to record levels.

Sanchez noted that housing prices across Europe have risen by 48 percent in the past 10 years, nearly double the increase in household income over the same period.

He said: “The West faces a critical challenge: not to become a society divided into two classes: the class of rich owners and poor tenants.”

He said, according to statements published by the government: “We are facing a serious problem, with enormous social and economic repercussions, requiring a decisive response from society as a whole, first and foremost public institutions.”

Is tourism the only factor affecting the housing crisis?

Spain is the second most visited country in the world with more than 94 million tourists in 2024. Tourism generates revenues estimated at $200 billion, or 13 percent of the country’s GDP.

Residents in Spain have complained about mass tourism, including gentrification, increasing costs of living and a rise in rowdy behavior by foreigners looking to party.

However, tourism is not the only factor contributing to Spain’s housing crisis.

Spain’s 2008 housing crisis and subsequent financial crisis also exacerbated the problem. Between 2008 and 2014, Spain experienced a major financial crisis, which also included a long-lasting real estate collapse.

“By 2015, house prices had fallen by a third from their peak in 2008, and there were essentially no new homes being built,” according to an ECB working paper.

The COVID-19 pandemic has also exacerbated the crisis as construction costs have risen significantly since then.

The high youth unemployment rate of 26% means that young people are living with their parents for longer periods, slowing down new housing developments. Nearly two-thirds of Spanish youth aged 18 to 34 live with their parents.

Other factors include complex regulations that have slowed land development and a lack of bank financing and balance sheets for real estate projects.