The recent remarks by Spanish Prime Minister Pedro Sánchez concerning a potential Spain’s property tax increase of “up to 100% of the value of the property” for non-EU buyers have stirred significant concern within the property investment community. While this proposal was part of a broader discourse on global property market challenges and enhancing housing affordability for younger generations, it has created considerable unease, particularly among UK investors.
This suggested tax hike appears to involve a substantial increase in the existing property transfer tax (ITP). Which currently varies between 6% and 10% depending on the region, rather than an unprecedented 100% levy on property values. Any such legislative change would necessitate passage through the Spanish Congress. This is a process likely to be protracted and intricate, given the autonomous regional governments set their own tax rates. Moreover, the IVA, Spain’s VAT, applies only to new builds, adding further layers of complexity to property transactions.
The proposal has drawn widespread media attention, seemingly achieving its aim of spotlighting issues related to affordable housing and the influence of foreign property speculation, particularly in key regions from the Balearic Islands to Barcelona and Malaga. This focus on housing issues is aligned with ongoing discourse about tourist and investor impacts on local communities.
Interestingly, the announcement may inadvertently spur short-term interest from non-EU buyers seeking to invest before new tax measures become law. This phenomenon mirrors the market activity seen when the potential scrapping of the Spanish Golden Visa scheme was announced.
Spain remains as an attractive investment destination in 2025
Despite the recent tax proposal, Spain remains an attractive investment destination. The country’s economy is projected to grow by 2% in 2025, with property prices expected to rise by around 4%. Additionally, Spain offers appealing rental yields, with long-term yields of approximately 5.5% in Madrid and Barcelona. And seasonal returns exceeding 8% in high-tourism regions like the Costa del Sol.
Furthermore, Spain’s mortgage rates are among the lowest in Europe, offering a compelling advantage for property investors. With expectations for further declines in mortgage rates by 2025, financing becomes even more favorable. Making investment in the Spanish real estate market increasingly attractive.
Spain’s robust economic outlook, competitive rental yields, and financing conditions bolster its position as a premier choice for property investment.
Kevin Monger
Mortgage Direct Co-Founder