Sanchez’ Property Tax Own Goal

Spanish Prime Minister Pedro Sanchez certainly put the cat amongst the pigeons when he announced that non-EU residents could be charged up to 100% tax on new property purchases. Homebuyers in Spain currently pay  6-13% purchase tax depending on the region. 

Sanchez’ announcement last Monday (13/1/25) was part of a 12-point plan due to start in 2026 to promote public housing. It’s been reported as fact but it’s just a proposal at this time and in truth has little chance of successfully getting through parliament as he does not have a majority and all coalition partners would have to support it, which is unlikely. What’s more current European law doesn’t allow it and Spanish property taxes are in the hands of the regional authorities and those which are controlled by the opposition Partido Popular (including the Balearics) have said that they wouldn’t introduce the tax. 

First of all let’s put this proposal into context. Non EU property purchases last year were only 2% of all Spanish property sales so this proposal won’t help the housing situation. Here in the Balearics, for example, the type of properties bought by non EU citizens in general are not the type of property that Spains public sector workers buy or rent. 

Rather than targeting the 2% of the market it might be an idea to look at landlords in the big cities who charge crazy money for rents plus the socialist PSOE government could be proactive by introducing realistic tax incentives for those who own multiple properties to encourage them to rent. Currently the rental market is a mess with tenants allowed to stay put for up to 7 years which deters many from renting while squatters are perceived to have more legal rights than owners.

The mortgage system in Spain needs a total overhaul and locks out those who don’t have large deposits to put down. A mortgage needs to be more attainable to the younger Spanish market and while he’s at, overhaul planning laws to make them more flexible to encourage the building of social housing. 

However instead of focussing on pro-active measures to encourage residents into home ownership or assisted housing Sr Sánchez has framed the blame on rich foreigners, a cheap and easy shot to keep his political partners happy. 

The cold hard fact is that there’s been no creation of any social or assisted housing here in the Balearics for many years (I wrote about the housing shortage in 2017). We’ve had consecutive regional and central governments that have done nothing amid a growing population and it’s these same politicians who are now shouting from the rooftops about the housing crisis.

The Partido Popular, the government opposition in Madrid, have decried the new proposal as “xenophobic” reiterating that they would not introduce these tax laws in regions that they govern such as Andalucia, the Canary Islands and the Balearics. “The problem is not that people want to live in Spain, the problem is that there is a lack of housing,” said Luis de la Matta, director of communications of the Partido Popular (PP).

So we have a badly thought through proposal that won’t get the necessary support targeting the wrong demographic being reported as fact. When it comes to bad optics is doesn’t come much worse. To score a few cheap political points Sr Sánchez has opened a can of worms that will rumble on for months. He should be very proud of himself.