Andorran real estate market: the versatility of investments

Located in the Pyrenees between France and Spain, Andorra is the bearer of the oldest state border in the world that has survived to this day, which has not changed since 1278. From the same year, the country does not participate in wars, maintaining neutrality. Andorra has not yet joined the EU, but is known for its preferential taxation and is considered one of the main offshores in the world, attracting a large number of entrepreneurs and tourists interested in duty-free trade. There is also no property tax in the country.

There is a flourishing trade in luxury goods and a high-level skiing industry, and the capital of the Principality of Andorra la Vella is the highest mountain capital in Europe. The country's standard of living, the quality of education, medical care, per capita income, which last year ranked 22nd in the world, overtaking France and Spain, which provokes many foreigners to move.

Trends

The Andorran government has created conditions under which a law-abiding and wealthy applicant can expect to receive a “passive” residence permit when investing in the purchase of real estate from 350,000 euros or registering an international company. The policy of experienced Andorran bankers in the field of lending also protects housing from depreciation, therefore, a stable situation has been observed in the Andorran real estate market for many years - prices either remain at their level or slightly increase.

After the adoption of a new investment law in 2012, there has been an increase in foreign buyers: now non-residents can not only buy real estate, but also open enterprises in the country and directly invest in the economy of the principality. The influx of cash and the general recovery of the economy - all this has a positive effect on the real estate market. Such processes led not only to the revival of the industry, rising prices, but also the formation of a certain deficit, especially commercial real estate - objects in this category are in high demand, since the yield on renting is from 15%.

One of the actual features of Andorra is the limited space for development. Including territories with investment attractiveness. Government policy is aimed at identifying promising sites or buildings with subsequent development or reconstruction and attracting investors for these purposes on favorable terms. If you find out about such options in advance (large companies that have been operating in the region for a long time have such information), then you can purchase an object that has positive prospects for long-term use, as well as receive a high rental income of up to 20%.

Therefore, today there is a shortage of new housing in the real estate market: if something new is being built in the capital, then we are talking about very high prices, which does not prevent the objects from being bought up even at the off-plan stage. For affordable real estate, demand also exceeds supply, so compared to 2017-2018. prices have gone up a bit. The cost of rent is also increasing, while finding a good object is quite difficult.

Geography and prices

Andorra, although a small country, is administratively divided into seven provinces. Each of the provinces has its own development specifics. So in the metropolitan region of Andorra la Vella , real estate prices are not only devoid of seasonality, but are also growing steadily, especially for commercial real estate, premises for long-term lease or obtaining a legal address. On average, we are talking about 3000-5000 euros per sq.m. A similar situation is observed in the province of Escaldes-Engordany, a very popular area with local residents. Here is located the largest complex with thermal water in Southern Europe, shopping streets with duty-free shops.

Prices in the provinces of La Massana and Canillo are lower: the cost per square meter usually does not exceed 3,000 euros. Previously, these areas provided services to tourists who come for winter sports, but recently the country has made great strides in the development of the tourism industry and infrastructure for golf, cycling, equestrian sports. The creation of "health routes" and "historical tours", duty-free trade in certain goods - all this ensures a year-round steady influx of tourists into the country, so the number of tourists is 12 times higher than the indigenous population. And, as a result, it supports the demand for real estate for various purposes.

A two-bedroom apartment in Andorra can cost from 150,000 euros, the average benchmark for a three-bedroom apartment will be in the region of 300,000 - 450,000 euros. Individual chalets can still be found for €750,000 but are likely to cost upwards of €1 million, especially if it is a new or newly built property. Apartments and chalets are in demand both in the capital itself and in the ski resorts of Encamp and La Massana.

Thus, real estate prices in Andorra are affordable, the yield remains within the average European limits, but the peculiarities of tax legislation, political and state systems allow the owner of Andorran real estate to receive additional preferences.

Since tourism, trade and financial management have become the main areas of activity of the Andorran economy, therefore, when renting out housing, there are two main areas: “long-term rental” and “short-term rental for the tourism business”. If in the first case the rates are low, but stable and reach 5%, then in the second case the rates exceed 8%. Moreover, thanks to effective management, investment in the tourism sector, the impact of seasonality in the rental business has been significantly reduced.

Buyer portrait

Basically, buyers of real estate in Andorra are people who want to get a residence permit here, as well as the opportunity to move freely around France, Spain, Portugal and Monaco. The Principality is also of interest to those wishing to organize a European company for business, eventually obtaining the residence of the country and reducing taxes on income (no more than 10%) or property.

They often buy real estate here “for themselves”: they plan to live in Europe, using the opportunities of the country's residents - free school education for children according to one of the three educational systems operating in Andorra (French, Spanish or Andorran). The country also has an international lyceum teaching in English. You can continue your education at the University of Andorra or abroad.

Of course, among the buyers of local housing there are many who wish to receive passive income from renting out real estate. For example, obtaining a resident status when buying a property worth more than 350,000 Euro allows you to receive passive income from renting it out; when buying a property, the buyer must open an Andorran bank account that can be used for commercial purposes. In the future, a company is opened, the legal address of which is registered at the address of the real estate.

Forecast

The government of Andorra has big plans to develop the country further. It is planned to build an international airport, and the tourism sector is “moving away” from seasonality. Most likely, sustainable and progressive development can be expected from the Andorran real estate market. The number of luxury properties offered by developers is growing, as well as due to the quick reaction of hoteliers and investors in the tourism industry, who have set a course for opening apart-hotels with an eco-concept, legal and legislative support for the construction and tourism industry, the reliability of banks and a stable political situation. .

Thank you for your help in preparing the material:

Irina Klyuchinskaya, head of AndInvest

Polina Skvortsova, expert of the company "Advex-Real Estate"