Faced with these internal issues, Sanchez is reportedly considering postponing the general election to early summer to bolster his political support.The proposal for 100% taxation should be viewed through the prism of an electoral strategy.This is a politically motivated statement aimed at appeasing a dissatisfied domestic audience, rather than a serious political initiative.
In Spanish politics, such statements often serve as "political bravado" rather than effective measures.On Sunday, January 19, at a political rally in Extremadura, Mr. Sanchez said he wanted to "completely ban the purchase of housing by non-residents from outside the EU" on the grounds that "they are all real estate speculators."
Sanchez irresponsibly shifted all the blame for rising house purchase and rental prices onto foreigners from outside the EU, making them scapegoats.
The proposed tax increase will have little impact on rising housing prices, but it will nevertheless have a serious impact on local businesses and employment if implemented.
The real reasons for the rise in rental prices in Spain
Rental prices are rising as landlords are leaving the real estate market en masse due to new legislative measures aimed at protecting tenants at the expense of landlords. Thus, there are fewer apartments on the market. Although the Spanish Government pursued noble goals (to help vulnerable segments of the population gain access to housing), it achieved this by ignoring the rights of landlords. Housing prices are rising for several reasons, including an increase in the cost of building materials. In addition, developers are now required to allocate 40% of their plots for social housing, which leads to a reduction in supply on the market. As a result, 60% fewer houses are being built in Spain than a decade ago.Minor impact on the real estate market
Despite its provocative nature, the proposed policy will have minimal impact on the Spanish real estate market as a whole.Of the approximately 587,000 transactions made in Spain in 2023, only 18,648 involved citizens of non-EU countries. In other words, buyers from non-EU countries accounted for 3% of the total in 2023, according to the Spanish Notary Association.It's a drop in the bucket!
Thus, even if this tax is introduced, it is unlikely to affect the growth of housing prices or the situation on the real estate market in general.
Negative effects of the proposed 100% tax on those who are not EU citizens
Foreigners, and in particular non-residents from non-EU countries, tend to settle in the picturesque coastal areas of Spain, the Balearic and Canary Islands.They usually do not buy property in major Spanish cities such as Madrid, Barcelona, Valencia and Malaga.
Due to the fact that these foreigners prefer to settle in certain places, thousands of local businesses (from schools to real estate agencies, supermarkets, etc.) will now find themselves in a difficult financial situation, as their businesses depend on newcomers. Thousands of jobs will be at stake.Moreover, foreigners who are heavily dependent on other foreigners for the sale of their real estate (since their price range is not available to Spanish citizens) may face a sharp decline in prices for their properties, as the range of potential buyers may decrease dramatically, at least until everything settles down.
Internal challenges: difficult and lengthy implementation
Spain is administratively divided into 17 autonomous regions, to which powers over tax matters have been delegated (with restrictions).Each of these regions has its own regional parliaments that pass laws.In some regions, it would take a very long time, even years, to coordinate and adopt such laws.
Moreover, as already mentioned, since the regions have tax powers, some regions that are politically opposed to the ruling party in Spain may reject, if not directly challenge, the proposed 100% tax for buyers from non-EU countries, which will lead to litigation and delay its introduction. for years to come.In short, it would be a lengthy and time-consuming procedure that could take years to implement.
EU legal and technical restrictions
More importantly, this proposal faces serious legal hurdles.As a member of the European Union, Spain is bound by basic principles that include the free movement of goods, services and capital.These principles, enshrined in fundamental treaties such as the Treaty of Rome (1957), prohibit member states from pursuing policies that restrict investment, including from non-EU countries.
These fundamental principles of the EU underpin the Union and cannot be violated by any of its members, including Spain.Simply put, member states cannot adopt laws that in any way hinder investment, even if they are not from the EU.
A practical solution to circumvent the 100% tax, even if it would have been accepted
Surprisingly, it would be as easy as possible to circumvent this limitation. All you have to do is apply for and obtain a residence permit in Spain.
Conclusion: much ado about nothing
The proposed 100% tax on the purchase of real estate for non-EU citizens is a prime example of political rhetoric.
Although the proposal may cause sensational headlines and temporarily scare off investors, it is unlikely that its adoption will actually occur due to the insignificant impact on the market and obvious legal inconsistencies at both the national and EU levels. For Spain, as an EU member, such a policy is not only impractical, but also legally untenable..
Source: Idealista
