Spain’s New Housing Measures: Will Limiting Foreign Buyers Solve the Crisis?
In January 2025, Spanish Prime Minister Pedro Sánchez announced a set of 12 measures aimed at tackling the country’s housing crisis. Among these, one proposal stands out for its potential to reshape the market: increasing taxes on property purchases by non-resident foreigners in Spain, especially in high-demand areas. While this measure is meant to prioritize access to housing for Spanish residents, questions arise about its potential effectiveness and unintended consequences.
The Proposed Limit on Foreign Buyers
Under this policy, non-resident foreigners, particularly those from outside the European Union (EU), would face a 100% tax increase on property purchases in Spain. This aims to disincentivize speculative buying and the acquisition of vacation homes in “tensioned zones” — areas with high housing demand and limited availability, such as coastal regions, islands, and metropolitan cities like Madrid and Barcelona.
The reasoning is straightforward: by reducing competition from wealthy foreign investors, the government hopes to free up more housing for Spanish residents. However, this measure also raises concerns about whether it addresses the root of the housing crisis.
Who Are Considered Foreign Buyers?
Citizens of EU countries and members of the European Economic Area (EEA), such as Norway and Iceland, are generally not subject to such restrictions due to agreements on the free movement of people and capital. However, non-EU countries like Israel fall outside this framework, classifying their citizens as non-resident foreigners.
This means that Israeli buyers — often active in Spain’s luxury property market — would be directly impacted by the proposed tax increase, as they do not enjoy the same privileges as EU residents.
Challenges with This Measure
While the proposal targets speculation and housing shortages, several issues highlight its potential shortcomings:
1. Tensioned Zones Are Already Expensive
The areas classified as “tensioned zones” typically feature high property prices that are already unaffordable for most Spanish residents. Even if foreign buyers are deterred, it is unlikely that Spanish citizens with limited purchasing power will step in to buy these expensive properties.
The measure could result in these homes sitting unsold, creating a stagnation in the housing market without significantly increasing access for locals.
2. Housing Affordability vs. Availability
Spain’s housing crisis is not just about availability but also affordability. While limiting foreign purchases might slightly lower prices in specific areas, it doesn’t directly address the lack of affordable housing. Many Spanish residents are more concerned with access to low-cost rentals or homes, particularly in urban centers and rural areas.
3. Impact on the Luxury Market
Foreign buyers, especially from countries like Israel, often focus on high-end properties that don’t necessarily compete with local demand for affordable housing. Restricting this market could have unintended consequences, such as reducing foreign investment in Spain’s economy without significantly alleviating the housing crisis.
4. Potential Inflexibility for Sellers
Property owners in tensioned zones might face difficulties selling their homes if the pool of buyers shrinks. This could lead to further immobilization of the market and discourage future real estate development in these areas.
Alternatives and Complementary Solutions
For this measure to work effectively, it must be part of a broader strategy. Some complementary actions could include:
• Encouraging Affordable Housing Development: Incentives for constructing affordable rental properties or subsidized housing could directly address the needs of Spanish residents.
• Repurposing Vacant Homes: Policies that encourage or require owners to rent out vacant properties at reasonable rates could help increase housing supply.
• Tax Incentives for Local Buyers: Offering reduced taxes or subsidies for Spanish residents purchasing homes could stimulate local demand.
• Reforming Rental Markets: Stronger regulations to control rental prices and prevent exploitation in tourist-heavy areas could benefit residents struggling with high living costs.
Global Perspectives on Foreign Buyers
Spain is not the first country to introduce measures targeting foreign property buyers. Canada recently implemented a two-year ban on foreign real estate purchases in certain markets, while New Zealand and Singapore have long-standing restrictions on non-residents buying homes. In each case, the success of these measures has varied, often depending on how they align with broader housing policies.
Final Thoughts
The proposal to tax non-resident foreign buyers at 100% represents a bold step toward addressing Spain’s housing crisis, but it is unlikely to be a silver bullet. While it may reduce speculative buying in tensioned zones, its impact on overall affordability and accessibility is debatable.
Without complementary measures to increase the availability of affordable housing and provide support for local buyers, this policy risks being a symbolic gesture rather than a transformative solution. As Spain grapples with its housing challenges, the success of these new measures will depend on their implementation and the government’s commitment to tackling the deeper issues of affordability and market inequality