Spain's real estate market is witnessing a marked upswing, with property prices escalating by an average of 9% during the first nine months of 2024. This uptrend, following the recovery from the 2008 financial crisis, has reignited worries about housing affordability.

In reaction to this, Prime Minister Pedro Sanchez has introduced a contentious proposal for a 100% tax on property acquisitions by non-EU nationals without residency in Spain.

The aim of this proposal is to temper property speculation, which many perceive as a factor in the escalating home prices and rents in cities like Madrid and Barcelona.

Yet, critics contend that foreign speculators constitute a minor segment of buyers, with high transaction costs and legal hurdles deterring speculative investments. Demand for Spanish properties from abroad has ballooned since the COVID-19 pandemic, with nearly a fifth of homes sold in the previous year being purchased by foreigners, notably from the UK, Germany, and other European nations.

Although increasing foreign purchases are pushing prices upward, the Spanish market is grappling with additional challenges, such as rising rents fueled by short-term tourist rentals.

Sanchez’s proposed tax would not impact EU nationals or companies, who can remain open to purchasing property freely.

Meanwhile, the conservative Popular Party (PP) has urged measures to alleviate the tax burden on property sales and to encourage affordable housing, including unlocking land in high-demand areas.

Globally, other countries have also addressed foreign property buyers, with some instituting taxes or restrictions to tackle affordability issues.

Singapore imposes the highest tax on foreign property ownership at 60%, and places like Hong Kong, Canada, and Switzerland have also adopted measures to regulate foreign investment in real estate.