Spain 'shooting itself in the foot' over plan to ban sales of homes to Britons

While current British residents in Spain would be unaffected by the proposed measures, the policy threatens to disturb the decades-long tradition of Britons purchasing retirement and holiday homes along Spain's Mediterranean coast.

The move has followed Spain's decision to axe its "golden visa" scheme, which is due to close on April 3 this year.

One estate agent claimed that Spain was "shooting itself in the foot" by taking a harder stance against foreign property owners.

Despite fears about Britain's decision to leave the European Union, British buyers have continued to dominate Spain's foreign property market, accounting for 8.5 per cent of all foreign deals in the third quarter of 2024.

Non-EU purchases make up just a small fraction of Spain's total property market - of 340,281 sales in the second half of 2024, just 69,412 involved foreign buyers from both inside and outside the EU.

Sánchez's crackdown comes amid an acute housing crisis, with the Prime Minister responding to Spanish anger over foreigners purchasing homes needed by locals.

However, Mark Stücklin, founder of Spanish Property Insight, has insisted that the Government is refusing to acknowledge the real causes of Spain's housing problems, describing the proposed tax as "posturing political theatre" aimed at appeasing Sánchez's far-Left coalition partners.

"It's scapegoating foreigners who are the only group that can't vote in Spain. Foreign property buyers have a financial stake but no political stake, so they're an easy target for a bully to pick on," Stücklin fumed.

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Stücklin declared that a 100 per cent tax or total ban would be a "catastrophe" for local housing markets and economies, particularly in tourist destinations.

"Non-resident, non-EU buyers make a massive contribution to the Spanish economy, through tax and investment, in spending on white goods and maintenance."

"It's incoherent. These people spend money, pay VAT. There is zero upside," Stücklin added.

Estate agent Mohammad Butt said: "Foreign buyers bring a huge level of investment. They pay tax on the purchase, then typically rent properties out when they're not living there, and the rent is taxed. Then they pay capital gains when they sell."

He added that his clients are in a "panic" due to uncertainty surrounding the announcement.

"We don't even know what a 100 per cent tax means. Will it be that you pay a million in tax on a one million-euro property, or does it mean a doubling of the current 10 per cent rate?" Butt asked.

"Spain has successfully positioned itself as a tourist destination. It's short-sighted to say 'we don't want this revenue' when there's no way to replace it," said Butt.

British buyers have long been drawn to Spanish property, with the trend taking off in the 2000s when television programmes like "A Place in the Sun" romanticised the Mediterranean dream.

Successive Spanish Governments actively welcomed the British investment, viewing foreign property buyers as beneficial to the economy, particularly in coastal regions and tourist hotspots.

The relationship dates back to the 1960s, when Britons first flocked to the beaches of Benidorm and Alicante, enticed by affordable property and welcoming locals.

These areas gradually developed into British enclaves - an oasis of English breakfasts and mostly English-speaking communities.