100% Spanish Property Tax: An Opportunity

Spanish Prime Minister Pedro Sanchez has warned that his government may impose a swingeing 100% tax on property sales to non-EU citizens.

Mr Sanchez says that this is necessary to make homes more affordable to Spaniards who, he suggests are being outpriced by foreigners.

He claims that there are similar precedents in other high-tax jurisdictions such as Denmark and Canada.

The statistics appear to indicate that there has been a Europe-wide hike in house prices of some 50% over the last 10 years, and that some 27,000 dwellings are sold in Spain to non-EU residents every year.

Price increases in Spain itself are recorded as having reached 8.3% in the third quarter of 2023, which is substantially higher than the European average.

The intended measure would of course not apply to EU nationals but would certainly affect UK residents who have traditionally been a major component in terms of buyers of second homes in Spain.

This presents the Gibraltar construction and development industry with an unexpected opportunity.

Whilst the property offering in Spain has of course always been substantially different to that of Gibraltar, there will be investors who, having been shunned (or threatened with sky-high taxes) by Spain, may consider Gibraltar as an option.

Of course, this will require a redoubling of efforts to make Gibraltar an attractive place to live in and a clear message from the Government of Gibraltar that it does not consider foreign investors to be an easy target for taxation to make up deficits incurred over many years.

True it is that Gibraltar also has an endemic housing problem, but it would be wrong to forget that the building of affordable housing over the last 30 years has, in great part, been funded by the proceeds from land sales to high-end developers and recurring income in terms of stamp duties and employment generated by luxury housing of which there is a long line of new projects currently in the pipeline.