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A new bucket of cold water has been thrown over tourism on the Costa del Sol, specifically for the residential housing sector. The measure recently announced by Prime Minister Pedro Sánchez to limit the purchase of homes by non-resident, non-EU foreigners by increasing the tax burden for property purchases up to 100% of the property's value will particularly affect Malaga province as it is the second biggest in Spain in terms of volume of property transactions made by foreigners, of which a significant portion correspond to this category.
Although there is no data broken down by nationality and by province, the latest nationwide report on the third quarter of 2024's statistics from Spain's real estate and land registry shows that, after Alicante, Malaga is the province in second place for most housing investment by foreigners, taking up a share of 34% of total deals done. Furthermore, of all the major locations with the highest volume of property purchases, Malaga province is the one where these operations continue to grow the most, with an increase of 3.9% compared to the 0.4% drop recorded in Alicante. In Spain as a whole the international demand for housing here has increased in both percentage and absolute terms to account for 14.85% on average for Spain and a similar proportion for all Andalucía.
The Junta's promotional entity for the tourism industry 'Planificación y Turismo Costa del Sol' states that, in the first nine months of last year, 27,791 property transactions were formally completed in the province, of which 10,676 were purchased by foreigners, representing 38.4% of the total number of deals. Of these 11% were purchased by foreigners already residing in the province. In the Andalucía region as a whole 100,747 real estate transactions were registered in this period, of which 17,723 belonged to foreign nationals, meaning a 17.6% market share.
The Spanish association for property registrars makes it clear that "tourist intensity is the key factor in achieving a greater or lesser relative weight in property purchases done by foreigners, with the leading provinces corresponding to Mediterranean destinations or islands with these characteristics." Their statistics show where the highest volume of this type of business is done - namely Alicante (43.08%), Malaga (34.76%), Santa Cruz de Tenerife (32.71%), Balearic Islands (32.5%), Gerona (27.12%), Murcia (24.68%), Las Palmas (22.41%) and Almeria (17.71%).
This statistic on Malaga confirms that the upward trend for the province has remained intact over the last five years, although experts and industry professionals fear that Pedro Sánchez's proposal could put the brakes on it. "From the outset, it has already generated great uncertainty," said Ricardo Arranz, president of the Andalusian federation of developers and residential tourism, who believes that "common sense alone shows that this measure is absurd. We have gone from rewarding residential investors with the 'golden visa', which has now also been eliminated, to paying double for a property." Arranz confirmed that this proposal, which he describes as "mere political publicity with no signs of becoming a reality", comes at a time of maximum boom for the sector and that "the only thing it will do is make many developers think about whether it is better to invest in other countries. This clientele is very important not only for residential tourism but for the destination as a whole."
On the Costa del Sol the measure will curb the purchase activity of the main non-EU foreign clients, which currently continues to be led by the British, although the proportion has dropped post-Brexit, replaced by residents with great purchasing power from all over Africa, the Arab nations and the new wealth from India. On a national level, the report from the land registry mentions that the main buyers of homes from outside the European Union are British, Moroccan, Chinese, Ukrainian, Russian and American.
Although PM Sánchez justifies this measure on the grounds of the need to prioritise the availability of housing for residents, Arranz insisted that these are different markets with very different needs. "The luxury developments that these clients are looking for have nothing to do with those demanded by young people as a first home or with the needs of those who want a VPO ['officially protected housing' in Spain]. What Englishman buys a VPO?", he asked, urging the authorities that what is needed is to build more homes and plan land to build social housing.
Arranz warned that the Spanish government's measure comes at one of the residential sector's best moments: "This activity is booming. Everyone wants to buy a house on the Costa del Sol and these types of investors are looking for them in the 'golden triangle' of this destination: Marbella, Benahavís and Estepona." Moreover, he said that "everything that comes out is sold off-plan" and that at present it is the Nordic nationals who are the main investors in second homes on the Costa del Sol, although they will not be affected by this tax proposal.
The data provided by Pedro Sánchez brings to 27,000 the number of houses and apartments bought by non-EU residents in the country in 2023. "Not to live in them, they did it mainly to speculate. To make money out of them. Something that in the context of the shortages we are experiencing we cannot afford," Sánchez said at the presentation of the package of his government's measures to alleviate the serious housing problem for the nation.
In a similar vein, Francisco Salado as president of the Costa del Sol tourist board asks: "What guarantees do we have that the Spanish government is going to invest all the money it is going to raise with these measures in areas with problems of access to housing? Until now, this government has been known for multiplying the tax burden, and this has increased tax collections in dynamic and tourist provinces like Malaga, and investing very little, practically nothing in these areas. In other words, many revenue-raising measures have been announced, but little or no investment. And there is no guarantee that what is collected in Malaga will be invested in this province to facilitate access to housing." Salado is concerned about what he considers to be a new attack on tourism. "We are concerned that the government is always encouraging the message that the [tourism] industry is to blame for all ills. It seems to me that once again, this government is using tourism as a scapegoat, as an alibi to excuse itself for its lack of investment and its legislative errors."
Likewise, the president of AVVA-Pro (Andalusian association of holiday rental professionals), Juan Cubo, in view of Sánchez's announcement of a tax reform so that holiday rental properties are taxed as businesses, comments that they support the application of IVA sales tax as long as it remains at a reduced rate of 10%, the same as that applied to the hotel sector. "We believe that it is essential to establish a balanced fiscal framework that does not penalise the sector and that recognises its importance in boosting local and regional economies," he says, adding that "we are aware of the housing problem, but to attribute the reduction in the supply of residential property to this sector is to simplify a much more complex problem. For every tourist property there are almost eight empty flats."
News of the tax has spread like wildfire in the British media. The Guardian headlined a story with "Spain proposes 100% tax on homes bought by non-EU residents" and in the text points to Marbella as one of the areas "where these buyers are flocking" and warned that "given his government's long-standing struggles to pass the legislation, one analyst suggested to the Financial Times that the aim was to deter foreign property investors by creating uncertainty and noise with a proposal that has little chance of becoming law." Likewise, the Financial Times pointed out that Sánchez's proposal was the second most read story of the day, only trumped by a Donald Trump story. For this reason Francisco Salado insisted on the message that "the housing problem in Spain is not the fault of tourism and is the responsibility of the government" and warned of the consequences of the recently announced measure: "the fact that tax costs for luxury housing for foreigners are going to be multiplied could mean that these investors or future foreign residents will take their money and go live in other more competitive, and certainly more receptive, destinations like Portugal, France, Italy, Greece, Croatia or any other Mediterranean competitor. Once again, the government is trying to kill flies with cannons, focusing on propaganda but not on finding practical and effective solutions that do not involve shooting itself in the foot."
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