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International Property News

Spain Introduces 100% Housing Tax on Non-EU Residents: A Cautionary Lesson for the UK Government

 

David Hannah, Group Chairman of Cornerstone Tax, is available to discuss the risks of disincentivising foreign investment in housing and its impact on job opportunities

Spanish Prime Minister Pedro Sánchez, has announced that he intends to impose a 100% housing tax on non-EU residents purchasing property. This policy is part of efforts to tackle the escalating Spanish housing crisis by prioritising affordable housing for local residents. However, critics such as David Hannah, Group Chairman of Cornerstone Tax, the UK's leading stamp duty advisory, argue that such policies which aim to curb foreign property investment could have unintended consequences for the wider economy. As France, Portugal, and Greece consider similar measures, David Hannah urges the UK government to take note of this approach and avoid replicating it. Disincentivising foreign investment in housing could undermine efforts to foster job opportunities for young people and negatively impact local economies.

Since the UK government's Autumn Budget announced a series of tax changes including raising Capital Gains Tax (CGT), Employers' National Insurance contributions, and lowering the earnings threshold for National Insurance, the fears amongst Brits about the new Labour government have drastically increased. Business confidence has fallen to its lowest level since the early Covid-19 pandemic, with The Institute of Directors' economic confidence index dropping to -65 in November, marking its fourth consecutive decline. Cornerstone Tax's national research also highlights the lack of confidence Brits have in the new government, revealing that 21% of the nation cites proposed tax increases from the Labour government as a key factor for moving abroad. A further 16% of respondents state that the Autumn Budget serves as the decisive reason for their planned departure.

The findings from Cornerstone’s research suggest the fears amongst Brits about the new Labour government, underscoring the looming crisis of an imminent exodus from Britain. The research has further shown that 23% of Brits are now motivated to relocate their families abroad due to the ongoing cost-of-living crisis. As 24% of Brits also contemplate relocating their tax residence overseas due to the Autumn Budget, Cornerstone is able to provide a unique index of where potential expats are considering their future move to. The most popular destinations for relocation according to Cornerstone’s study are as follows:

Adobe
  • Spain

  • Australia

  • USA

  • Canada

  • Dubai

  • Portugal

  • France

  • Malta 

  • Cyprus 

While Spain’s 100% tax on non-EU buyers seeks to limit speculation and protect local housing markets, in the UK a similar strategy could exacerbate housing shortages, making it more difficult for young people to secure jobs and affordable housing. As the UK continues to grapple with its own housing challenges, it must carefully consider the lessons from Spain, where foreign investment has helped sustain local economies, particularly in popular regions like Barcelona, Marbella, and Ibiza.

Group Chairman of Cornerstone Tax, David Hannah comments:
“This year, the government​must urgently recognise the ever-pressing need for drastic changes to the housing market. The previous government's decision to abolish Multiple Dwellings Relief (MDR) was beyond counterproductive and will result in fewer new homes being built, with a significant drop in both domestic and overseas investment into housing delivery.

“By removing a critical tax break such as MDR, ​the government's refusal to reverse this policy undermines the build-to-rent sector, which relies heavily on such incentives to maintain and expand the housing supply. Furthermore, the increase in the second home surcharge and Stamp Duty thresholds reforms will not only reduce the stock of homes in the UK, but will make it harder for first-time buyers to get onto the property ladder. 

"New policies need to promote affordability, accessibility and support for businesses building in Britain.​The​ government​ must now listen to property firms and industry stakeholders to solve this vitally discouraging situation for Brits, otherwise this crisis will continue to cause chaos for years to come."

David Hannah, Group Chairman
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