Spain wants non-European Union residents to pay as much as 100 per cent tax for home purchases in the country, a move that could affect buyers from the United Kingdom and Latin America.

“Just to give us an idea, in 2023 alone non-European Union residents bought some 27,000 houses and flats in Spain and they didn’t do it to live in, they didn’t do it for their families to live, they did it to speculate, to make money from them, which we cannot allow in the context we live,” Prime Minister Pedro Sanchez said in Madrid on Monday.

The government’s proposal on the 100 per cent tax on non-EU residents’ house purchases will be sent to parliament, Sanchez said. The plan is inspired by tax regimes in Denmark and Canada, he added.

Spain’s extensive Mediterranean coastline is a popular destination for foreigners seeking a holiday residence, with the Balearic Islands one of the most popular locations. British citizens are the biggest group of non-EU property buyers.

The country has for years attracted home buyers from northern EU nations and the U.K., either for retirement or as a location for holiday homes in regions such as Andalusia and Valencia. But since Brexit, British citizens have to face more hurdles than their counterparts from countries such as Germany and the Netherlands.

Real estate prices in some of these regions, notably the four Balearic islands, have in recent years been highly affected by a combination of short-term rentals and an increase in high-end properties, which are pricing out local residents in some cases.

Madrid has also become a popular market for wealthy Latin Americans, who are snapping up property in central parts of the city and have helped push up prices across the entire capital.

Sanchez’s announcement Monday was part of a broader package that seeks to tackle a brewing housing crisis. The new measures include a commitment to move thousands of houses from the country’s bad bank into a newly created housing agency, as well as a plan to offer state-backed financial guarantees to young renters.

Spain has a severe shortage of new homes. Late last year, the Bank of Spain estimated that the country would need some 550,000 new residences to be built to meet demand over the next two years. Sanchez said on Monday that some 90,000 new houses are built annually to cover demand for 300,000.

—With assistance from Jorge Zuloaga.

Bloomberg.com