Foreign buyers purchase nearly 100,000 homes annually in Spain, hitting record high

Spanish media outlets have renewed accusations that foreign investors are displacing local residents from coastal and island properties. On the Costa del Sol, in Alicante and across the Balearic Islands, one in two homes sold go to foreign buyers. In Málaga, the Balearics and Santa Cruz de Tenerife, foreign purchasers account for more than 26% of transactions.

The diagnosis is accurate, but the proposed remedy will not work. A ban on property purchases by foreigners might modestly reduce prices for second homes by the sea, but it would not address Spain's principal housing crisis: an acute shortage of affordable accommodation in areas where people work and live. Moreover, foreign investors bring capital into the country, pay taxes, support local businesses and rescue entire coastal economies from decline.

What nobody seems to notice, however, is that transaction costs when buying property in Spain are simply prohibitive. Transfer tax, stamp duty, notary fees, registration—all of this makes purchasing a home more expensive even before accounting for the property's actual value. Yet Spanish newspapers somehow do not demand that these taxes be reduced.

Foreign money is part of the problem, but not the whole problem.

Source: Spanish Property Insight