Spain’s prime minister, Pedro Sánchez, has unveiled a controversial proposal that would saddle non-EU property buyers who lack legal residence with taxes equalling the full purchase price of their new home.

The move represents a fresh effort by Spain’s Socialist government to discourage speculation and relieve pressure on a housing market beset by soaring prices — but it stands to hit British buyers particularly hard.

Under the draft measure, any non-resident from outside the EU purchasing property worth over €1 will be subject to a tax rate of 100 per cent on the home’s value. This startling levy, included in a broader package of housing reforms, comes as official statistics show more than 12,000 Spanish properties were bought by British buyers in 2023 alone. Although that figure is down on the previous year, it underlines the significance of Spain’s second-home market to Britons seeking a foothold in the sunny Iberian Peninsula.

Mr Sánchez’s announcement, made in Madrid on Monday, outlined additional plans to raise taxes on holiday rentals — ensuring they are taxed “like a business” — amid concerns over growing gentrification in popular tourist hotspots and complaints that locals are being priced out of the housing market. Meanwhile, his socialist administration aims to channel hundreds of acres of state-owned land into social housing via a newly created public housing agency.

Passing these changes will be far from straightforward. Mr Sánchez’s minority government faces stiff opposition both from conservative politicians, who view the proposals as overly interventionist, and from the far left, who argue that the reforms do not go far enough in helping tenants. The Bank of Spain, however, recently warned that stretched household rents could have “adverse economic and social effects”, lending urgent impetus to the debate.

British homebuyers, landlords and holiday-rental operators alike are now watching closely to see how parliamentary negotiations unfold. If approved, the unprecedented 100 per cent tax rate for non-EU non-residents could profoundly reshape Spain’s property market, sending ripples through the country’s tourist economy and beyond.

---