On Wednesday 15th January it was announced that Spain is to introduce a 100% tax on property bought by non-EU residents in an attempt to tackle its growing housing crisis.
As it turns out, the country is facing a shortage of available properties to rent or buy after prices soared, exacerbated by high inflation and interest rates.
This situation has caused anger and resentment among the local population. It is exacerbated by a lack of new housing construction, which means that demand far outstrips supply. And this is causing prices to rise even further.
The new tax is an initiative of the Spanish Prime Minister, Pedro Sanchas. The innovation is part of a plan to overcome the housing crisis and ensure affordability for residents. Incidentally, Sanchas said that in 2023 non-residents of the EU will buy 27 thousand properties in Spain. According to him, the majority of transactions were made with the aim of making a profit and not for their own needs.
Experts suggest that some investors may turn their attention to Cyprus and neighbouring countries in the region. Pavlos Loizou, head of the analysis firm Ask Wire, said that the changes in the Spanish market were creating new prospects for neighbouring countries and Cyprus in particular. However, he believes that the extent of these changes will be limited.
The rental market in Cyprus has already attracted significant investment and new players are unlikely to have a significant impact, Loizou said.
He also pointed out that Greece has tightened regulations in the property rental sector. For example, Athens has temporarily banned new licences for platforms such as Airbnb and introduced a sustainability tax on short-term rentals.
In Cyprus, short-term rentals are not yet strictly regulated. Although the government has created a registry of rental properties, the registration process remains incomplete and only about 40 per cent of properties have been formalised. Meanwhile, some UK analysts predict that tax changes in Spain could deter some investors.
Cyprus and Greece will become attractive to those looking for more favourable conditions," said a representative of the British Association of Estate Agents.
Large markets such as Turkey and Italy may also take advantage of the situation. New tax measures in Spain have caused widespread concern. Against this backdrop, Cyprus is seen as an attractive destination for investors. However, experts believe that the overall level of demand for local property is unlikely to change significantly, given the increasing competition in the region.