Foreigners Banned from Buying Property in Andorra: What You Need to Know

Foreigners will be banned from buying property in Andorra after its government brought in a temporary prohibition in an attempt to halt soaring prices that have left local people struggling to afford places to live.

Rising Property Prices Prompt Temporary Ban

The tiny principality in the Pyrenees between Spain and France, which is popular with high-net Britons because of the low tax rate, and which sees a huge influx of skiers and mountain bikers in the summer, has experienced an 18 per cent rise in property prices between the start of 2022 and the first quarter of 2023.

The three-month ban in the tax haven will apply to non-residents and aims to stop aggressive speculation by foreign investors but does not apply to foreign residents in Andorra.

Local Struggles and Impact on Andorrans

Andorrans have been forced to leave the country because they cannot afford to rent or buy a residence in the mountainous country, according to opposition politicians.

“The idea of this ban is to stop aggressive speculation by foreigners,” Patrick Mueller, a partner in Andorra Solutions, a tax and legal consultancy, told i.

The Presence of Foreign-Owned Empty Properties

About 3,000 empty properties were detected by Feda, the Andorran electrical company, with most believed to be owned by foreigners.

Andorra’s Attraction for Foreign Buyers

The principality, which is home to 84,000 people of which 800 are Britons, has an income and corporate tax rate of 10 per cent, which has also proved attractive to YouTubers from neighboring Spain where the highest tax rate is 47 per cent.

Britons are the fifth-largest community out of 55,000 foreign residents after Spaniards, Portuguese, French, and Argentinians.

Strict Regulations and Real Estate Challenges

Andorra is not part of the European Union and has stringent regulations to obtain residency. There is no inheritance or wealth tax.

“We are going through a real estate epidemic. Some residents are leaving the country because they cannot afford to live here,” Cerni Escalé, the leader of the opposition in Andorra, told eldiario.es, an online newspaper.

Rapidly Increasing Cost of Rental Properties

The average cost of rental property has risen 100 per cent between 2019 and 2023. Andorran residents earn an average monthly wage of almost €2,000, making it hard for many local people to afford to rent. The average price of a three-bedroom house is about €450,000.

Temporary Ban and Future Taxation Plans

Xavier Espot, the Prime Minister of Andorra, said this month that the ban was temporary until the government decided on a tax on foreign nationals who are not residents buying property.

Influx of Foreign Investment in Andorra

In the past six years, foreigners have invested about €1 billion in property in the principality, according to the Andorran government.

Foreigners do not have to be residents of Andorra to buy property but must attain this status to take advantage of the principality’s low-tax status.

Residency Requirements and Housing Market Challenges

To secure residency, Andorra requires a refundable deposit of €50,000 for shareholders or entrepreneurs. ‘Passive residency’ for those who are not running a company requires an investment of €600,000 in property.

Conxita Marsol, the Andorran minister for housing, said what was happening in Andorra had been repeated in many other European cities, with foreigners buying properties and pushing prices up.

Population Growth and Housing Crisis in Andorra

In the past ten years, the population of Andorra has risen 20 per cent from 69,966 in 2013 to 83,990 in 2023.

Similar Measures in Other Countries

In January, Canada imposed a two-year ban on foreigners buying property in a bid to try to resolve a housing crisis. Plans to replace hotels with social housing in the Balearic Islands to curb the boom in tourism were put in doubt after the opposition conservative People’s Party took power at elections in May, these plans were put in doubt.