You’ve worked hard for decades, saved diligently, and now you’re ready to enjoy your retirement by buying some real estate in Spain.
But before you sign that property contract, you need to hear this:
The financial reality of owning Spanish property is nothing like what the glossy real estate brochures suggest.
And it might get much worse: The Spanish government is considering a 100% tax increase for non-EU residents.
Today I’m going to show you the exact numbers that real estate agents don’t want you to see
The hidden costs that are causing many expats to go broke in Spain.
I’ll also share the most ignored risk of all – the Okupas, and how 16,400 properties in Spain were illegally occupied by them – a 7.4% increase from the previous year.
By the end of this article, you’ll understand exactly why property in Spain is a financial minefield for foreigners, and most importantly, how you can protect yourself if you’re thinking about making the move.
If you want to protect your retirement savings while still enjoying the Spanish lifestyle, the next paragraphs could be the most important financial information you’ll ever hear.
This could save you from making a six-figure mistake.
We start with…
The Hidden Tax Burden That’s Bankrupting Foreign Property Owners
What if I told you that a €200,000 home in Spain actually costs about €230,000 from day one? And that’s just the start of your money troubles.
When you’re browsing those lovely Spanish properties online, the price tags look tempting. A sunny villa for €200,000 seems like a bargain compared to real estate prices in the UK or US. But here’s what those shiny websites don’t tell you – the actual cost hits you long before you get the keys.
Most foreign buyers focus solely on the listing price, completely missing the substantial upfront costs that await them. These aren’t small fees either – we’re talking about potentially adding 15% to your purchase price immediately. And the worst part? Real estate agents rarely give you the full picture until you’re emotionally invested in a property.
Let’s break down what actually happens when you buy that €200,000 dream home. For new builds, you’re immediately hit with a 10% Value Added Tax. That’s an extra €20,000 before you’ve even stepped through the door.
Buying a resale property? Don’t celebrate yet – you’ll face the Impuesto sobre Transmisiones Patrimoniales, or transfer tax, ranging from 6% to 10% depending on the region.
But wait, there’s more. The legal paperwork in Spain is extensive and expensive. Notary fees and property registry costs typically add another 1% to 2.5% of the purchase price. Then there are legal fees for your solicitor – absolutely essential when navigating Spanish property law – adding another 1% to 2%.
When you add it all up, a €200,000 property suddenly requires nearly €30,000 in additional upfront costs. That money disappears before you’ve bought a single piece of furniture or planted one flower in your new garden.
Even after you’ve recovered from the initial sticker shock, the annual costs start rolling in.
The Impuesto sobre Bienes Inmuebles (IBI) – Spain’s version of property tax – ranges from 0.4% to 1.1% of the cadastral value. For a property with a cadastral value of €150,000, you’re looking at around €1,050 per year at a 0.7% rate. And unfortunately, this tax tends to increase annually, slowly eating away at your retirement budget.
Here’s where it gets particularly painful for non-residents. Spain has a special tax just for you – the Non-Resident Income Tax (IRNR). Most buyers never hear about this until it’s too late. Even if you don’t rent your property out, you still pay this tax on “imputed income” – essentially, Spain taxes you on income you could have earned but didn’t.
Let me show you how this works: For a property with a €150,000 cadastral value, the imputed income at 1.1% is €1,650. This gets taxed at 19% for EU residents, coming to €313.50 annually. Non-EU residents pay even more at 24%, or €396 per year. Remember, this is a tax on money you never actually earned.
Compare these costs to other popular retirement destinations like Italy, where non-habitual residents from cities with less than 20,000 residents can enjoy significant tax benefits, or Greece, which offers more favorable property tax rates. Spain’s complex tax structure makes it significantly more expensive than many alternatives.
Just when you think you’ve accounted for everything, there are still community fees to consider. If your property is in a condominium or urbanization – as many foreign-owned properties are – you’ll pay hundreds or even over €1,000 annually for maintenance of shared areas like pools and gardens.
Non-resident buyers face even higher hurdles with financing. Banks often require much larger down payments – sometimes 40% compared to 20% for residents. You’ll also likely face less favorable mortgage terms with higher interest rates, further straining your finances.
The cumulative effect is substantial. For that €200,000 property, you’re not just paying €230,000 upfront – you’re committing to at least €3,000 to €5,000 in annual costs. Over a ten-year period, your “bargain” Spanish property will cost you an additional €30,000 to €50,000 beyond the purchase price.
If all that does not sound terrifying enough, it might get much worse, very soon, but before, I have some good news.
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The Government’s Plan to Tax Foreign Owners Out of Spain
While those annual expenses might soon become the least of your worries, Spain has just declared a “housing emergency” that puts foreign property owners directly in the crosshairs. Prime Minister Pedro Sánchez isn’t mincing words about who he thinks is responsible for Spain’s housing crisis – and if you’re a non-EU citizen looking to buy property, you’re at the top of his list.
And here is a small digression and personal opinion: for me, this entire habit that some politicians have of blaming increasing housing prices on foreigners is completely non-sense.
Housing prices (or any price) increase because either the value of money decreases (when the government prints more money), or when offer is constrained, maybe too many regulations not allowing more houses to be built. But of course, it is always easier to blame John and Mary who bought an apartment to retire in Málaga, and give generous tips to the local waiter…
Politicians love pinning high prices on foreigners—it’s easier than admitting that to win elections, they printed money like people throwing tomatoes in Buñol!
If you disagree with me, tell me why in the comment section – I am very open to read your opinion.
Now back to the subject: The government’s proposed solution is unprecedented and potentially devastating for foreign buyers:
A 100% increase in existing property taxes for “non-resident non-EU foreigners.”
That means British retirees, Americans, and anyone else from outside the European Union who spends less than 183 days per year in Spain could face taxes doubled from their current rates when purchasing a home.
The specifics are still being worked out “after careful study,” according to government officials, but the intention is crystal clear.
Spain wants to limit property purchases by foreigners, and they’re willing to implement extreme measures to do it. They’re following similar policies already in place in Denmark and Canada, signaling a broader international trend against foreign property ownership.
The announcement has already sent shockwaves through the foreign buyer community. Several potential British purchasers are already reconsidering their plans. One house-hunter near Alicante told reporters they’re now looking at Cyprus instead. Another potential buyer from London was even more direct: “I wouldn’t touch Spain now. Who’s to say they won’t introduce a retrospective tax or other taxes on existing owners?”
This tax doesn’t exist in isolation.
It’s part of a broader set of measures targeting foreign ownership across Spain.
Several regions are considering their own restrictions, and the national government is exploring additional taxes on vacant properties and stricter regulations on short-term rentals. Even if the 100% property tax increase is modified before implementation, the direction is clear: Spain is systematically making foreign property ownership more expensive and complicated.
The government justifies these measures by claiming foreign investors drive up property prices beyond what locals can afford.
For existing foreign property owners, these developments create an uncertain future. In countries that have implemented similar policies, pre-tax property owners often face declining property values, difficulty selling, and increasing hostility from both government authorities and locals. What was once a retirement dream can quickly become a financial prison.
Even if you somehow avoid the proposed 100% tax increase by purchasing before it takes effect, you’ll still face the looming threat of vacancy taxes targeting properties that sit empty for portions of the year – precisely the usage pattern of many retirees who split their time between countries. Combined with the existing tax structure, these new measures could make maintaining a Spanish property financially impossible for many foreigners.
And now, time for me to tell you about the most dangerous of all these untold risks – the one that can literally make you lose your apartment.
By the way, if you’re reading this article, you’re probably planning to travel abroad for a longer time, and you want to save money and pay fewer taxes. I’ve written three top-rated Amazon books on living abroad, based on my experiences and insights from hundreds who’ve done the same – You can purchase them through this link.
The Okupas Crisis: How Squatters Can Legally Take Your Spanish Dream Home
The video below shows an Okupa threatening to m*rder the mayor of a Spanish city…
As if the financial burden of these taxes wasn’t terrifying enough, there’s another nightmare scenario waiting to ambush foreign property owners in Spain.
In 2022 alone, over 16,400 properties in Spain were illegally occupied by squatters – a 7.4% increase from the previous year. If you’re an expat or retiree with a second home in Spain, your risk is exponentially higher, especially if your property sits empty for months at a time. The legal process to remove these squatters can take up to two years, cost thousands in legal fees, and leave your property damaged beyond recognition.
This isn’t some rare occurrence – it’s a growing crisis that’s shocking foreign buyers across Spain. The Spanish call them “Okupas,” and these organized squatting networks have turned breaking into vacant properties into something of an art form. They specifically monitor homes for telltale signs of vacancy – uncollected mail, overgrown gardens, or simply noticing that the lights never come on at night.
Among the autonomous communities, the Okupas are very active in Catalunya. Holiday homes on the Costa del Sol and Costa Blanca are particularly vulnerable targets. What would you do if you returned from a three-month visit home to find strangers had moved into your Spanish villa, changed the locks, and were now legally protected as they lived in your property rent-free?
What makes this situation truly terrifying is the legal framework protecting these intruders.
Fighting Okupas in court is like trying to evict a seagull from your chips—it’s loud, messy, and you’re still out of pocket!
In Spain, once squatters have occupied a property for more than 48 hours, they can’t simply be removed by the police. Instead, owners must embark on a legal odyssey that typically takes between 12 and 24 months – and potentially even longer with appeals. During this entire period, you as the rightful owner cannot enter your own property, yet you’re still responsible for all mortgage payments, taxes, and other expenses.
The financial impact is devastating.
Legal fees typically range from €3,000 to €15,000 depending on the complexity of your case. Property damage is almost guaranteed, with repair costs often reaching €20,000 to €30,000.
A British couple whose Marbella home was occupied by squatters claiming to have been invited by a vanished contractor ended up fighting an 18-month legal battle costing €12,000 – and that’s actually considered a relatively quick resolution by Spanish standards.
Foreign owners who split their time between countries are particularly vulnerable. If you’re only visiting your Spanish property seasonally, you’re essentially hanging a target on your door. These organized squatting networks have sophisticated methods for identifying which properties sit empty for extended periods, and once they’re in, the law largely protects them instead of you.
Even recent legal reforms aimed at improving the situation haven’t fully addressed the problem.
The “desahucio express” law approved in December 2024 theoretically allows for expedited evictions within 15 days in certain cases. But the reality remains complicated – many police departments still refuse to intervene without court orders, and squatters’ rights continue to take precedence in many legal proceedings.
Insurance companies have recognized this epidemic by creating specialized “anti-okupas” policies costing between €200 and €500 annually. These policies cover legal fees, temporary accommodation, and even damages caused by squatters. The very existence of such insurance speaks volumes about how common this problem has become.
The emotional toll can be just as severe as the financial one. Many foreign retirees have invested their life savings into their Spanish dream home, only to find themselves locked in exhausting legal battles while strangers occupy their property. Some eventually give up entirely, selling their homes at substantial losses just to escape the ongoing nightmare.
To protect yourself, you’ll need to implement multiple preventive measures.
Installing comprehensive security systems with alarms and cameras is essential. Making your property appear continuously occupied by using light timers and arranging regular mail collection can help deter opportunistic squatters. For foreign owners, hiring local property management services is practically mandatory – these services can regularly inspect your property and respond immediately to any unauthorized entry attempts.
The squatter crisis represents yet another layer of financial risk that many foreign buyers never anticipate when purchasing their Mediterranean dream home. Combined with the tax burdens we’ve discussed, it creates a storm that can quickly transform your retirement delight into an unsustainable financial burden.
So we’ve unpacked the financial minefield of Spanish property ownership. The dream of your sunny retirement home can transform into a financial nightmare through escalating taxes, government policies targeting foreign owners, and the ever-present Okupas threat.
But here’s a solution worth considering:
Long-term renting offers the Spanish lifestyle without the ownership headaches.
You’ll sidestep property taxes, maintenance costs, and squatter risks while maintaining the flexibility to relocate if needed.
If ownership remains your goal, and you would like to live in some of the healthiest places in the world, with the most spectacular weather, perhaps look to Greece, or Italy where foreigners receive tax incentives rather than penalties. In fact, the tax incentives and breaks in these two spectacular countries are so great that I wrote an article comparing Italy to Greece for expats and retirees. You might pay up to 80% less taxes than what you would pay in Spain!
Levi Borba is the founder of expatriateconsultancy.com, creator of the channel The Expat, and best-selling author. You can find him on X here. Some of the links above might be affiliated links, meaning the author earns a small comission if you do a purchase.
