Andorran MPs change real estate rules as internet celebrities and wealthy foreign investors flock to the tax haven.
One of Europe’s smallest states, nestled between France and Spain, has introduced a temporary ban on foreigners buying property.
Known for its ski resorts, mild summer temperatures, and generous tax breaks, Andorra is a popular destination for affluent expats, but their influx has caused a housing crisis in the principality as locals struggle with rising housing costs.
Real estate prices in Andorra have climbed by over 30% since mid 2018, forcing many poorer residents to relocate into neighbouring Spain.
Just between the last quarter of 2022 and the first of 2023, real estate prices went through a 13% surge in the microstate, according to Spanish news outlet El Diario.
In 2022, 500 real estate applications from foreign investors were authorised by the Andorran government for a value of almost €183 million.
Ban on foreign investments
The three-month ban on overseas investment, passed last month, aims to tackle the housing crisis by barring non-residents from investing in real estate, and will later be replaced by a tax on all foreign property purchases.
This tax revenue will then be used to build more affordable rental housing. According to several Spanish real estate sources, the average square metre price in Andorra can reach €4,700 – higher than in most Barcelona districts.
With the Andorran monthly minimum wage being below €1,300, working-class nationals can struggle to afford living in their home country.
Whilst this may be a first step towards supporting local Andorrans, critics have raised doubts about the ban’s effectiveness.
The restrictions will only apply to non-residents, meaning there may just be an increase in wealthy foreigners applying for residency permits.
If you have money, it’s not too difficult to become a “passive resident” in Andorra, as you’re only required to live there for 90 days per year.
The nature of the permit means you aren’t allowed to be employed by an Andorran-based company, but this makes it an ideal option for affluent digital nomads, who have income coming in from abroad.
Many passive residents are required to invest at least €600,000 into the country, the majority of which has to go into property, but this requirement can even be waived if you are earning money outside the state.
Compulsory minimum level of Catalan expected
It’s not just the new ban on overseas investment that will throw up obstacles for foreigners wishing to buy property in Andorra -- they’ll have to brush up on their language skills too.
From 2024, residential permit holders will need to prove they can speak basic Catalan to have their permit renewed.
The new law aimed at protecting the micro-state’s language will entail a 30-hour Catalan course, except for those who can prove a minimum A2 level in the language.
Neither the language requirement nor the real estate investment ban are without their critics.
Agustin51, a Spanish YouTuber with 5 million subscribers who’s been living in Andorra for the past five years, has scorned the Catalan measure. He in turn was slammed for going as far as questioning whether Andorra was a dictatorship.
It’s not the first time critics have targeted foreign YouTubers in Andorra, with some accusing them of being part of the wealthy foreigners fuelling the housing crisis.
In 2021, El Rubius, one of Spain’s most influential YouTube stars, announced he was relocating to Andorra. Social media users condemned the 40 million subscriber YouTuber’s choice, pointing out that the low tax rate was likely his main motivation.
Additional reporting by Héloïse Urvoy