Crisis in the housing market: Andorra is fed up with rich foreigners

Andorran parliamentarians are changing real estate rules after internet celebrities and wealthy foreign investors seek a tax haven. This one of Europe's smallest countries, located between France and Spain, has temporarily banned foreigners from buying real estate.

Andorra is known for its ski resorts, mild summer temperatures and generous tax breaks, making it popular with wealthy emigrants. However, their influx has caused a housing crisis in the principality as locals suffer from rising housing costs.

Property prices in Andorra have risen by more than 30% since mid-2018, forcing many poor residents to move to neighboring Spain. According to Spanish news portal El Diario, property prices in the microstate have risen by 13% between the last quarter of 2022 and the first quarter of 2023 alone.

In 2022, the Andorran government authorized 500 real estate purchase applications from foreign investors worth almost 183 million euros.

Ban on foreign investment

The three-month ban on foreign investment, passed last month, aims to address the housing crisis by prohibiting non-residents from investing in real estate. The ban will later be replaced by a tax on all real estate purchases by foreigners.

The revenue from this tax will be used to build affordable rental housing. According to several Spanish real estate sources, the average price per square meter in Andorra can reach 4,700 euros, which is higher than in most parts of Barcelona.

With the minimum wage in Andorra being less than €1,300 per month, working people may find it difficult to afford living in their home country.

While this may be a first step in supporting Andorran locals, critics question the effectiveness of the ban.

If you have the money, becoming a "passive resident" in Andorra is not difficult, as you are only required to reside there for 90 days per year. Possession of this permit does not allow you to work for a company registered in Andorra, but it is an ideal option for wealthy digital nomads who have income from abroad.

Many "passive residents" are required to invest at least €600,000 in the country, most of which must be in real estate. However, this requirement can be waived if you earn money outside the state.

Mandatory minimum level of Catalan

Not only will the new ban on foreign investments be an obstacle for foreigners wishing to purchase real estate in Andorra, but they will also need to learn the language skills.

Starting from 2024, residence permit holders will have to prove that they possess a basic level of the Catalan language in order to renew their permit.

The new law aimed at protecting the language of the microstate requires a 30-hour course in Catalan, except for those who can prove a minimum level of A2 in the language.

Neither the language requirement nor the ban on real estate investments goes without criticism.

Agustin51, a Spanish YouTuber with 5 million subscribers who has been living in Andorra for five years, mocked the Catalan measure. He was condemned for even questioning whether Andorra is a dictatorship.

This is not the first time that the presence of foreign YouTubers in Andorra has been criticized; some accuse them of being part of a wealthy foreign group that contributes to the housing crisis.

In 2021, El Rubius, one of the most influential Spanish YouTubers with 40 million subscribers, announced that he was moving to Andorra. Social media users criticized his choice, pointing out that the low tax rate was likely his main motivation.