Housing crisis: Andorra tired of rich foreigners

Andorra, one of the smallest states in Europe, located between France and Spain, has introduced a temporary ban on the purchase of real estate by foreigners. Known for its ski resorts, mild climate and generous tax breaks, Andorra is a popular destination for wealthy foreigners, but their growing numbers have led to a housing crisis in the principality as locals struggle to cope with rising housing costs.

The cost of property in Andorra has risen by more than 30% since mid-2018, forcing many poorer residents to move to neighboring Spain. According to Spanish publication El Diario, real estate prices in the microcountry increased by 13% in the last quarter of 2022 and the first quarter of 2023 alone. The Andorra government has authorized 500 applications for foreign investors to buyreal estate worth almost 183 million euros in 2022.

The three-month ban on foreign investment passed last month aims to address the housing crisis by banning real estate investments for non-residents, and will later be replaced by a tax on all foreignreal estate purchases. These tax revenues will be used to build more affordable rental housing. The average cost per square meter in Andorra can reach 4700 euros, which is higher than in most areas of Barcelona. Meanwhile, the minimum wage in Andorra is less than 1,300 euros a month, making it difficult for low-skilled workers to afford to live in their home country.

While this may be a first step towards supporting Andorra locals, critics have raised doubts about the ban's effectiveness. The restrictions would apply only to non-residents, which could lead to an increase in the number of wealthy foreigners applying for residency permits.

The conditions of the permit mean that you cannot work for a company registered in Andorra, but this makes it ideal for wealthy digital nomads who have income coming from abroad. Many "passive residents" are required to invest at least €600,000 in the country, most of which must go towards buying real estate, but this requirement can be waived if you earn money outside the state.

The obstacles for foreigners looking to buy property in Andorra are not just limited to the new ban on foreign investment - they will also have to improve their language skills. From 2024, residence permit holders will need to prove they have basic Catalan language skills to renew their permit.

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

Like the ban on buying real estate, the language requirement has its critics. Agustin51, a Spanish YouTube vlogger with 5 million subscribers who has lived in Andorra for the past five years, mocked the Catalan measure. In turn, he was condemned for going so far as to ask whether Andorra was a dictatorship. This is not the first time foreign bloggers on YouTube in Andorra have been criticized, with some accusing them of being part of the wealthy foreigners fueling the housing crisis. In 2021, one of Spain's most influential YouTube stars El Rubius announced a move to Andorra. Social media users condemned the choice of the blogger with 40 million followers, pointing out that the low tax regime was probably his main motivation.

Additional information from Héloïse Urvoy.