Andorra has introduced a three-month ban on the purchase of housing for foreigners. According to Euronews, in addition to the moratorium on the purchase of real estate, an additional tax for investors and mandatory knowledge of Catalan have also been introduced. All this is done in order to make it difficult for foreigners to move to Andorra.

What's happening in the Andorran real estate market?

Andorra is one of the smallest European countries, located between Spain and France. However, this particular state has long been a very popular destination for wealthy expats to move to in order to obtain a residence permit or permanent residence permit. In addition to its picturesque nature with famous ski resorts, Andorra attracted investors with a large number of different tax incentives.

However, such popularity of the state among expats has led to a serious housing crisis. Over the past five years, real estate values have increased by more than 30%, and from 2022 to 2023 prices increased by 13%, which is truly critical for such a small state. According to Nubeo, the average cost per square meter of housing in Andorra now ranges from €3,800 to €4,900 (depending on the location of the property).

Considering that the minimum wage in Andorra is less than 1,300 euros per month, many can barely afford to live in their country.

All this forces many local residents to move to neighboring Spain.

Moreover, last year the Andorran government approved 500 applications for the purchase of real estate from foreign investors worth almost 183 million euros.

Why does Andorra attract investors?

Why is Andorra so attractive? Firstly, this state has one of the most stable economies in the region. The country's main sources of income are tourism and the banking system. Actually, this is the second reason for such interest in Andorra - a flexible and loyal tax system with many different benefits.

Another bonus of this country is the possibility of obtaining a residence permit for investments, and an investor only needs to live in the country for 90 days a year. In this case, the foreign investor becomes a “passive resident” of Andorra. Moreover, after receiving a residence permit, a foreigner will not be able to work in an Andorran company, but this is unlikely to be a problem for digital nomads who work for foreign companies.

There is one more condition - “passive residents” are required to invest at least 600,000 euros in the country (part of which may take into account the cost of purchased real estate). However, this requirement may be waived if the investor earns money outside the state.

Restrictions for foreign investors

Since September, Andorra has had a three-month moratorium on real estate investment by foreigners. In the future, the government plans to replace this ban with an additional tax on the purchase of real estate for foreigners. It is planned that the proceeds will be used to build more affordable rental housing.

In addition, foreign investors will have to pass a test of knowledge of the Catalan language. Starting from 2024, in order to renew a residence permit, all applicants will be required to pass a Catalan language proficiency exam at level A2. The new law, according to authorities, is aimed at protecting the national language. Those who cannot demonstrate their language proficiency at the proper level will be required to complete a 30-hour training program.