Are Foreign 2nd Homeowners Important?

A recent study has highlighted the substantial contribution made by foreigners who own second homes in Spain to the country's GDP, coinciding with deliberations in some regions regarding potential limitations on overseas property investment.

The economic impact of foreign individuals owning secondary residences in Spain was illuminated by a recent study, although it does not come without its challenges.

According to research conducted by PricewaterhouseCoopers (PwC) for the Spanish Association of Developers and Builders (APCE), foreigners with secondary homes in Spain contributed €6.35 billion to the Spanish GDP in 2022 and facilitated the creation of over 105,000 jobs in the tourism sector.

Defined in the study as individuals who purchase property in Spain for year-round enjoyment, these “residential tourists” are presumed to spend a portion of the year in Spain. In 2022, foreign property transactions in Spain reached a historic peak, with 88,858 acquisitions, a considerable portion of which were attributed to established second-home communities, with Britons leading at 11.1 percent, followed by Germans (9.5 percent), French (7 percent), and Belgians (5.2 percent).

The report underscores the vital role of residential tourism in the Spanish economy, emphasizing its triple GDP contribution compared to the textile industry, double that of timber, and equivalent to pharmaceutical manufacturing.

However, amidst uncertainty surrounding foreign homeowners’ status and their influence on the Spanish property market, concerns have arisen, prompting the APCE to commission the report. They aim to demonstrate the adverse effects that potential restrictions, proposed in some regions overwhelmed by tourism, could have on the Spanish economy.

For each euro spent by residential tourists, €2.34 is added to the Spanish GDP, with associated economic activities creating over 105,600 full-time jobs in 2022, a figure comparable to the chemical industry and surpassing furniture and beverage manufacturing. The financial significance of these second-home owners in Spain is undeniable, even surpassing certain major industries.

Although regions such as the Balearic and Canary Islands and the Valencian Community, historically favoured by foreign second homeowners, have considered limiting property purchases by foreigners, challenges persist. The 90/180 day Schengen rule has particularly affected British homeowners, restricting their time spent in Spain.

Despite the economic benefits, foreign homeownership has drawbacks, including post-pandemic cash purchases driving price inflation and exacerbating the property market’s supply shortage. Moreover, the rise of short-term residential tourism, notably through platforms like Airbnb and Booking, has fueled gentrification and affordability issues in Spanish cities, prompting regulatory efforts that landlords often circumvent.