Housing crisis: Andorra is getting fed up with wealthy foreigners

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.

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,