The Squeeze

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Andorra introduced a temporary ban on foreigners buying property, as the diminutive European country experiences a surge in real estate prices that has made housing scarce for its residents, Euronews reported.

Lawmakers recently passed a three-month ban on foreign investment that will bar non-residents from investing in real estate in the principality nestled between France and Spain. The new rules will later institute a tax on all foreign property purchases.

The tax revenue will then be used to construct more affordable rental housing for lower-income Andorrans.

Apart from the new ban, prospective buyers and residential permit holders will need to demonstrate basic proficiency in the Catalan language starting next year.

The move comes as the principality – known for its ski resorts, mild climate, and generous tax benefits – has become an attractive destination for wealthy expatriates and Internet celebrities in recent years.

Real estate costs in Andorra have increased by more than 30 percent since mid-2018. Prices saw a 13 percent increase between the last quarter of 2022 and the first quarter of 2023.

With the monthly minimum wage being below $1,400, many poorer locals have been forced to move to neighboring Spain.

However, critics questioned the ban’s effectiveness, noting that the restrictions will only apply to non-residents and may lead to an increase in wealthy foreigners seeking residency permits.

In Andorra, becoming a “passive resident” is relatively straightforward as foreigners are only required to spend 90 days per year in the country. This type of residency prohibits them from being employed by an Andorran-based company, but allows them to receive income from abroad – a lucrative option for digital nomads.

Many passive residents need to invest at least $637,000 in the country, primarily in property, although this requirement can be waived if an individual generates income outside the microstate.

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