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We need to talk about restricting overseas buyers snapping up homes

The Republic’s property market is one of the most open in the world, with effectively no limits on overseas buyers

Although second-home ownership causes market and social problems, most owners here are still Irish. Photograph: Dara Mac Dónaill/The Irish Times

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Newton Emerson
Thu Apr 11 2024 - 06:00

Ireland is overdue a debate on banning overseas buyers of residential property. This is very much a live debate elsewhere - EU countries are even wondering if they can ban citizens from other members states. Last year, a Mallorcan MEP asked if this was possible. The European Commission response, delivered by Fine Gael’s Mairead McGuinness, was a heavily qualified yes.

“Such restrictions may be justified [on] grounds of public policy or public security, or on overriding reasons of general interest recognised in the case law of the Court of Justice of the European Union, provided that they are not discriminatory and are proportionate to the aim pursued.”

The government of the Balearic Islands wants a ban due to a housing crisis and “ghost villages” of holiday homes. It believes the EU would grant it a regional exemption from rules on free movement of capital and acquisition of property. This has support from the left within national Spanish politics.

Last year, Portugal’s small Left Bloc party presented a bill for a nationwide ban on all foreign buyers to “combat rising house prices”. It modelled this on 2022 legislation in Canada, introduced as a two-year emergency measure, but extended in February until 2027. Portugal has experienced a surge in American homebuyers since the pandemic. A quarter of all house sales in the Algarve are to foreigners.

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Like Ireland, Portugal abolished its “golden visa” for non-EU investors last year. Spain is about to do the same. All three countries have acted under pressure from the European Commission, which considers golden visas a security risk. However, Portugal only abolished golden visas for property investors, while the Spanish government has been specific it sees this as a domestic housing issue, despite banning golden visas for all investors.

On Monday, prime minister Pedro Sanchez said: “Ninety-four out of every 100 such visas are linked to real estate investment ... in major cities that are facing a highly stressed market and where it’s almost impossible to find decent housing for those who already live, work and pay their taxes there.”

Spain has issued fewer than 5,000 golden visas since its scheme opened in 2013, mainly to Chinese and Russian citizens. It is revealing that Sanchez chose to make a major political point out of a marginal factor - banning sales to foreigners is popular.

At the back of many minds are the 300,000 Britons resident in Spain. Although almost none have obtained or could qualify for a golden visa, it had been seen as a potential loophole in post-Brexit residency restrictions. Spain’s move made headlines in the UK this week, bringing the concept of a ban to wider attention. A ban in the UK itself has been increasingly discussed in recent years, inspired by a ground-breaking 2018 policy in New Zealand and concerns about Russian money following the invasion of Ukraine.

Foreign house-buyers, as distinct from overseas property investors, are only a noticeable phenomenon in affluent parts of London, where they own 3 per cent of the city’s housing stock. This is said to affect the entire housing market, but its true impact is the resentment of the British social elite at being priced out of their own capital. Labour has promised a crackdown when it gets into office by raising stamp duty for foreign buyers, although it has stopped short of proposing a ban.

Other international models are available. Australia limits overseas buyers to new-build dwellings to encourage construction, while levying consent fees and vacancy charges. Switzerland has a national quota of holiday home sales to foreigners, capped at 1,500 a year, in addition to regional restrictions.

An evidence base is also building up on how these policies work. Economists have struggled to discern any impact on house prices from New Zealand’s ban. It has been a political success, however, and for politicians that is what counts.

Ireland will become involved in any British debate on property restrictions because Irish citizens would have to be exempt to protect the Belfast Agreement and the Common Travel Area. The reverse would apply should Ireland initiate a debate of its own. The Republic’s property market is one of the most open in the world, with effectively no limits on overseas buyers. This is only beginning to become contentious, following recent reports that Chinese multimillionaires were using Irish-based property agents to buy homes in south Dublin “sight unseen”, particularly those close to fee-paying schools. But although second-home ownership causes market and social problems, most owners are still Irish.

Spain, New Zealand and the UK show how low numbers of wealthy overseas buyers can still become symbols or scapegoats in a housing crisis. Two years ago, estate agents reported that foreign buyers accounted for half the “country homes” sales in Ireland, with 85 per cent paying cash.

This is a tiny segment of the market, with average prices over €1 million. But they are the type of houses Ireland’s social elite dream of owning. As in London, pricing them out may be what puts this issue on the political agenda.

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