Andorra's real estate market cannot cope with the existing demand

Andorra's real estate market cannot cope with the existing demand

In 2022, the Principality of Andorra is experiencing a real «boom» in the real estate market. The increase in the number of buyers, local and foreign, forces construction companies to launch new projects that attract even more people, including investors, looping the situation.

The described trend, which began after the end of the acute phase of COVID-19 in 2021, led to a sharp increase in demand for housing, the creation of a shortage of goods on the market, an extremely active price increase, new construction, a new increase in demand and another price increase.

A special role in this was played by the spread of remote employment as a standard workflow in the Spanish economy. There is also a fairly soft tax regime in the region: VAT, income and corporate taxes are set at 10%. The tax time is much lower than in Spain and there are also fewer of them. For buyers of real estate, the main tax is the fee for the transfer of property rights — only 4%. And if a person buys a house for the first time, then he has the right to request a reduction even of this bar.

It is also worth adding the high cultural attractiveness of Andorra, safety, high quality and high availability of medical care and education.

In general, this tiny state, «squeezed in» between France and Spain, is extremely attractive to a huge number of people. And although construction in the region is actively underway, the creation of new real estate will take developers years, and a huge number of buyers have to actively fight with each other today both in the primary and secondary housing markets.

According to the Idealista real estate portal, over the past year, the search for real estate for sale in the Andorra market turned out to be 99.1% higher than the growth in demand in neighboring Spain. At the same time, we are talking about an extremely compact territory, where only 80,000 people live. The Principality attracts workers from the IT sector, media personalities and influencers, entrepreneurs and investors, especially real estate investors. About 50% of visitors are Spanish citizens, 30% are French, and the remaining share is shared by Belgians, Dutch and residents of Northern Europe.

Considering how the country is trying to meet the current demand, it is worth pointing out the construction of the first 20-storey residential complexes — novelties in the local real estate market. Such projects were so unusual for Andorra that amendments to the legislation had to be adopted for their construction.

Previously, the territory was occupied exclusively by low-rise or single-storey buildings, which complicated the current urban planning. The changes had to be made quite urgently, because earlier Andorra attracted foreigners purely as a place for temporary recreation and tourism, and not permanent residence. About 50% of arriving foreigners intend to become expats, remaining to live in the country.

All this has led to an impressive increase in prices. As of June this year, the average price per square meter of housing increased to 3,723 euros, that is, by 8.13% in annual terms by June 2021. Such data is shared by the real estate portal Indomio. This is a record figure for the principality. But the growth in the rental segment was even greater — 14.51% in annual terms. The rate was 13.34 euros per square meter per month.

Since Andorra attracts a large number of wealthy buyers from other countries, workers with more modest savings found themselves in a situation of extremely high prices and a lack of affordable housing. The practice of living together and/or using houses and apartments began to spread actively.

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