The primary advantage of purchasing property in Andorra, whether you are a resident or a non- resident of the principality, is the absence of property taxes. The only expenses involved are contributions to the administration of the local Comu districts, which typically do not exceed €100 per year for chalets with an area exceeding 500 square meters.
In neighboring Spain, for instance, property taxes (known as El Impuesto sobre Bienes Inmuebles or IBI) range from 0.4% to 1.3% of the cadastral value of the real estate and depend on the locality and population size.
Residence Permit and Immigration
Individuals who own real estate valued at over €400,000 are eligible to apply for a residence permit, often referred to as a "passive residence," in Andorra. To put this in perspective, neighboring Spain requires a minimum investment of €500,000 for its "Golden Investor Visa" through real estate investment.
However, there is a diminishing interest among foreigners in obtaining a "passive residence" in Andorra. This is mainly due to the fact that, in today's market, €400,000 can secure a three-room apartment in the secondary real estate market, while a chalet of medium quality typically commands
a starting price of at least €1,000,000.
Political and Economic Stability
Andorra is renowned for its political stability and robust economy. Its status as a neutral and tax- efficient jurisdiction has attracted a continuous stream of foreign investors. The principality's unwavering commitment to maintaining a stable and secure environment makes it an attractive destination for real estate investment.
Natural Beauty and Resorts
Andorra stands out as a country with no industrial production, where nearly 15% of the land is designated as a national park. Nature enthusiasts can explore the Coma Pedrosa Natural Park, featuring pristine alpine meadows, tranquil lakes, and a unique variety of flora and fauna. Another notable attraction is the Madriu-Perafita-Claror Valley, recognized as a UNESCO World Heritage site.
Andorra's resorts are renowned for seamlessly combining natural beauty with modern amenities. Particularly during the winter months, ski resorts like Grandvalira and Vallnord draw visitors. They offer an extensive network of slopes suitable for skiers and snowboarders of all skill levels, complemented by top-notch facilities, including ski schools, equipment rentals, and après-ski entertainment.
High Quality of Life
Andorra offers a high quality of life, boasting a stunning natural environment, clean air, and a safe and tranquil atmosphere. The country's mountainous landscapes provide abundant opportunities for outdoor activities, including skiing, hiking, and mountain biking. Additionally, well-maintained infrastructure and modern amenities contribute to a comfortable lifestyle.
According to a World Bank report, Andorra ranks fifth in the world in terms of "political stability" and "lack of a criminal situation."
Andorra stands out as the only country in the world with three parallel systems of preschool and school education: French, Spanish, and Andorran. Andorra is a bilingual nation, with Catalan and French serving as its official languages. The education system reflects this linguistic diversity, with students receiving instruction in both languages. Most subjects are taught in Catalan, while French is introduced as a second language from an early age.
While Andorra's central location can be advantageous, its mountainous terrain can lead to limited accessibility, particularly during the winter months when snowfall and road closures can disrupt travel to and from the country.
It's important to note that Andorra lacks its own airport or train station, making access primarily dependent on two roads accessible by car or bus.
The road from France, accessible by car, is winding and has not undergone significant modernization in recent years. Additionally, entering Andorra from Spain has become increasingly challenging due to long traffic jams at the border.
The nearest international airport to Andorra is El Prat in Barcelona.
Prices and liquidity
Although Andorra may offer attractive real estate investment opportunities, property prices can be relatively high, especially in popular areas or the luxury segments of the market. Potential buyers should carefully consider their budget and assess the potential return on investment.
Similar to many resort properties in Europe, Andorran real estate can lack liquidity. The country's small size and population can result in limited demand for rental properties, especially outside of peak tourist seasons. This may affect the potential for generating rental income from your property.
It's worth noting that more than 60 real estate agencies are registered in this small country, and numerous offers of Andorran real estate can be found on international real estate websites, typically acting as mediation services.
Technical difficulties in investing
It's important to be aware that obtaining a mortgage in Andorra is nearly impossible for non-residents. Real estate purchases must be paid from an Andorran bank account.
Andorran banks primarily focus on private banking, leading to a potentially lengthy account opening process with strict compliance requirements.
These difficulties in opening accounts should be considered when registering a company in Andorra, particularly for purchasing commercial property. Banks may refuse to service accounts of legal entities for international transactions unless the account maintains a deposit of more than €500,000.
Additionally, obtaining permission to build a house in Andorra can be time-consuming, with a "turnkey" agreement for buying a land plot taking up to six months to a year.
Cost of living
Prices for food and household goods in Andorra tend to be 15-30% higher than prices in neighboring Spain and France. Andorra does offer competitive prices for tobacco, alcohol, cosmetics, perfumes, and luxury goods. However, luxury clothing brands are not typically found in Andorra.
Andorran real estate market
Despite its aspirations in 2013 to become an international financial center, Andorra faced several challenges in fully realizing this goal. The country opened its doors to foreign investors, amending its laws to allow foreigners to register firms and acquire resident status.
Over the span of seven years, some large-scale investment projects were initiated, including the construction of an aqua park and a casino. However, the first project, attempted by a Russian investor, was halted. According to experts, Andorran authorities, who own Caldea, expressed concerns about potential competition and prevented the investor from entering the market. The most significant project for Andorra's economy and status, a casino, was only completed in March 2023.
According to the rating agencies, One of the primary factors contributing to Andorra's lack of attractiveness for investment, including its real estate market, is its critical lack of economic diversification. The country heavily depends on foreign trade, tourism, commerce, and financial markets. While there has been gradual growth in recent years, it remains sensitive to external shocks. According to the Andorran Department of Statistics, growth slowed to 2.3% in the first nine months of 2019, down from 2.5% in 2018 and 2.6% the previous year. Standard & Poor's expects an average growth rate of 1.3% for 2019-21, largely driven by improved performances in neighboring economies like France and Spain. However, Andorra must diversify its economy to mitigate potential risks associated with its heavy reliance on the financial services sector.
Andorra has earned a place among the top 5 most visited countries, according to the World Bank.
Remarkably, there are 32.4 tourists for every inhabitant of the country. Nevertheless, a significant proportion of these tourists, nearly 94%, are one-day visitors. These individuals typically hail from nearby villages in France and Spain and primarily visit Andorra on weekends for shopping purposes, taking advantage of lower prices for items such as tobacco, alcohol, and fuel. High- quality tourism, involving longer stays in the country, accounts for a mere 6% of Andorra's overall tourism.
Prime Luxury Real Estate Locations in Andorra
Andorra presents a selection of exquisite locations where luxury real estate properties are prevalent. These areas are celebrated for their breathtaking natural surroundings, close proximity to essential amenities, and the opulent lifestyle they offer. Below, we highlight some of the standout locations for luxury real estate in Andorra:
1. La Massana:
La Massana is a picturesque parish renowned for its captivating mountain landscapes and abundant outdoor recreational opportunities. It boasts the esteemed Vallnord ski resort and provides an array of opulent chalets and apartments, all offering panoramic vistas of the enveloping mountains.
2. Andorra la Vella:
As the capital city, Andorra la Vella hosts upscale apartments and penthouses situated in the heart of the city. This prime location provides convenient access to high-end shopping districts, fine dining establishments, and cultural attractions, embodying urban luxury living.
Escaldes-Engordany is celebrated for its opulent wellness centers, thermal spas, and luxurious hotels. It presents a blend of upscale apartments and houses, often featuring breathtaking views of the neighboring mountains and picturesque valleys.
Ordino is characterized by its tranquil ambiance and scenic landscapes. It offers an array of luxury properties, including traditional chalets and modern villas, frequently nestled amidst the serenity of nature.
Canillo is home to the prestigious Grandvalira ski resort, featuring an array of luxury properties conveniently located near the slopes. This locale promises seamless access to winter sports activities while providing captivating mountain views.
Soldeu, positioned in close proximity to the Grandvalira ski resort, offers luxury properties catering to ski enthusiasts. It represents an excellent choice for those seeking a harmonious blend of outdoor pursuits and upscale living.
7. El Tarter:
El Tarter is strategically situated near the Grandvalira ski resort and offers an array of luxury chalets and apartments, often boasting direct access to the ski slopes for a truly exceptional alpine experience.
How to buy and the taxation of deals
In 2007, Andorra enacted legislation that effectively put an end to real estate speculation in the country. A progressive law on real estate sales was subsequently introduced, with a tax rate of 15% applied if the property was acquired within the last 12 months. This rate gradually decreases to 0% after a holding period of 12 years. However, exceptions exist; for instance, if a resident of Andorra decides to sell a property to reinvest the proceeds in other projects within the country.
All real estate transactions in Andorra are conducted exclusively through accredited real estate agencies. This, combined with the progressive tax law mentioned earlier, forms the foundation for equitable market pricing and helps prevent speculative practices. Notably, the concept of "developer prices" does not exist in Andorra. Instead, property prices align with the average market rates. Nonetheless, there can be a price differential of 15-20% between properties in the construction phase and fully completed ones. Construction timelines in Andorra are extended due to the mountainous terrain, which can impact investment returns.
The process of purchasing real estate in Andorra is generally straightforward and expeditious. It typically commences with the submission of a purchase agreement, accompanied by a 10% deposit, which is non-refundable should the buyer decide not to proceed with the deal. Subsequently, a notary officer is engaged, and the transaction typically takes around two months to conclude. The transaction culminates with the signing of a "title transfer" agreement. Upon acquiring the property, the prospective owner is obligated to pay a fixed tax amounting to 2% of the property's cost to the local Comu (municipality), in addition to a 2% tax to the government. However, if the buyer is a legal entity, the tax rate increases to 4.5%. Importantly, buyers are not subject to any taxes levied by the real estate agency. Meanwhile, the seller is responsible for the payment of a commission, which typically equals 5% of the total transaction amount. All tax payments must be processed through Andorran banks.
Andorra is served by only four notary officers, and the text of real estate sales and rental contracts adheres to government standards. The fixed fee for notary services is €180, and an additional 5% tax is applied to all notary documents. The notary officer, who presides over the signing of the contract, guarantees the legality of the transaction, eliminating the need for legal scrutiny by third- party lawyers, a common practice in many other EU countries. Furthermore, notary officers maintain a confidential record book of all real estate transactions, and this registry is not accessible to third parties.
Foreign individuals and foreign companies are granted unrestricted rights to purchase real estate in Andorra. It's important to note that automatic property inheritance between spouses is not applicable in Andorra, necessitating specific inheritance arrangements in such cases.
The real estate rental market in Andorra has experienced a resurgence in the last two years, with price growth ranging from 5% to 15%. This revival can be attributed to an increased number of applicants seeking passive and active residence, following the adoption of a new "Law on Investments," as well as a growing interest from foreign investors looking to establish companies in Andorra.
Notably, the market for luxury real estate has remained robust throughout the entire period, even during the 2008 financial crisis, demonstrating price stability. Experts suggest that this stability can be attributed to a shortage of properties in this elite category, making it an attractive segment for potential investors.
Currently, no taxes are imposed on rental agreements for tenants. Payments for community services are typically made through fixed-sum deposits, which vary depending on the specific property, with adjustments made based on the year-end results.
Tenants are typically required to provide a deposit equivalent to two monthly rental payments. This deposit is refundable in full upon the conclusion of the lease term or partially, following a property assessment. Additionally, the cost of real estate agency services for facilitating the rental agreement is equivalent to one month's rental payment plus VAT (IGI, 4.5%), in addition to the first month's rent. Consequently, the total cost of entering into a rental agreement in Andorra amounts to the equivalent of four months' rental payments. Rental agreements in Andorra are typically signed for a term of five years.
After signing a rental agreement, tenants are obligated to enter into a service agreement with the Andorran energy company, FEDA, in order to have electricity connected to the property. Initially, tenants must obtain a "Butlleti Electrical" document stamped by the Andorran Government, specifying the required electrical capacity. The cost of this document varies, ranging from 50 to 150 euros, depending on the type of property being rented.
Following the signing of a rental agreement, tenants must register the agreement with the appropriate local administration (Comu). To complete this process, the property owner is required to provide the tenant with a copy of the Habitability Certificate, bearing the seal of the Andorran Government.
Tenants are also obligated to sign real estate insurance agreements, primarily covering fire and other forms of property damage. This insurance is a mandatory component of rental agreements and can be arranged through any insurance office in Andorra.
Given the growth observed in the real estate market, particularly in 2013, these developments may serve as additional incentives for individuals considering the purchase of residential or commercial properties in Andorra.