Andorra is an attractive place to live because of the friendly people, almost no crime and easy access to the outdoors. It also happens to be a remarkably small country with a limited supply of housing and an occasionally harsh climate, so it makes sense to pay careful attention to where you live.
The relatively low tax regime is one of the country’s most famous characteristics. This applies to capital gains on real estate but only on a declining basis after several years of ownership. Details like that are important to note when considering your Andorra real estate options.
Below we outline how to start your real estate search in Andorra and give some background on what you need to know about the legalities of Andorran real estate.
The State of Real Estate in Andorra
Any snapshot or report of the state of the real estate market in Andorra has to start with the global financial crisis in 2008. That’s because so much of Andorra’s economic product is derived from banking and tourism and because real estate prices in Andorra are buoyed by external demand from foreigners.
Reportedly, real estate values had climbed by 50% in the five years before 2008. After the Global Financial Crisis, it dropped by 25%.
Like many places in Europe — outside of major capitals, at least — it can take some time to sell a piece of property in Andorra. Think months and even years, not weeks, when planning how long you might have to have a potential purchase on the market when it comes times to sell it.
Also, take this illiquidity into account when prioritizing the features of a home you might buy. Even if you can live in a house with no sun, know that it will take some time to sell when it comes time to move on.
For more, see our detailed post about Andorra’s property market.
Restrictions on Buying Real Estate in Andorra
There are some restrictions on who can buy property in Andorra:
- Non-residents need permission from the government to buy property. (But this is almost always just a formality.)
- As of a new foreign investment law in 2012, non-residents are no longer limited to buying properties smaller than 1,000 square metres and can now buy more than a single apartment.
- But non-residents can only buy a commercial property for the use of their own business.
These restrictions don’t apply to Andorran residents.
The “autoritzacio d’inversio estrangera en immobles” is the government go-ahead for non-residents to purchase property and usually takes a couple weeks to be approved.
A non-resident purchaser of Andorra real estate pays taxes to the Andorran government equal to 4% of the agreed purchase price.
The Process of Buying Real Estate in Andorra
There is a standardized, multi-step process for real estate transactions in Andorra. It goes as follows:
- The buyer and seller agree on a price and any conditions. The buyer pays the seller a 10% deposit that is not refundable if the buyer walks away from the sale.
- A local architect is hired by the seller to provide a “certificat d’habitabilitat“, which guarantees that the property can be lived in.
- A notary is hired to confirm that the remainder of the purchase price is held in escrow and to oversee the exchange of keys to the buyer and cheques to the seller.
- The notary will also create and issue an “escriptura publica”, which is the Andorran equivalent of a title or deed.
This process usually takes four to six weeks, but sometimes longer.
The buyer is responsible for paying the notary fees which range from €600 to €1,300 (depending on the selling price), plus 0.1% to 0.3% of the price.
Selling Andorran Real Estate
When deciding to purchase property it is advisable to have an idea of how much its value will have to appreciate in order for you to recoup costs. For property in Andorra, the major considerations are agent fees, the government purchasing taxes, and capital gains taxes.
The agent’s fees that sellers pay in Andorra can range as high as 10% but is usually no more than 5%.
As we’ve mentioned, you’ll pay 4% in taxes when purchasing a property. This is made up of:
- a fixed tax: 1.5% of the sale price paid to the commune (local government)
- ITP: 2.5% of the sale price paid to the Andorran Government
For real estate in Andorra, capital gains taxes are calculated on a schedule:
- Property held for less than 12 months: 15%
- Between 1 and 2 years: 13%
- Between 2 and 3 years: 10%
- Between 3 and 4 years: 9%
- After each additional year after 4, the taxes are reduced by 1%. So, after 12 years there is no capital gains tax on real estate in Andorra.
Making Investments in Andorra Real Estate
Andorra has no income tax or inheritance tax and other than capital gains tax, doesn’t charge any transfer tax on real estate. The principality must be a great place to invest in property, right?
Well, a combination of soft rental demand and not very much appreciation means that yields have typically been only 2-3% per year.
Andorra’s luxury real estate market is becoming an exception. With greater European integration, more high-net-worth individuals are choosing to buy property in Andorra, and most of this is luxury real estate.
Commercial real state is another bright spot, where yields can climb to 10% per year though patience is required.
However, as the Andorran property market picks up, these yields may improve.
Buying real estate can be a useful step towards being granted Andorran passive residency. There is a requirement that applicants have invested 400,000 euros in Andorra and real estate counts towards this total.
Terminology for Understanding Andorra Real Estate
Real estate listings in Andorra tend to be in either Catalan or Spanish or a mix of both. That means a legend is helpful for understanding them.
Atic: A penthouse apartment.
Borda: The traditional farmhouses found in Andorra’s villages and mountainsides. These can range from tobacco-drying barns to fully-finished and modernised hotels.
Casa: Any structure that can pass as a house.
Casa adossada: Attached house, townhouse, terraced house.
Duplex and triplex: Apartments split over two or three floors, respectively. A duplex is most often a penthouse with sleeping quarters on the very top floor and living rooms connected and on the floor below. Triplexes are mostly townhouses.
Edifici: A building, residential or commercial.
Oficina: An office.
Pis: Apartment, flat.
Xalet: A chalet, standalone detached house, villa.
Special Considerations for Buying Property in Andorra
Remember how we said it can take a while to sell the average property in Andorra? There are some factors that can combat this and you might consider looking for the right combination of your priorities and what will make your property more attractive to future buyers.
Altitude and latitude mean that Andorrans can go for quite some time in the winter without a solid dose of sunshine. This can vary by area, so, if possible, it’s best to try and see a property in early winter to know how much light it gets.
Quickly Changing Weather
In Andorra, a ten-minute drive can take you from sunny and brisk to full-parka weather. A property’s location relative to mountains and valleys can really affect how comfortable its micro-climate is.
A scenic vista is a valuable characteristic, but what happens when that view is ruined by a new multi-unit apartment building? Sometimes this is unavoidable, but a good real estate agent can help discover planned developments before you buy.
Ease of Access (Especially During Winter)
The long, winding road may seem romantic in photos, but when will it get cleared after a winter storm? Proximity to a major road will be attractive to many potential future buyers.
Biomass is slowly starting to replace gasoil as the primary heating system of choice, though gasoil remains the most common. Some properties will use the far less efficient electric heaters, while fireplaces are often used in certain parts of homes or as a homely accent.
Finding a home with windows and insulation that are up to meeting whatever Andorran winters can throw at you is important. Double glazed windows are a minimum in Andorra, but insulation is hard to know until you’ve spent a winter in a property.
This is one of those times where a seasoned agent who knows what to look for can save you a lot in heartbreak, and money later.
Whether ski, hike or mountain bike trails, the closer your home is to outdoor activities, the more in-demand it will be when it comes time to sell.
Andorra has a multi-stream education system based on language and other factors. So, depending on what you want for your children, it pays to be sure you’re close to your school of choice.
Space comes at a premium in Andorra and mountainous terrain is difficult without a car, so parking is in high demand.
Snapshot View of Andorra Real Estate
If you plan to take up residency in Andorra, you’ll obviously need somewhere to live. Andorra doesn’t have the most complicated real estate system in the world, but keep in mind that:
- The paperwork will all happen in Catalan.
- The process for purchasing real estate in Andorra is structured and can take longer than you might expect.
- After 12 years there are no taxes on the capital gains earned from real estate appreciation.
- The market is strengthening, but yields have historically been modest and it can take several months (or even more than a year) to find a buyer for an Andorran property.
Think of this article about Andorra real estate as a starting point. Frankly, the real estate options in Andorra are so different from other parts of the world (and sometimes complicated) that it’s worth paying to have an expert help. Good real estate agents in Andorra are definitely worth their commissions.
Have more questions about Andorran real estate? Get in touch and we’ll do our best to share additional expertise.