Andorra is an attractive place to live thanks to its friendly people, almost complete absence of crime and easy access to nature. It’s also a surprisingly small country with limited housing and a sometimes harsh climate, so it makes sense to pay close attention to where you live.
The relatively low tax regime is one of the country’s most famous features. This also applies to capital gains from real estate, but only declines after several years of ownership. Details like these are important to consider when considering real estate options in Andorra.
Below we’ll tell you how to start your search for property in Andorra and give some information about what you need to know about the legality of property in Andorra.
State of real estate in Andorra
Any survey or report on the state of the real estate market in Andorra must begin with the global financial crisis of 2008. demand from foreigners.
Property values were reported to have increased by 50% in the five years to 2008. After the global financial crisis it fell by 25%.
As with many places in Europe – at least outside the major capitals – selling property in Andorra can take some time. Think months and even years, rather than weeks, when planning how long you might want a potential purchase on the market when it comes time to sell.
Also, take this illiquidity into account when prioritizing the features of the home you might buy. Even if you can live in a home without sun, know that selling it will take some time when it’s time to move on.
Restrictions on purchasing real estate in Andorra
There are some restrictions on who can buy property in Andorra:
- Non-residents need government permission to purchase real estate. (But this is almost always just a formality.)
- Under the new foreign investment law passed in 2012, non-residents are no longer limited to purchasing properties of less than 1,000 square meters and can now buy more than one apartment.
- But non-residents can buy commercial real estate only for use in their own business.
These restrictions do not apply to residents of Andorra.
“ Autoritzacio d’inversio estrangera en immobiles ” is a government permit for non-residents to purchase real estate and usually takes a couple of weeks to get approved.
The non-resident buyer of Andorran real estate pays taxes to the Andorran government in the amount of 4% of the agreed purchase price.
The process of buying property in Andorra
In Andorra, there is a standardized multi-step process for real estate transactions. It happens like this:
- The buyer and seller agree on the price and any terms. The buyer pays the seller a 10% deposit, which is non-refundable if the buyer backs out of the sale.
- The seller hires a local architect to provide a “certificate of occupancy”, which guarantees that the property is habitable.
- The 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 checks 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 notary fees, which range from 600 to 1300 euros (depending on the sale price), plus 0.1% to 0.3% of the price.
Sale of real estate in Andorra
When deciding to purchase a property, it is advisable to have an idea of how much its value needs to rise in order for you to recoup the costs. When choosing property in Andorra, the main factors to consider are agent fees, government procurement taxes and capital gains taxes.
Agent commissions paid by sellers in Andorra can be as high as 10%, but usually do not exceed 5%.
As we already mentioned, when purchasing real estate you will pay 4% tax. This consists of:
- flat tax: 1.5% of the sales price, paid to the commune (local government)
- ITP : 2.5% of the sale price is paid to the Andorran government.
For real estate in Andorra, capital gains taxes are calculated according to the following schedule:
- Property held for less than 12 months: 15%
- From 1 to 2 years: 13%
- From 2 to 3 years: 10%
- From 3 to 4 years: 9%
- After each additional year after 4, taxes are reduced by 1%. So, after 12 years, there is no capital gains tax on real estate in Andorra.
Investments in real estate in Andorra
There is no income or inheritance tax in Andorra and, apart from capital gains tax, there is no tax on the transfer of real estate. The Principality must be a great place to invest in real estate, right?
Well, the combination of low rental demand and not much growth in property values means that yields are typically only 2-3% per year.
The Andorran luxury real estate market is becoming an exception. Thanks to greater European integration, more wealthy people are choosing to buy property in Andorra, and much of this property is luxury property.
Commercial real estate is another bright spot where returns can rise up to 10% per year, although patience is required.
However, as the Andorran property market recovers, these returns may improve.
Purchasing a property can be a useful step towards obtaining a passive resident permit from your TV in Andorra . There is a requirement that applicants invest €400,000 in Andorra, and real estate is included in this amount.
Terminology for understanding Andorran real estate
Property advertisements in Andorra are usually written in either Catalan, Spanish, or a mixture of both. This means that the legend helps to understand them.
Atik: Penthouse apartment.
Borda: traditional farmhouses located in the villages and slopes of Andorra’s mountains. These can range from tobacco drying barns to fully completed and modernized hotels.
House: Any structure that can pass for a house.
Casa adossada: Attached house, townhouse, townhouse.
Duplex and triplex: apartments occupy two or three floors, respectively. A duplex is most often a penthouse with sleeping quarters on the top floor and connected living rooms on the floor below. Triplexes are basically townhouses.
Edifici: Building, residential or commercial.
Oficina: Office.
Pis: Apartment, apartment.
Chalet: Chalet, detached house, villa.
Special considerations when purchasing property in Andorra
Remember when we said that the average property in Andorra can take a while to sell? There are some factors that can combat this, and you may want to consider finding the right mix of your priorities and what will make your property more attractive to future buyers.
Sun Ray
The altitude and latitude mean that Andorrans can go for quite a long time in winter without a solid dose of sunlight. This can vary by region, so if possible, it’s best to try to view the property at the beginning of winter to see how much light it receives.
Rapidly changing weather
In Andorra, a ten minute drive can take you from sunny and cool weather to a full parka. The location of a property relative to mountains and valleys can significantly affect the comfort of its microclimate.
Development
A scenic view is a valuable feature, but what happens if that view ruins a new apartment building? Sometimes it’s unavoidable, but a good real estate agent can help you find out about planned projects before you buy.
Ease of access (especially in winter)
A long winding road may look romantic in photos, but when will it be cleared after a winter storm? The proximity to the main road will be attractive to many potential future buyers.
Heating system
Biomass is gradually beginning to replace gas oil as the primary heating system, although gas oil remains the most common. Some homes will use much less efficient electric heaters, and fireplaces are often used in certain areas of homes or as a home accent.
Build quality
It is important to find a home with windows and insulation that can withstand the challenges of Andorran winters. Double glazed windows are a minimum in Andorra, but insulation is difficult to determine until you’ve spent the winter in the house.
This is one of those cases where an experienced agent who knows what to look for can save you a lot of money down the line.
Recreation opportunities
Whether it’s skiing, hiking or mountain biking trails, the closer your home is to outdoor activities, the more desirable it will be when it comes time to sell.
Schools
Andorra has a multi-level education system based on language and other factors. So, depending on what you want for your children, it’s worth making sure you’re close to the school you choose.
Parking
In Andorra, space is at a premium and the mountainous terrain makes it difficult to get by without a car, so parking is in high demand.
Snapshot of Andorra real estate overview
If you are planning to live in Andorra, you will obviously need somewhere to live. Andorra does not have the most complex real estate system in the world, but keep in mind that:
- Documents will be processed in Catalan.
- The process of buying property in Andorra is structured and may take longer than you expect.
- After 12 years, capital gains resulting from increases in the value of real estate are not subject to tax.
- The market is strengthening, but historically returns have been modest and finding a buyer for property in Andorra can take several months (or even more than a year).
Consider this article on Andorran real estate as a starting point. To be honest, the real estate options in Andorra are so different (and sometimes complex) from other parts of the world that it’s worth paying for expert help. Good real estate agents in Andorra are definitely worth their commission.