European real estate market review: Andorra

Investment property. Property for sale. Commercial real estate. Buying a house

“Pros”

Taxes

The main plus when buying property in Andorra by residents or non-residents of the principality is the absence of taxes on it. The only payments are contributions to the administration of the local Comu districts and usually they do not exceed €100 per year for a chalet with an area of more than 500 m. In neighbouring Spain, taxes (El Impuesto sobre Bienes Inmuebles or IBI) vary from 0.4% to 1.3% of cadastral value of housing and depends on the locality and the number of inhabitants. There is also a state tax (from 0.2% to 2.5% of the cadastral value)—it is paid if the value of the property is more than 700 thousand euros.

Taxes when buying property in Spain are paid by both parties: seller and buyer. The seller pays a commission to the agency, and the buyer pays for notary services and registration fee for 0.5–2.0% of the value of the object.

When making transactions with primary residential real estate, the buyer pays 10% VAT (El Impuesto sobre el valor anadido or IVA), at the acquisition of a land plot or commercial property—a rate of 21%. Together with VAT, the buyer is paid stamp duty (Actos Jurídicos Documentados, AJD)—1.5% of the property value. If the object is bought on the secondary market, then the buyer will have to pay a tax on the transfer of property rights (depending on the region). In Catalonia, the rate reaches 10%.

In France, there are two real estate taxes (houses or apartments). Property tax (only the owner pays it) and accommodation tax (it is paid by both the owner and the tenant). For example, in the alpine resort of Font-Romeu (Font-Romeu, about 80 km from Andorra) behind a residential building of 100 square m about €1,400 per year must be paid for each type of tax.

Residence permit and immigration

The owner of real estate worth more than €400,000 has the right to apply for a residence permit (“passive residence”) in Andorra (for comparison: in neighbouring Spain, the “Golden Investor Visa” is issued for investments in real estate of at least €500,000).

True, those wishing to obtain a “passive residence” in recent years are becoming less and less. At today’s prices for €400,000 in Andorra, you can buy a three-room apartment in the secondary market and not in the most prestigious area. A medium quality chalet will cost at least €1,000,000, which is uncompetitive compared to other European countries.

Nature and resorts

There is no industrial production in Andorra, and almost 15% of the territory is a national park (UNESCO protects some areas). Therefore, this country has an ideal ecological situation.

Ski resorts of Andorra (Grandvalira and Vallnord) are in the top ten most visited resorts in the world. Accordingly, the most popular winter sport is downhill and cross-country skiing and snowboarding.

Andorra has developed ecological tourism recently. In the mountains there are many walking paths and several “mountain shelters” where you can stay for the night. The most popular summer sport is cycling.

Safety

According to a World Bank report, Andorra ranks fifth in the world according to the criteria of “political stability” and “lack of a criminal situation” (index 1.32). For example, neighbouring Spain is in 31st place (index 0.01).

Education

Andorra is the only country in the world in which there are three parallel systems of preschool and school education: French, Spanish and Andorran.

According to Irina Bokova (ex-director of UNESCO), “the presence of three primary education systems in Andorra—French, Spanish and Andorran—makes it possible to use this experience to develop the Global Education First Initiative (GEFI), there are no countries with similar experience in the world. This is the only and unique experience in the world.”

“Cons”

Transport logistics

Andorra is a dwarf state that does not have its own airport. No in Andorra and the train station. The issue of building a “heliport” has been discussed for many years, but the project has not been officially launched so far.

The country can be reached by two roads by car or by bus.

The road from France by car is a serpentine that has not been modernized for many years. The road is often blocked due to the risk of landslides in the summer and avalanches in the winter. During the ski season 2018-2019, there were several heavy snowfalls and avalanches that blocked the road for several days in a row. And in the spring of 2019, the same road was blocked for several weeks due to a landslide. The issue of its reconstruction and modernization has been on the agenda for several years now, but the situation has not changed yet.

In recent years, it has also become much more difficult to enter Andorra from Spain due to kilometres of traffic jams at the border. This is mainly due to the huge flow of “one-day” tourists who come to the country for cheap cigarettes and alcohol.

Last year, the newly elected government of Andorra seriously took up the study of the construction of an international airport in Andorra. A study was ordered from a subsidiary of Airbus, which “entered” the airport project into one of the valleys near Pas de la Casa. However, the project was buried.

Instead, in May 2020, it announced the imminent start of full-fledged operation of the airport in the vicinity of the bordering Spanish city of La Seu d’Urgell. However, by virtue of its size, the airport will serve short-range aircrafts, such as the ATR-42 turboprop (from Madrid or Ibiza). According to experts, this will only worsen the situation with entry into Andorra. La Seu D’Urgell and Andorra are connected by a two-lane highway (in both directions), they don’t talk about expanding the road. This means that tourists and businessmen who have landed at this border airport will be forced to join the general traffic jam.

Now the way from the nearest international airport to Andorra (El Prat, Barcelona) takes a minimum of three hours, without traffic at the border. During ski season 2018-2019 at least ten huge traffic jams took place at the border. The longest was about ten km from Andorra la Vella and it took about three additional hours to pass it.

Prices and liquidity

Like all resort property in Europe, Andorran property is illiquid. It is difficult to buy good real estate in Andorra due to the low quality of construction, inflated “bubble” prices, and the lack of the concept of “luxury villages” (you can often find expensive houses with large land plots that are adjacent to wastelands or old dilapidated buildings of the middle of the XX century).

Andorra is a country located in very narrow gorges. You can buy real estate “with a view” only high in the mountains—and these are the same single-lane serpentines, which can be passed in winter only with four-wheel drive cars and only on chains.

But it’s even more difficult to sell real estate in Andorra, as the offer significantly exceeds demand. By the beginning of 2020, the market situation had become classic: “buy is easy—sell is difficult.”

It is even more difficult to rent a good apartment or house at a reasonable price (we will talk about prices a little lower).

Residential real estate in Andorra has never been beneficial in terms of subsequent rental. Traditionally, the yield from the delivery of local real estate does not exceed 1.5-2%.

In accordance to the law, adopted in 2007, the speculations at Andorran market ceased to be pertinent. A new progressive law on real estate sales now makes up 15%, in case the property was acquired no more than 12 months ago (see lower).

A characteristic feature of Andorra: more than 60 real estate agencies are registered in this small country (about 40 work). Numerous offers of Andorran real estate on international real estate sites are mediation services.

Among the Andorran agencies themselves, the same object can be found at different prices, which can vary by 3-5%. Moreover, in large agencies (the franchisors of international agencies) the price may be higher than in neighbouring small agencies. The database for all real estate agencies is almost the same. However, when contacting a small real estate agency, the client does not have to “overpay for the brand.”

In 2020, in Andorra, you can see many objects put up for sale more than ten years ago, and, for example, the modern five-star STARC hotel has been abandoned for many years on the main shopping street of the city—Avenue Meritxell.

“Elitism” of housing and quality of development

It is also worth noting that the very concept of “luxury real estate” in Andorra does not correspond to the global one. There are few houses in the country, facing the south (that is, few owners of apartments in the principality boast the sunny side).

One of the last major projects is a house in Escaldes with its own helipad and overlooking … the city cemetery. By 2021, two “elite” towers will be built in the centre of Andorra, even though they will be adjacent to a house built several years ago and still not populated (apparently, due to the lack of interest of investors and residents in luxury real estate).

Among the shortcomings can also be called low ceilings, poor sound insulation and a very low percentage of glazing (which makes apartments and houses in Andorra dark and uncomfortable). Only a small number of architectural projects follow this standard.

Andorra la Vella and Escaldes—the most central, but at the same time the most vulnerable areas of Andorra in terms of noise pollution. Both cities are in narrow gorges, and due to imperfect urban planning, the noise level is very high. In particular, in Escaldes, the only hospital in the country with a helipad is located, so regular helicopter flights create the most powerful noise interference from which the whole city suffers, including the most so called “elite” and expensive Andorran village—Els Vilars—whose residents complain of vibrating double-glazed windows.

In Andorra there are no eco-friendly wooden chalets at all, but the neighbouring French resort town of Font Romeu, which also has the Pyrénées 2000 ski resort (and next to the city there is another French ski village Les Angles), can boast of Canadian pine-trees chalets, which are the main fashionable trend now in European alpine resorts.

The main building material in Andorra is stone, which, being a “cold” material, requires high heating costs.

Technical difficulties investing

It is important to know that in Andorra it is almost impossible to get a mortgage. Local banks (there are only five) almost do not work with loans. Despite the loud statements of the bank management and advertising banners on the central streets of the cities, almost all foreigners are denied loans. Life story (not a joke)—the banks of Andorra are ready to lend to foreigners (of course, at interest rate), if a client is ready to put and freeze about the same amount of money on their own account (to freeze means to deposit without interest). What is the meaning of credit then?

Banks of Andorra are still deeply focused on private banking. Opening an account here can stretch for eight months. The rejection rate has recently been high. The reason is the tough compliance, which became such after a large international corruption scandal with one of the Andorran banks—BPA. This bank was closed following an investigation launched by the United States in a case involving money laundering. The scandal occurred in 2015. But some investors still can’t return their savings. After the change of management and ownership, the bank is now called Vallbanc and is owned by the American investment fund J.C. Flowers & Co.

The difficulties with opening accounts must be borne in mind when registering a company in Andorra, for example, to buy a commercial property. Banks will refuse to service accounts of legal entities (to support international transactions) if the account of this company does not have a deposit of €200,000 to €300,000. Andorran banks may also not “miss” a remittance from countries that they consider “doubtful” without any explanation. All banks are owned by private individuals, and the state has no leverage over them.

Besides, it is important to note that obtaining permission to build a house in Andorra is quite long: a “turnkey” agreement when buying a land plot can take up to six months – one year.

Standard of living

Prices for food and household goods in Andorra are 15-30% higher than prices in Spain and France. That is why on weekends, next to the supermarkets of nearby Spanish and French cities, you can see parking lots lined with cars with Andorran license plates. A comparison table with prices can be found here.

Andorra only keeps competitive prices for tobacco, alcohol, cosmetics and perfumes, as well as luxury goods. The aforementioned “one-day” tourists also come to Andorra for economy-class clothing. There are no luxury clothing brands in Andorra.

Reasons for the investment unattractiveness of the Andorran real estate market

Andorra never managed to become an international financial centre, as planned in 2013, when the country “opened” to foreign investors, changing the law and allowing foreigners to register firms and obtain resident status. Over the past seven years, not a single serious foreign investor has come to Andorra. This was acknowledged in an interview by the mayor of the capital of Andorra, Conxita Marsol, who said, “The bureaucracy severely limits the flow of foreign capital into Andorra.” She could not recall a single large foreign company, except for dried fruit producers and a couple of house developers. Pilar Escaler, Director of the Chamber of Commerce and Industry has also confirmed the declining interest of foreign investors in Andorra in 2020.

Over a seven-year history, large-scale investment projects have arisen, for example, the construction of an aqua park and a casino. The first project, which an investor from Russia tried to implement, was frozen (according to the experts, authorities of Andorra, which owns Caldea, were afraid of competition and simply did not let the investor enter the market).

And the most important project (for Andorran economy and status) with a casino in general ended with an international scandal (a certain “one-day” Andorran company won the competition with the participation of international reputable companies that have been involved in gambling for years). Losers of the contestants filed a compatible lawsuit against the government, the case has not yet been closed.

According to the rating agencies, one of the main reasons for Andorra’s investment unattractiveness (including real estate market) – critical low diversification of the economy and the dependence on foreign trade, tourism, commerce and financial markets. Growth has picked up slowly in recent years but remains sensitive to external shocks. Andorra’s growth has been relatively stable since 2016, and according to the latest figures released by the Andorran Department of Statistics it slowed down to 2.3% in the first nine months of 2019, compared to 2.5% in 2018 (and 2.6% one year earlier). Standard & Poors expects an average growth rate of 1.3% in the period 2019-21, only thanks to improved performances of neighbouring economies – namely France and Spain – although the country needs to diversify its economy to avoid potential risks linked to the financial services sector.

Investment alternatives

In recent years, the Pyrenees (Spain and France) have experienced an investment boom. Every year many cities in the Pyrenees become more attractive for business and life. With all the advantages of Andorra (taxes), the neighbouring cities can be much more curious from the point of view of investing in real estate both for renting and for living.

We spoke with the mayors of some cities of the Pyrenees both in France and in Spain, and found out the following.

Lourdes—the second most visited city after Paris in France—is looking for investment partners for hotel development. Being the centre of the Catholic pilgrimage since 1858, the city annually receives six million visitors from all over the world. It is the fourth most visited Catholic pilgrimage site in the world after the Vatican, the Basilica of Our Lady of Guadalupe in Mexico and the Basilica of Our Lady of Aparecida in Brazil.

Perpignan—a city that is among the five best cities in France in terms of population growth—also welcomes investors. “Investing is our priority. I study all the offers and receive potential investors within 48 hours after their official appeal. Land needs to be sold in order to open the way for business,” says Perpignan Mayor Jean-Marc Pujol. Development land in the city and its environs costs from €160 to €300 per square meter.

In Andorra there is little land for building, and at the same time there are many wastelands both in the central regions and higher in the mountains. Land, as a rule, belongs to private owners who do not want to sell it or equip it. There are no legislative levers to force owners to equip territories (or dilapidated house facades) in Andorra.

Another tourist French city of Carcassonne is actively promoting the development of private business. Private shops and cafes are opening more often in the city due to the partial coverage of rents from the city budget during the first year of operation. “Our city is considered the center of Occitania, both geographically and technologically,” says Carcassonne Mayor Gérard Larrat.

“The real estate market in Tarascon-sur-Ariège (the French region of Ariege bordering Andorra) is very attractive: a decent house with a garden can be bought for only 150-250 thousand euros,” says the mayor of Tarascon Alan Sutra. Around the city there is the largest number of cave zones in the world, which also makes it attractive for tourists.

Housing tax in Foix—the largest tourist centre of Ariege—is lower than in cities with the same number of inhabitants (about 20 thousand people). According to Mayor Foix Norbert Meler, the city is actively engaged in the reconstruction of the housing stock, is building new schools, and plans to reconstruct streets and squares.

Bayonne and Biarritz are two French cities that are rightfully the pearls of international tourism. Although they are located about five hours by car from Andorra and are located in the Atlantic Pyrenees, they are also worth mentioning in the context of the alternative in terms of real estate investment in the region. Both cities are rapidly developing due to tourism. An apartment in the most prestigious area of Biarritz—a resort city called the “king of the beaches”—with a view of the Atlantic Ocean can be bought at prices not higher than Andorran (for example, an apartment in a new building of about 130 sq. M with a terrace can be found for €900,000). The argument is in favour of real estate on the coast—it is always easier to rent out for a long time (unlike real estate in the mountains).

Information for lovers of mountains and winter sports. Near Andorra (just 30 km from the Andorran city of Pas de la Casa, bordering France), is Ax-les-Thermes, a French ski village that has been hosting tourists for the past 200 years. In addition to the ski resort with a separate area for freeriding, the city is notable for its “natural” thermal springs, which have healing properties, as well as its own casino. “We need new hotels with a minimum of four stars. We have land, and we are waiting for investors,” says the Mayor of the city, Dominique Fourcade. The city (deeply lost in the Pyrenees), nevertheless, had a direct railway connection with Toulouse and Paris.

Let’s turn to the side of Spain. The airport of Spanish Girona is preparing to become the “fourth strip” of the international airport of Barcelona, which will favourably affect the economic development of the city. Perhaps now it would be interesting to invest in the real estate of Girona, which, accepting and serving more tourists, will increase in price (including the rental price). At the same time, according to the mayor of Girona Marta Madrena, the city is expanding the possibility of issuing housing subsidies to young families who buy it for the first time.

Pamplona is the largest Spanish centre for biomedical research. According to the Mayor of Pamplona Enrique Maya, the unemployment rate in the city at the end of 2019 was 8.19%, which was the second lowest rate among the autonomous regions of Spain. The main foreign investor in the city is Volkswagen.

Cardona is looking for investors to build the largest salt therapy spa in Catalonia, says Mayor Ferran Estruch. If one is built, the city will also need hotels and pensions.

According to the index of economic activity, Zaragoza is the fourth city in Spain, says mayor of the city Jorge Azcón. According to realtors’ forecasts, this particular city will become the most profitable in Spain in terms of real estate investments.

And again, information for ski lovers. From the side of the Spanish Pyrenees is the royal resort of Baqueira-Beret (Baqueira-Beret). It is called royal because it is here that members of the royal family of Spain prefer to ride. The nearest areas are natural parks with big land plots on offer. For example, in 2020 FC Barcelona player Leo Messi has purchased the Himàlaia Baqueira hotel through his hotel company MiM.

La Molina and Masella are the first ski resorts in Spain that appeared after the Civil War of 1936-1939. You can get there from Barcelona by train, and you don’t have to stand in traffic jams at the border, as is the case with Andorra. Masella is known throughout the Pyrenees for her night skiing. Albert Piñeira, the mayor of Puigcerda, where the resorts are located, spoke about the region’s powerful sports and tourism infrastructure: “Yes, we have land for sale. These are two large areas next to the hospital and next to the French border. The city has a sufficient number of hotels, campsites, tourist apartments. But if they put on my table an interesting commercial proposal for the construction of new objects in the tourism sector, I will gladly consider it.”

As mentioned before, the airport of La Seu d’Urgell must also affect the liquidity of land and real estate in the Alt-Urgell region. Andorrans often choose this city to live in. Living in La Seu d’Urgell is cheaper than in Andorra. For example, renting a new studio of about 80 m2 with furniture in the centre in a good house will cost less than €450 per month, says the mayor of the city, Jordi Fabrega. A house in the historic city centre with a view of the old cathedral (about 300 m2) in 2019 was sold at a price of €600.

Minimal prices in Andorra

The most democratic studio as of May 2020 was found in Encamp (30 m2)—€500 per month. The price for a two-room apartment up to 70 m2 ranges from €650 to €800 (areas of El Tarter, Canillo, Incles, Arinsal, Santa Coloma, Arans, Yorts). In the centre of Andorra, you can also rent a two-room apartment for €800 per month. A three-room apartment in Escaldes (85 m2) can be rented for €850 per month. An apartment of 150 m2 in the same area will cost €1,500 per month.

Chalets in Andorra can be rented from €1900 per month (La Massana).

The cheapest apartment in Andorra today costs €80,000 (45 m2) in the most remote city of Pas de la Casa. An apartment in Encamp (two bedrooms, 90 m2) costs about €250,000. An apartment in Escaldes (145 m2) is offered for €485,000. An apartment in Sant Julia de Loria (in the “luxury” section) 405 m2 with four parking spaces (on the minus floor, individual windows face a stone wall) is exposed for €1,100,000.

House in San Julia 385 m2 exposed for €1,400,000. A house in Escaldes about 390 m2 costs €1,500,000. In the same area, a house of 1,500 m2 costs €3,500,000.

So, to consider Andorran real estate as a profitable investment (for example, an apartment or a chalet for winter holidays and skiing) is a questionable question. Especially in the presence of a huge number of ski resorts around Andorra with much more optimal real estate prices and logistics (in the immediate vicinity of the ski resorts of the Spanish and French Pyrenees, railway lines are laid, which makes a trip from such megacities like Barcelona, Toulouse or even Paris and Madrid, fast and comfortable and most importantly—eliminates the need to lose precious hours of vacation or a weekend, standing in line at the border).

Luxury real estate main locations

Posh real estate of Andorra is mostly located in the certain districts of Escaldes and Andorra la Vella, most often these are the upper levels of buildings. In particular, these are the districts of Els Vilars and Engolasters. Beyond the borders of the capital, the buildings in La Massana area (La Massana, Ordino, Pal, Arcalis) can also be attributed to the group of luxurious; here the property is mostly acquired by wealthy immigrants from the UK and USA. The parròquia is located at the dead end highway CG3, that leads from Escaldes to the biggest national park and the highest mountain peak – Coma Pedrosa. Due to that, the ecological situation here is traditionally the most favorable in Andorra. Vallnord ski resort, located in La Massana, has got World Ski Award twice as the best Andorran resort, though it is smaller than the second Andorran resort Grandvalira, located not far from the border with France. At that Vallnord doesn’t “sleep” in summer, but becomes the biggest cycling center in the Pyrenees, that welcomes global championships in different cycling disciplines. This is also the place of location of the only paid private school in Andorra, where the children are taught by the tutors with UK University diplomas in English and Spanish. The only heliport in Andorra is also located here in La Massana, it allows to get directly to Toulouse or Barcelona by helicopter within 30 minutes.

Encamp and Canillo parroquias, located along CG2 highway, that links Spain and France via Andorra, have traditionally been the regions of service infrastructure location of the second biggest ski resort of Andorra – Grandvalira. Due to the fact that this highway leads to France and the major cities of both parroquias (Encamp, Canillo, Tarter, Soldeu, Pas de la Casa) are located relatively far away, the logistics of transfers to the capital is pretty complicated, especially during snowfalls. The major type of buildings are apartments, chalet and houses are not that popular. The real estate objects in here are acquired mostly by the citizens of France and Spain that use their property as winter apartments for ski season that lasts from December to April. In general, in summer the life here fades down.

How to buy and the taxation of deals

In accordance to the law, adopted in 2007, the speculations at Andorran market ceased to be pertinent. A new progressive law on real estate sales now makes up 15%, in case the property was acquired no more than 12 months ago, 13%– less than 2 years ago and 10%– less than 3 years ago. Further on the tax rate falls by 1% every other year of owning the real estate object; thus after 12 years it will make 0%. Nevertheless there are certain exceptions. For instance, in case a resident of Andorra decided to sell the property in order to reinvest the money into other projects on the territory of Andorra.

All real estate objects are sold only via the real estate agencies accredited at AGIA (Association of Real Estate Agencies of Andorra). In Andorra there are about 200 registered agencies (really working about 50). This factor together with the above mentioned progressive law makes the basis for the market prices equation in general and prevents the market from speculations. The notion “prices from a developer” doesn’t exist in Andorra. It completely corresponds to the average market offer. Meanwhile, the price difference between the stage of “foundation pit” and ready objects makes 15-20%. The terms of construction in Andorra are enhanced due to the mountainous terrain in comparison to other analogue objects at other location. Due to that, the process of investment returns is also enlarged.

Buying real estate in Andorra is easy and quick. In general, the process starts from the stage of lodgment for fixing the deal (10% of the total sum of the deal, thereby the sum of deposit is irreversible in case a buyer declines the deal) and the work of a notary officer (about 2 months). The deal closes up by signing the agreement of transferring “the title” (Escriptura Publica). When aquiring the property, the potential owner pays the fixed tax (2% of the object cost) to the local Comu as well as 2% tax t the Government (Impost de Transmissions Patrimonials). It´s 4.5% tax if a buyer is juridic person. A buyer doesn’t pay any taxes to the agency. Alongside with that, a seller pays the commission, which makes 5% of the deal sum. All the tax payments should be implemented at the banks of Andorra.

Additionally, a buyer should pay the cost of notary transaction processing and the expenses for the mortgage loan arrangements to the bank. In 2013 the banks of Andorra cut down on mortgage loans for non-residents. To get the mortgage application approved by the bank, nonresidents should present the confirmation of possessing the sum of money at their accounts that 3 times surpasses the sum of the loan. The specialists of international real estate agencies state that this measure allowed stopping the tendency of price decrease at the market.

Notary expenses are paid in accordance to the growing scale depending on the price of the deal. The notary expenses of the buyer for the real estate that costs from 70 000 euro up to 115 000 euro makes up 0,3% of the deal, for the real estate that costs from 120 000 euro up to 300 000 euro –0.2%, and higher—0.1%.

The price of the object Up to The cost of notary services 66,122 72,111 euro 444,75 euro + 0,3% of the deal price 72.112 78.111 euro 462,75 euro + 0,3% of the deal price 78.112 84.111 euro 480,80 euro + 0,3% of the deal price 84.112 90.111 euro 498,85 euro + 0,3% of the deal price 90.112 96.111 euro 516,85 euro + 0,3% of the deal price 96.112 102.111 euro 534,90 euro + 0,3% of the deal price 102.111 108.111 euro 552,90 euro + 0,3% of the deal price 108.112 116.111 euro 570,95 euro + 0,3% of the deal price 116.112 120.111 euro 589,00 euro + 0,3% of the deal price 120.112 300.506 euro 607,00 euro + 0,2% of the deal price 300.507 601.012 euro 997,70 euro + 0,1% of the deal price 601.013 Higher 1.268,15 + 0,1% of the deal price



Only 4 notary officers are working in Andorra, the text of real estate sales or rental contracts are standardized by the Government of the country. The fixed price for signing the notary act is 180 euro. Besides, the tax, imposed on all the notary documents, makes up 5% of the service cost. The contract is signed in the presence of notary officer, he also guarantees the legitimacy of the deal, which allows to skimp on the payments to the lawyers that check the real estate object in accordance to the rules of many other EU countries. The notary officers also have got the record book of all real estate objects of the country. At the same time this record book is not public, which excludes the chance of third party access.

Previously, the only restriction for non-residents, related to acquiring real estate in Andorra was the possibility to buy only two real estate objects. Currently, in accordance to the Law on Foreign Investments from 2012 almost all restrictions, that have existed on the real estate market for 75 years, were annihilated. Foreigners as well as foreign companies obtained the right to buy real estate in Andorra without any limits.

A nonresident should obtain the permission from the Government of Andorra for buying real estate. Alongside with that, a buyer should be older than 18 and also should have all the documents: ID and an account at any bank of Andorra. In its turn, a real estate object should have all the documentary permissions from the government for sale.

Currently, the banks of Andorra provide mortgage loans in the amount of 80% of the object price for the residents of the country, and 60%– for nonresidents. The interest rate for the mortgage loan starts from 2% over Euribor rate (0.75%). At the same time, in accordance to the data of Andorran Bank Association (ABA), there has been a substantial decrease in the amount of the loans given to nonresidents within the last 2 years.

It should also be noted that automatic proprietorship inheritance between spouses is not relevant for Andorra. The cost of the notary will registration is 90 euro.

Rent market

The market of real estate rent has come through the period of revival within the last 2 years; the growth of prices has been fixed at the level of 5-15%. This revival may be attributed to the growth of the amount of applicants for getting passive and active residence due to the adoption of a new “Law on Investments” and the amount of foreign investors, willing to launch companies in Andorra.

The market of elite real estate remained livened during the whole period of crisis from 2008 and demonstrated the stability of prices. In accordance to the specialists, this can be related to the deficit of objects of this category, which gives the opportunity to view this segment from the point of view of potential investments.

Currently, no taxes are levied on any real estate rent deals for a tenant. The payments for community facilities are implemented by means of the fixed sum depositing (depending on the real estate object) with further deduction or vice versa extra payment in accordance to the results of the year.

The tenant is obliged to make a deposit in the amount of 2 monthly payments (this sum is reversal and is paid back completely after the end of agreement term or partially after the estimation of property). The cost of real estate agency services for settling a deal is the cost of 1 month of rental payment + VAT (IGI, 4.5%) and the payment for the first month of rent. Consequently, the total cost of the rental deal in Andorra is the cost of 4 months of rental payment. The contract is signed for 5-year term. In case a tenant takes a decision about early termination of contract, he should write about his decision to the landowner or the agency no later than 5 months in advance within the 1st year of rent, 4 months within the 2-nd year, 3 months within the 3rd year, 2 months within the 4th year and 1 month within the 5th year of rent.

After rental agreement, a tenant should sign a service agreement with energetic company of Andorra FEDA (electric energy will be connected to the object only after signing this agreement). Preliminary, a tenant should have the document (Butlleti Electrical) with the stamp of Andorran Government that mentions which capacity a client needs. The cost of such document varies from 50 to 150 euro (depending on the rented object).

After signing a rental agreement, a tenant should go to corresponding local Administration (Comu), and register the above mentioned agreement. For that a landowner should give a tenant the copy of Habitability Certificate, affixed with the seal of Andorran Government. The validity term of such document is 10 years. After the end of this term, a landowner is obliged to prolong it and present to a tenant.

Tenants also must sign real estate insurance agreements (in case of fire or other terms of causing damage). This is the obligatory term of rental agreement. Such insurance may be registered at any insurance office of Andorra.

After closing the deal, the landowner gets the certificate of community facilities payments. The certificate that should also be presented to a notary officer should mention the information, regarding the absence of any utility payments debts. A landowner should also get the certificate that confirms the absence of debts at the corresponding local administration office (Comu). This document should also be presented to a notary officer.

A standard rental agreement is signed for 5 years and existing rental terms of Andorran real estate evidently favor tenants. In his turn, a landowner may determine the contract only in case the evidences of violating the terms of the contract will be presented, for instance, breaking financial commitments. But at the same time, a landowner, for instance, hasn’t got the right to sell the leased property for 5 years. Besides, in the course of 5-year term, the cost of rental payment cannot be increased by more than the rate of annual inflation.

Meanwhile, the government of Andorra mulls over the opportunity to alternate the real estate legislation of the country. In particular, the changes may touch upon the period of a rental agreement. Currently, the standard rental contract for an apartment, a chalet or commercial property is signed for 5 years, which is unfavorable for landowners that lose control over it (in particular, the opportunity to sell it at the moment of market growth) for the corresponding period. The law presupposes to diminish this term to 2 years.

At the same time, after the joint counseling between AGIA and the Government of Andorra, it has been decided to exclude from the law the item that obliges a tenant to warn a landowner about the decision to determine the contract no later than a month. This term will be stretched to 3 months. Besides, the experts of AGIA share the opinion about the necessity to liberalize the article of the law regarding housing sublease and commercial real estate.

Within the bounds of the marked real estate market growth, in particular in 2013, such alterations may become the additional incentive for buying housing or commercial real estate.

By Irina Rybalchenko

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