The tiny Pyrenean principality of Andorra only fully opened its doors to international investment in 2012, in order to diversify its economy.
It has also now relaxed residency laws in a move towards attracting wealthier citizens. As a result, the property market, which until last year was stagnating, has begun to see a significant rise in demand and prices.
Andorra measures just 468 square kilometers and its main income is from financial services and tourism. Around nine million visitors arrive annually to pursue outdoor activities, including skiing, and duty-free shopping.
There are also tax benefits for residents. The first €24,000 of earnings is tax free, and global income over €40,000 has a flat rate of ten per cent.
Non-nationals can apply for passive residency, which requires they are resident for at least 90 days per annum and make a financial investment in Andorra of at least €400,000. This includes property and stocks. In return they can take advantage of the country’s fiscal benefits, which also include no inheritance or wealth taxes.
Prices in sought-after locations, such as upmarket Escaldes-Engordany, have risen by more than 10 per cent over the past year.
“Buyers are entrepreneurs and corporate heads, primarily looking for tax advantages,” says Ralph Lünenschloss, partner with the Andorran office of Sotheby’s International Realty. He says his firm is receiving increasing enquiries from high-net worth buyers from across Europe as well as Russia, America, China and African countries.
Standard one-bedroom flats in the capital, Andorra La Vella, and in popular ski resorts such as Soldau or Tarter can cost less than €100,000, though the average price is from around €200,00 for two bedrooms.
The highest spec three- to four-bed apartments start from around €1 million, while substantial modern villas with land, can average from around €1.5 million to in excess of €10 million.
Aside from individual villas and building refurbishments, there are few opportunities to buy new-build, though some landowners are selling parcels for development as demand grows.
One potential site, close to the historic village of Auvinyà, near Sant Julià de Lòria, is listed with Sotheby’s at €20 million. It offers three hectares of buildable land with permission for the development of a large resort that could include a residential component.
Interested investors may want to act soon to secure a foothold in the country. Lünenschloss says there are rumours the government is considering increasing the passive residency threshold to €1 million.
“There is an increase in demand for second residences but a limit to available space, as only 14 per cent of land in Andorra is available for construction,” he says.
For Sotheby’s International Realty in Andorra visit andorra-sothebysrealty.com