Why Andorra Is a Property Investor’s Dream

A little pocket of the eastern Pyrenees wedged between France and Spain, Andorra is perhaps best known for ski holidays and tax-free shopping. It is certainly a superb place to do both, but the world’s only co-principality has also been establishing itself as a tax-friendly destination. This well-run country with more ski runs than roads is a bit like a mini Switzerland, with Catalan flair and fewer restrictions. So what exactly does it offer potential homebuyers? In 2012 Andorra changed its immigration laws so that foreigners need spend only 90 days there per year (instead of 183) to enjoy the benefits of “passive” residency. As long as they invest at least €400,000 (£304,000) in property, stocks or shares in Andorra they can enjoy the single tax rate of 10%. “We want to open Andorra up to the world,” says Gilbert Saboya Sunyé, Andorra’s minister of foreign affairs. “We have spent the past four years creating bilaterial agreements and reforming our economy so we can compete globally.”

While not part of the EU, yet pursuing further integration, Andorra uses the euro and made further legal changes in 2012 to encourage greater direct foreign investment. Tourism, healthcare, wellness, IT and education are all high priorities in this Catalan-speaking country served by high-speed internet. Negligible crime and unemployment combine with 300 days of sunshine a year (more than the Alps) to produce one of the longest life expectancies in the world (83 years). Andorra’s 80,000 inhabitants — 35,000 of whom hail from more than 100 other nations — seem a very contented bunch. One of them is the Dutch-born model, Mark Vanderloo, a keen skier with children aged 10 and 11, who has decided to make the village resort of El Tarter his main base, despite having homes in Ibiza, Amsterdam and Bali. “I love Andorra because, while it’s very clean and safe, it packs more of a punch than the Alps,” says the model, who was the face of Calvin Klein’s Obsession advertisements. “It’s not just a ski-holiday destination but the complete package, with a working city [Andorra la Vella] 12 minutes away, offering great designer shopping and a fabulous selection of restaurants. It is also only two hours to Barcelona — or five hours to my other European houses. I feel very happy every time I come home,” he says.

Vanderloo’s home for three years has been a four-bedroom rustic chalet in a “pleta” development of stone and oak, traditional antique-style homes — facing the ski resort of Grandvalira. These attractive communities can also be found in the resorts of Soldeu, Arinsal and Ordino, and are especially popular with French and Spanish buyers — the biggest investors in Andorra, according to Ralph Lünenschloss, of Sotheby’s International Realty, Andorra. “With extra services and security they are ideal lock-up and leave homes for overseas buyers,” he says. “They cost from about €475,000 to €1 million and rent for about €3,500 a month.” Lünenschloss says that British buyers — who have increased by 15 to 20% in the past year — prefer more modern properties and there is a good choice of stylishly renovated family homes with high-tech fittings if you have at least €1.5 million to spend. The average Sotheby’s sale is €500,000. “Many British buyers start off buying a holiday home but when they realize the tax benefits, they convert to become a passive resident,” he says. The topography of Andorra means that, while it’s breathtakingly rugged with 72 mountains and 60 lakes, only 12% of the land can be built on, so property prices are high. (There is no room for an international airport so people need to fly in and out of Barcelona or Toulouse.) However, after a 2008 “bubble” the market was hit hard by the Spanish recession and prices fell by 5 to 10% (in the city), up to 30 per cent in sought-after residential areas, and 50% in resort complexes with surplus apartments.

There’s now something for most budgets, from €6 million chalets in Can Diumenge, the “Beverly Hills” of Andorra (a sun-drenched enclave handy for the Burberry and Moschino outlets of the city especially loved by the Russians), to plenty of sub-€100,000 bank-repossessed studio apartments in El Tarter. The most high-end new apartment scheme was designed by the starchitect Jean Nouvel in one of the prettiest towns, Ordino (prices from €1.8 million), but a more typical mountain country house or “borda”, built in granite and timber, is about €1.2 million. Some of these borda have been converted into restaurants where Michelin-starred chefs serve a tempting fusion of French and Catalan cuisine. In a land of endless soaring peaks and troughs (to be showcased in this year’s Tour de France and Mountain Bike World Cup) the sunniest locations command the premiums. The hotspots for affordable ski pads are the popular resorts of El Tarter, Soldeu and Canillo in the Grandvalira ski area (the sixth largest in the world); or Arinsal (where The Corrs own a ski home), and Pal and La Massana in the Vallnord ski area. “In Soldeu I just sold a two-bedroom apartment close to the ski slopes to a British couple for €140,000 — a bank repossession,” says Jordi Tapies Ibern, of the estate agency Lucas Fox. “You can also get a new two-bedroom apartment in El Tarter for €225,000. However, it’s mainly the French and Spanish who buy for the skiing as they drive over for the weekend. For the British it is as much about the tax.” For those who do buy, purchase tax is about 4%, plus non-residents need to pay €250 for an investment permit (with police-record checks barring those with a criminal record), but there is no limit on the number of homes you can buy. Residents can get mortgages of up to 60 per cent loan-to-value but non-residents tend to be cash buyers. Andrea López Cruzado (@lopezcruzado) contributed to this article.