Can Madeira Ban Property Sales to Non-Residents?

Regional Government Opposes Restrictions on Foreign Buyers

Madeira’s President Miguel Albuquerque today reaffirmed his strong opposition to any restrictions on the sale of properties to non-residents. He argued that market controls lead to inefficiencies and harm the economy, rejecting what he called a "socialist" approach to regulating the housing market.

Public Debate Over Housing Market Regulations

Albuquerque's stance has fueled discussions online, with some citizens advocating for a ban on property sales to non-residents. Critics argue that foreign investment drives up real estate prices and mainly encourages luxury construction, which will never be in reach for locals to purchase and makes housing unaffordable to locals.

Legal Barriers to Restricting Property Sales

As Diário de Notícias da Madeira points out, Madeira is granted authority over housing policies by the Portuguese state, but altering fundamental principles of civil law, including property rights, remains a national matter. Similar debates have taken place in other European regions, such as Spain’s Balearic Islands, where legal experts have warned that restricting property sales could violate European Union laws on capital movement.

European Union Laws Limit Housing Restrictions

The European Commission has made it clear that restrictions on property purchases by non-residents would require "overriding reasons of general interest" recognized by the European Court of Justice. In past rulings, the court has consistently deemed such measures discriminatory and excessive. While Spain is considering legislation to limit sales to non-EU buyers, legal challenges are expected, particularly concerning international trade agreements and the rights of European citizens to buy and sell properties freely.

There Are Exceptions For Some Countries

The Treaty on the Functioning of the European Union (TFEU) upholds the principle of free movement of capital within the EU and between EU and non-EU countries. This includes the right of individuals to buy property, such as holiday homes or secondary residences.

While this freedom applies to all EU member states, some countries negotiated transitional periods and specific exemptions during their accession to the EU. These exceptions cover capital movement restrictions, including limitations on purchasing property, agricultural land, and forests in certain regions.

• Protocol No 32 to the Treaty on the European Union (TEU) permits Denmark to maintain existing legislation which restricts the purchase of second homes by non-nationals.

• Protocol No. 6 to the Act of Accession 2003 allows Malta to restrict the purchase of secondary residences.

• Protocol No. 2 to the Act of Accession Finland 1994 allows for specific restrictions regarding the Åland Islands, including e.g. the purchase of real estate;

• Annex V of the Act of Accession Croatia 2011 permits Croatia to maintain certain restrictions on the purchase of agricultural land by EU and EEA (European Economic Area) nationals for 7 years from the date of accession, with the possibility of a 3-year extension.

Legal Hurdles Make Property Sale Restrictions Unlikely

Since Madeira cannot change property rights laws without approval from the Portuguese state, it would be very difficult to restrict non-EU residents from buying property. Even if the state would approve such a move, international agreements would be put in jeopardy.

For EU residents, the situation is even clearer - neither Madeira nor Portugal was granted the right to limit real estate purchases by foreigners when joining the EU.

Implementing a ban would likely face significant legal struggles at both national and EU levels, making it at best an impractical solution to the region’s housing challenges.

Still, the question remains: Despite economic success, Madeira’s housing crisis remains a critical issue, undermining democracy and displacing locals. What solutions exist?

Sources:
Diário de Notícias da Madeira
European Union Law
BBC