The Andorra Real Estate Crisis: What Happened?

House prices for both renting and buying have globally been on an upward trend since 2020. It will come as no surprise that the Andorra real estate market has experienced similar trends also. There are however factors more than global economics at play here in Andorra. While large economies such as the USA and UK have had property prices more or less stabilise since mid 2022 (to no surprise given inflation rates up until 2024), house prices in Andorra have continues to increase into 2025. The Andorra real estate issue became a housing crisis, with a continued increase in demand and a stagnation in supply.

Túnel de les dos Valires, Andorra

The factors in play here are the following:

1. Property prices in the past

Andorra real estate used to be cheap, and we mean outstandingly cheap. As a low tax state on the European continent, with some of the lowest global crime rates in the world, good climate, a 3-hour drive to major airport hubs and with a flexible immigration policy, it would seem Andorra is a near perfect destination for many a new business owner, worker or retiree. Surprisingly however, in the days of non-existent or low government bond deposits (which now stand at €50,000 per immigration application), Andorra was not on anyone’s radar. Nevertheless, being such a small country, with little import-export, no business hub, and an economy based on local tourism (Spain and France), the picture on how Andorra stayed off the internet for so long becomes clearer.

In the early 2020s, you could expect the following prices in the main central parishes:

• €50-90,000 for a studio apartment

• €100,000-190,000 for a 1 bed

• €200,000-290,000 for a 2 bed

• €350,000-500,000 for a 2-3 bed small house or large apartment

• €500,000-700,000 for a new terraced house

• €800,000-1,200,000 for a luxury semi-detached new build

The rental prices were around 8-12€/m2 while in 2024-2025 you are looking at prices of 20-40€/m2.

The fact it was so cheap meant one thing: one day the property prices in Andorra were going to rise sharply. They now have and continue to do so.

2. Hidden sales prices

There is no transparency concerning property transactions in the country.  It is impossible to know what your or anyone else’s property was sold for historically, unless you have managed to get ‘inside’ information, or you have been involved in the market for many years. This of course influences the property prices in Andorra. With no resources to turn to, speculation becomes the key factor in deciding on the value, giving way to exponential price increases in expected and importantly, unexpected moments.

3. Changes in immigration

We are small country by square mile or kilometre standards (468km2) and a minute country by population size also (85,101 people). Furthermore, the land that you can construct on is only around 8% of the real figure, giving only approximately 40km2 of land that is buildable, of which much of it is already built on. Whilst the population size was stable no issues occurred, but this is no longer the case.

Graph of Andorran population from 2013 to 2023

In the past 3 years we have seen a 9% increase of the Andorran population size (3% annually) and a whooping 21% in the last 10 years (2.1% annually). Compare this with the UK or USA having an average annual growth rate of 0.3-0.4%. No developed country in the world has come close to 3% annual increases in recent statistical history.  This does not even account for the 14,000,000 floating population in Andorra annually (tourists), some of which are also foreign investors in the Andorra property market.  When you increase your population size 3% annually but continue to build housing at a regular rate, for obvious reasons the demand way outstretches the supply of Andorra real estate.

4. Interest rate changes

The whole world economy has of course been affected by the fluctuations in interest rates in the past few years, as has the Andorra property market and economy. The only difference is our interest rates have always been a lot lower than in higher taxed societies. The interest rates on mortgages here since the 2008 crisis sat at between 1-2% fixed for 20 or 25 years. The current fixed rate for 25 years now stands at around 3.5% in 2025 and saw maximums of over 5% in early 2024. This percent change is like the ones seen in other countries, although most countries have never had on offer 1% lifelong fixed mortgage rates. In Andorra remortgaging was not a concept as there was no such thing as a 3 or 5-year fixed term in the mortgage market until a year ago. Most mortgage holders are on historical 20-25-year fixed mortgages in Andorra. Many people are therefore holding onto their property waiting for a decrease to past interest rates, stagnating the supply on the property market further in the meantime.

5. Foreign investment

In most large western economies, the middle class is the big buying power. This middle class also holds and controls the mortgage market. In most cases they need mortgages to be on the property ladder and are also a big risk to an economy in the case of a collapse and an inability to pay their mortgage as was seen in 2008. This is not the case with Andorra real estate.

The main buying power in the Andorra property market is as much foreign investment coming in the form of second home purchases, passive residents buying without the need for a mortgage, and buy-to rent (for seasonal and holiday rentals mostly), as it is the middle class. Property developers also make up a large proportion of investors in land, simply because of the low taxes to build, construct and then sell with very high profits.

Using the Andorran government statistic publications, it is possible to see the percent of property sold to foreign investors every year, which equates to between 25-35%. Furthermore, thanks to our knowledge of Andorra real estate, we know that the buying structure nowadays is approximately as follows:

Foreign investment : 30-35%.

Cash buying residents : 30-35%

Middle class (with mortgages) : 30-35%

Given the quantity of foreign investment on the Andorra property market and also the number of cash buyers here in the past 10 years, Andorra is protected now from the same swings as the global economy. To give an example, although interest rates have a large effect on property sales, this effect is cushioned by the cash buyers and foreign investors in Andorra, meaning supply has stagnated from the middle class who own a lot of property, but demand is still high from the other 60-70% cash buying power. This also means large quantities of the population cannot default on mortgage payments, which avoids huge drops in property prices in the case of an economic depression.

6. Changes to land planning policy

Given the information about the huge increases in population size and the small amount of buildable land, you would expect a consensus to open more land for construction. This however is not the case in many of the parishes. Having spent 10 years in heavy construction with huge effects on the visible landscape, many land planning departments in parishes are holding back from handing out new building permits for the time being, and thus even turning buildable land back into agriculture land hoping to stop development in its tracks. The idea is to have some control on the visible effect of such large population increases, but while the population still grows, the prices will simply inflate further if not enough housing is built.

7. Types of properties that are built

Llorts, Ordino, Andorra

Property developers are in the game of looking for builds that will give them the most profit per square meter possible. This story follows true in Andorra where developers are quite aware of the quantity of wealthy individuals investing here. The most popular property to develop in the last 5 years has been in the above €1,000,000 mark as single-family housing or luxury apartments. Very few mid-range properties have been constructed, which is constricting the market into very high average price ranges. Furthermore, the 2-3% annual increases in population size include a larger quantity of middle class individuals which need regular and not luxury housing. With a stagnated market, and only luxury construction, there is simply not enough regular housing available, consequently prices have risen.

8.   The passive residents

Passive residents, that is to say residents who do not pay into the social security system, have the choice to invest €600,000 in their primary residence to obtain residency. This figure stood at €400,000 up until late 2022. This investment is necessary to get residency and must be done in the first 6 months of obtaining residency.

To no surprise, properties that have a close value to these ranges are advertised at a higher price. For example, up until 2022 you would see most properties with a value of €320-390,000 being advertised at €450,000 and nowadays properties worth €500-590,000 being advertised at €650,000. This is because the realtors are aware the passive residents are a big buying power, and they are filtering their property searches with minimums that do not go below their necessary investment figure (currently standing at €600,000). Most passive residents, being unsuspecting expats, are unaware they are overpaying by possibly €100,000 or more. This also means that property values above these figures are pushed higher too. The rule of thumb is to be careful with any property advertised between €20,000 and 300,000 above the passive resident investment figure at any the time.

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If you are reading this, you might be interested in purchasing property in Andorra. We are Guy Sharp and Elizabeth Pierce, experts in Andorra property and real estate and are here to offer you Andorra’s only buyer exclusive realtor service. This blog is the first step in helping you to get your money’s worth in the Andorran real estate market, and we hope our professional offer can be of service too.