Europe’s ‘Golden Visa’ Programs Grapple With Rising Housing Costs

Residency by investment programs provide individuals with a pathway to residency or citizenship in a foreign country through financial investments.

In the aftermath of the 2008 financial crisis, several countries such as Portugal, Ireland, Greece, and Spain introduced “golden visa” programs to attract foreign investment. These initiatives proved highly successful, attracting billions of dollars in foreign capital and playing a significant role in revitalizing real estate markets in cities where demand had previously been subdued.

But the era of golden visas in Europe, which catered to affluent foreign investors seeking improved travel opportunities, enhanced lifestyles, and effortless retirements, seems to be ending.

Portugal is poised to end its residency and potential citizenship program for foreign investors. Last year, the criteria for Portugal’s Golden Visa Program were tightened, which had previously allowed individuals to qualify by investing $383,000 in real estate and spending a minimum of seven days per year in the country. The program attracted a significant number of high-net-worth individuals, but it also faced criticism for driving up housing prices and making homeownership less affordable for residents.

In response to mounting concerns over skyrocketing housing prices and in an attempt to tackle the issue of affordable housing in one of Western Europe’s less prosperous economies, Portugal has made the decision to terminate its Golden Visa Program for new foreign property buyers.

Golden visa programs have been introduced in several European countries and worldwide, including the United States, Canada, Spain, and Greece. These programs usually continue until they face substantial opposition from critics who highlight negative aspects like escalating housing prices, absentee property owners, and corruption allegations. As a result, politicians often choose to terminate these programs.

Here is how these programs work and what they mean for the mobility industry.

 

How Do the Programs Work?

Residence by investment programs, commonly referred to as golden visas, provide individuals with the opportunity to obtain a residency permit in a country by either purchasing real estate, making a substantial investment, or making a generous donation.

Following the global financial crisis in 2008, Portugal and about 10 other European countries embarked on residency-for-sale programs to address budget deficits. Due to the absence of European Union-wide regulations, eligibility criteria varied significantly. The minimum investment threshold ranges from €50,000 in Latvia to €1.2 million in the Netherlands. In return, investors generally receive the privilege of residing and working in the country for a period of three to five years and, subsequently, they have the option to apply for citizenship.

In addition to golden visas, there is also citizenship by investment programs, commonly referred to as golden passports, which enable foreigners to obtain citizenship through similar means. For EU countries, this offers the added advantage of accessing the benefits associated with being a resident of the bloc, including the freedom of movement between member states.

Investors gaining citizenship through golden visa programs in Portugal and Greece also received EU passports, granting access to other European countries. Evidence indicates that a significant majority of participants in these programs are from China, with Chinese nationals accounting for over 90% of the 1,727 approved applications in Ireland since 2012.

 

Pressure to End Programs

The European Union has consistently exerted pressure on governments to abolish golden visa schemes due to concerns over their undemocratic nature and potential for facilitating the influx of illicit funds into the region.

“European values are not for sale,” Didier Reynders, the EU commissioner for justice and consumers, said last year. As European countries regain financial stability and encounter growing domestic opposition, certain popular destinations for applicants are becoming less receptive to the idea.

Transparency International issues an urgent plea for the discontinuation of golden visas in Europe: “Golden passport and visa schemes have turned European Union (EU) citizenship and residency rights into a luxury good: with enough money, anyone can buy in.” The statement continued, “These EU golden passport and visa schemes are not about genuine investment or migration but about serving corrupt interests.”

The proposed remedy involves banning golden passport schemes entirely and implementing robust regulations with sufficient checks for golden visa schemes. Transparency International further suggests that governments conduct a thorough review of previously granted golden passports and visas, with the oversight of the European Commission, to revoke citizenship or residency from individuals who should not have obtained them originally.

Across Europe, countries are caving to pressure and ending their golden visa programs.

 

Countries With Golden Visa Programs

On 15 February, Ireland ceased its program, while Portugal declared the suspension of new golden visa issuance due to apprehension over foreign buyers inflating housing prices. These actions occurred one year after Britain terminated a comparable visa program targeting millionaire investors.

Other countries are considering doing the same.

In 2013, the Spanish government introduced the Golden Visa Program as an economic stimulus measure. This program provided visa-free access to the Schengen Zone and a potential pathway to permanent residency. However, the Spanish government is currently considering either discontinuing the program or increasing the minimum investment requirement to €1 million.

On the other hand, Greece’s residency by investment program, which offers a five-year residency permit to individuals who invest a minimum of $500,000 in Greek real estate, experienced a noteworthy surge in applications during 2022. The Greek Ministry of Asylum and Migration reported a nearly twofold increase in the issuance of the country’s golden visa, reaching 2,767 permits last year compared to 1,525 in 2021.

Despite certain countries in the continent tightening their regulations on golden visas, the global competition to attract affluent individuals is intensifying.

Several African nations are creating programs to offer residence and dual citizenship programs to entice individuals with significant financial resources. Kenya is presently in the advanced stages of implementing a citizenship-by-investment program, while reports suggest that Uganda is also exploring the possibility of launching a comparable initiative.

Joining the ranks of these countries are destinations such as the island of Mauritius in the Indian Ocean, which grants residency to individuals who invest a minimum of $375,000 in any of six upscale real estate projects. Similarly, the nearby Seychelles offers citizenship in exchange for a minimum investment of $1 million.

 

Impact on the European Housing Market

According to the European Parliament, the golden visa programs successfully injected approximately €3.5 billion annually into European property markets between 2016 and 2019.

“There is an interesting paradox countries are grappling with—on the one hand, they want investment,” Will Harvey, a leadership professor at the University of Bristol, told Bloomberg. “The flip side of it is a big political trend around the optics of very wealthy investors from overseas having a privileged status at a time when there are a lot of challenges for large swathes of society.”

Rising home prices have given rise to the perception that affluent golden visa holders are displacing local residents, highlighting the contrasting views on revitalization and gentrification. In Lisbon, residential property prices have tripled since 2015, as reported by the real estate website Idealista. Similarly, in Dublin, prices have surged by 130% since 2012.

Increasing housing costs are of significant concern to people transferring for work due to several reasons. First, rising home prices can make it more challenging for transferees to find suitable and affordable housing options in their new location, impacting their overall quality of life.

Moreover, escalating housing costs can lead to a higher cost of living, which can erode the financial benefits of the work transfer. Additionally, the perception that affluent golden visa holders are contributing to gentrification and displacing local residents adds to the social and political complexities surrounding the issue. These factors highlight the need for careful consideration and support from employers when addressing housing challenges for transferees.

 

What Golden Visas Mean for Global Mobility Programs

While the golden visa scheme may appear extravagant for the average transferee, either due to financial limitations or a lack of interest in obtaining residency in the destination country, it should not be completely disregarded.

The visa program holds significant appeal for affluent transferees who possess both the willingness and the financial means to make a substantial investment in their new location. It goes beyond merely obtaining residency; it provides an opportunity to establish deep connections, contribute to the fabric of their new community, and make a lasting commitment to their chosen destination.

The golden visa can provide a more seamless immigration process for transferees who possess the financial means and an interest in investing. With this visa, individuals may have the opportunity to enter and work in the country with fewer obstacles. Nevertheless, it is important not to perceive this as a completely effortless pathway, as certain requirements and considerations still apply.

Securing a golden visa diverges from the conventional process of obtaining a work visa. Even for experienced mobility professionals, navigating the complexities of applying for a golden visa can be challenging. It’s essential to note that this visa is not a guaranteed pass but rather offers enticing benefits, such as simplified investment and residency in a new country, which may be appealing to certain employees in your global mobility program.