In the wake of turbulent times brought on by Covid pandemic and recent military conflicts, the investment migration industry has not been left untouched. Despite facing continuous pressure from the European Union, public critique, and political meddling, interest in European Golden Visas has notably increased. This demand boom has led to essential changes in Europe’s principal programs, making us wonder about their future.
For over a decade, residency by investment programs, affectionately known as 'golden visas,' have drawn numerous investors from outside the EU. Nations such as Portugal, Malta, and Greece offer a variety of attractive investment opportunities for securing local residency, with real estate emerging as the most popular option for its obvious perks.
What do all European golden visa programs have in common?
Golden visa programs were launched by various countries as strategic efforts to attract foreign investment and boost economic development.
These programs allow non-EU nationals to secure a residence permit for an initial 5 years, with the possibility of extension, in return for a significant investment. This could be in the form of purchasing shares in local companies, making state contributions, or, most commonly, investing in real estate. With an investment of around 500,000 EUR, investors not only gain local residency but also enjoy benefits like visa-free travel within the Schengen Area, work permits, the ability to start a business, and the inclusion of family members in the application.
Countries like Portugal even facilitate a route to citizenship, requiring just a minimal period of residency for a final eligibility for "naturalization."
Clearly, this arrangement proves advantageous for both the investor, who gains a valuable asset and increased global mobility, and the host country, which sees economic gains from taxes and application fees, thereby bolstering its economy.
Post-Pandemic Surge: A New Wave of Interest
Unprecedented worldwide lockdowns, closed state borders, and government intervention in citizens' daily lives and movements likely sparked a new wave of investor interest that had never considered the "Plan B" option before. As a result, 2023 saw a record spike in European Golden Visa applications.
For instance, the number of applications for the Greek Golden Visa in the first six months of 2023 nearly tripled compared to the same period in 2022, reaching an all-time high of 7,752 total applications by the end of the year. Portugal also experienced a record year in terms of application approvals in the first six months of 2023 before any changes occurred.
Facing EU critique and political challenges
Golden visa programs have long been under the microscope of EU authorities, who express concerns over potential risks including money laundering and threats to security.
This critical attention has led to the adoption of stricter regulations and enhanced transparency requirements, significantly shaping how nations devise and administer their golden visa programs.
As we have observed in many cases, periods of financial success in these programs tend to prompt government actions, resulting in changes that we may view with skepticism and want to really question.
As we discuss further in the article, the motivations behind these interventions vary from country to country, whether openly acknowledged or subtly implied by the authorities.
Latvia
Introduced in 2010, The Latvian Golden Visa program almost had the whole market to itself for 2010-2013, by receiving thousands of applications each year. This early success peaked in 2014, with a remarkable 2,500 applicants. The program's appeal was straightforward: its proximity to the largest non-EU neighbour, Russia, whose citizens were familiar with Latvian cities like Jurmala and Riga from Soviet times. Additionally, the initial investment threshold of EUR 140,000 was financially accessible for many Russian families, making it an attractive option.
However, the program experienced a dramatic decline, with applications dropping by approximately 90% between 2014 and 2020. This downturn can be primarily attributed to two factors: the increase in the real estate investment threshold to EUR 250,000 in September 2014, and a noticeable reduction in active promotional efforts by the Latvian government.
During our agency’s practice from 2017 to 2019, we observed a lack of interest by Latvian government in keeping up the market rapid dynamics among Europe's golden visas.
Moreover, the decline was further driven by policy decisions, particularly the 2022 legislation that explicitly banned Russian and Belarusian applicants, reflecting a deep-seated political opposition to these groups. This move significantly narrowed the program's potential applicant pool
Greece
Greece's residency by investment program has emerged as a favored choice among Chinese nationals and a diverse international clientele. Since 2018, it has consistently ranked as one of the top programs, and by 2023 it became the world's most applied-to residence by investment scheme.
With 90% of applicants choosing real estate investments, certain areas are experiencing high demand. This has led to discussions about adjusting the investment threshold to better support the local market
In response to these dynamics, the Greek Golden Visa program is about to change its rules for buying property. Soon, there will be three different price levels for different areas: the highest is EUR 800,000 for places like Athens, Thessaloniki, Mykonos, and Santorini; the middle range is EUR 400,000 to EUR 500,000 for areas around Athens; and the lowest is EUR 250,000 for less popular areas. This means investors will have to spend more or less depending on where they want to buy property.
This methodical approach aims to evenly distribute investments across the country, ensuring that the program's benefits reach beyond its usual focal points.
Amidst these changes, the Greek government has faced internal and external pressures to address concerns over housing affordability and market saturation in prime locations.
Portugal
Portugal's residency by investment program has stood out as one of the most prominent and popular in Europe for many years. Its clear and straightforward path to citizenship, requiring only a week of physical presence over a five-year residence permit, has attracted numerous individuals and families seeking a future in Europe. Since its inception in 2012, the program has injected over 7 billion euros into the Portuguese economy.
Initially, in 2022, the Portuguese government sought to steer investments towards regions in need of economic development and population growth. It restricted investments in high-density areas like Lisbon and Porto, setting the starting investment threshold at EUR 280,000 for less populated areas.
However, in a significant shift in October 2023, legislation changes led to the removal of all types of real estate investments from the Golden Visa Program
These changes have been driven by pressure from political groups advocating for the termination of golden visa programs, which they view as a significant threat to the local real estate market
These changes, driven by pressure from political groups advocating for the end of golden visa programs perceived as threats to the local real estate market, reflect a broader trend. Across Europe, the stance of domestic policymakers and the disapproval from certain political factions highlight a growing skepticism towards these programs.
The evolving regulatory landscape and political pressures across countries like Portugal, Latvia, and Greece signal a critical juncture for European residency by investment programs. This scenario sets the stage for a broader discussion on the future of these initiatives amidst tightening EU regulations.
Tightening Grip on Investment Migration by 2025
In March 2022, the European Parliament advocated for stricter controls on investment migration, especially targeting citizenship by investment schemes, including those in the Caribbean, over security and transparency issues. By 2025, we can expect a potential phase-out of certain citizenship by investment schemes and the implementation of a comprehensive, Union-wide regulatory framework for residency by investment programs, aiming for harmonization and increased oversight across the EU.
Recent EU actions to end golden visas aim to curb corruption with growing concern that the programs are being abused by organized crime syndicates and corrupt officials. That prompted the European Commission, the bloc's executive arm, to call on member states last year to stop selling them.
However, we believe that focusing solely on golden visas may overlook broader issues within the spectrum of organized crime's operations, suggesting that a more comprehensive approach is needed to address the underlying challenges.
Application surges amidst regulatory changes: a reaction to potential abolishment?
The year 2023 witnessed unprecedented spikes in applications for golden visas, a trend many experts believe was propelled by anticipated changes in legislation, rendering these programs less appealing than before. This surge can be attributed to a strategic marketing push by investment migration consultancy firms, which capitalized on the fear of missing out (FOMO) by promoting a "last-chance" narrative to prospective investors.
Despite this frenzy, our experience with the Latvian Golden Visa, alongside insights from colleagues involved in other European programs, suggests that the demand among high-net-worth individuals (HNWIs) targeting Europe remains robust. These investors appear willing to meet even higher investment thresholds, indicating that demand is somewhat inelastic and that the allure of certain programs is not easily diminished by price increases.
This enduring interest underscores the complexity of the investment migration landscape, where regulatory changes, political pressures, and market dynamics intersect, shaping the future of golden visas in Europe.
Can Latvia regain its early dominance in the Golden Visa scene?
In our opinion, Latvian Residency by Investment Program was always a reliable option without significant changes like in other EU Jurisdictions that continue to be overlooked.
With its unique advantages and lower profile, it represents a noteworthy option in this dynamic environment.
We will delve into the Latvian program in more detail in another article. Stay tuned!