Spain has announed plans to grant permanent residency status to foreign nationals who buy Spnish property priced at €160k or above.
The Secretary of State for Trade, Jaime Garcia-Legaz, announced the plan at a conference in Madrid in November of last year. “In coming weeks,” Mr. Garcia-Legaz told reporters, “we will start to reform the law regarding foreigners to reactivate demand abroad and contribute toward reducing housing stock.” Spain normally grants 90-day visas to foreign purchasers, but under new plans will give permanent residency status to those who buy properties worth €160k (£130k).
The hopes of the plan hang on the response from Chinese and Russian buyers, since these two countries represent the largest markets outside the EU for Spanish property.
After the 2008 crash, Spain was left with a large and widening gulf between housing stocks and demand. There’s demand enough in the country to absorb 200k homes annually, and a stock of between 700k and 1.1m housing units – a stock that will grow as homes currently being built are completed and investment, retirement and holiday homes belonging to cash-strapped Europeans hit the market.
One effect of the scheme would be to allow purchasers of homes in Spain to move around the 25-nation Schengen zone, the group of European nations sharing a common border. Holders of a residency permit can travel freely in, though not work in, any country in the zone.
There are elements of the plan that are unclear. Spain could face a backlash from other EU member states if the residency permit offer is seen to be a step towards obtaining an EU passport, and thus the right to live and work in any EU member state.
Spain won’t be alone if it does face ire from other member states, however; Portugal and Ireland, other major casualties of the housing crash, have already instituted similar deals. In Portugal, residency comes with a property investment of €400k (£327k), and in Ireland the price is €500k (£410k).
Hungary is the latest EU state to offer permanent residence to non-EU nationals.Â The right to live in Hungary will cost, not a house purchase, but the purchase of €250k (£201k) of special issue government bonds.
Spain’s offer to investors from abroad undercuts these offers significantly. If the transaction is seen as the purchase of a residency permit with a property requirement, which it inevitably will be, the Spanish deal is by far the best, at less than half the price of the nearest property-linked rival.
The sum required has been set at the national average property price in Spain. Mr. Garcia-Legaz told reporters that it was a “balanced figure,” adding, “any lower and it might create a massive demand for residence permits with housing as the excuse to get them.”
In fact, such demand will already exist in Eastern European and Balkan states, in Russia, and in China.
For the Spanish worker the move seems another designed to liberalise movement and property for the wealthy alone, and Spain’s UGT, the second largest trades union in the country, said the government “wants to attract foreigners who are obviously rich and can supposedly remain in Spain without working with the aim of getting rid of a stock of houses that are largely in the hands of the banks.”
But for the Spanish government, arguments about labour mobility or the dangers of making the borders of the EU porous to foreigners with enough money to buy their way in are secondary. The bottom line, as stated by Prime Minister Mariano Rajoy, is: “We need to sell these houses.”
Photo credits: JosÃ© via Flickr