ADIOS, GOLDEN VISA OF THE MILLIONAIRES!

Money MattersNewssliderSpain


The Spanish government is set to scrap the so-called Golden Visa for foreign
investors spending €500,000 or more on real estate in the country

 

by Rose Maramba

The Government is set to amend the law that grants non-EU foreigners who buy real estate property in Spain worth €500,000 or more a Spanish residence permit. The so-called Real Estate Golden Visa will be scrapped. This is because the visa has been found to exacerbate the severe housing shortage in Spain.

 

Backdrop

Why the housing shortage? In Spain, 95% of properties being rented out are owned by private individuals; not surprising when over 75% of Spanish people are homeowners (2019 figure). The rest is in the hands of large property owners (those with ten or more properties). Fortunately, the percentage of households renting out their homes is rising – in 2018, nearly 18% of households did, compared to 16% in 2013. This is not sufficient, though.

The Government will focus on affordable new housing, rehabilitation of old apartment buildings, and social-rental homes. Golden Visa for Real Estate Investment will be scrapped. (Photo: old apartment building in the center of Madrid)

Only around 1.1% of the country’s rental properties are designated for social housing. That is much lower than in other OECD countries. Compare Spain with Britain, for example, where subsidized housing represents nearly 17% percent of rental properties; France, where it’s 14%; and Italy, 4%. Faced with this rather grim reality, Spain has dedicated €1 billion of the funds from the EU’s Recovery, Transformation and Resilience Plan to the country’s social housing sector. In addition, Spain has recently made provisions to reserve 30% of units in new housing construction for affordable and decent low-income public housing. To guarantee the Spaniards’  access to this kind of housing, the Government has also set aside €2 billion to stimulate the construction of 40,000 public and private housing units for social rental.

 

The end of the Golden Visa for Real Estate: a solution

At a press conference last April, the Minister for Housing and Urban Agenda, Isabel Rodríguez, said that the Government is embarking on a four-prong line of action that will reinforce the supply of affordable housing; promote financing for families, young people and public and private developers; smooth out bureaucratic kinks to speed up construction procedures;  and to address exceptional situations, such as the current housing crisis, with such measures as facilitating access to housing in places faced with the heavy burden of spiraling prices and lack of residential supply.

The Minister for Housing and Urban Agenda, Isabel Rodríguez, at the press conference on the housing situation in Spain and the Golden Visa

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The minister emphatically pointed out that the elimination of the Real Estate Golden Visa represents an immediate step toward solving the problems generated by and in these special situations.

From the time the law on foreign investments as a means to obtain a Spanish Residence Permit (Ley14/2013) was passed in 2013, nearly 15,000 Golden Visas linked to real estate investments have been granted, mostly to wealthy Chinese, Russian, British, and Americans as well as citizens of Ukraine, Iran, Venezuela and Mexico.  Most popular with the real estate investors are the provinces of Barcelona, Madrid, Malaga, Alicante, Valencia and the Balearic Islands.

The Government is prioritizing construction of new affordable housing, edging out the Golden Visa for Real Estate Investment.

According to Rodriguez, housing purchases by foreigners increased considerably in the last quarter of 2023. In point of fact, the number of “real estate visas” has doubled since 2022. While this may indicate the success of the foreign real estate program, it actually puts a heavy strain on the real estate market, driving prices up, as well as encouraging speculation, not to mention money laundering, which is why the Government is putting an end to the Real Estate Golden Visa. In its place, the Government will direct investment toward the promotion of affordable new home ownership, the rehabilitation of old residential properties, and the construction of high-quality social rental housing for the local population.

The annual target is 300,000 renovated homes per year until 2030, thus converging with the European Union.

The minister says the construction of 24,964 social rental homes which  has been financed with €1 billion from the Recovery Plan has exceeded the commitment to build 20,000 homes.

 

The Golden Visas

The so-called Golden Visa is actually a program of several different investments:

  1. Investment of at least €500,000 in unmortgaged real estate in Spain
  2. Investment of at least €1,000,000 in Spanish companies
  3. Investment of at least €2,000,000 in government bonds
  4. Bank deposit in a Spanish financial institution
  5. A business project of general interest that creates jobs, contributes to technological and/or scientific innovation, or impacts the local area in the socio-economic sphere

 

What’s in it for Spain

The above program is aimed at foreign investors who would put down considerable amounts of euros to obtain an indefinite residence permit in Spain but subject to the maintenance of said investment over a stipulated period.) Like the other types of investment, the Golden Visa for Real Estate Investment allows the investor to live and work in Spain. And being a resident of Spain, the investor will enjoy free movement across the Schengen Area. This right and privilege is extendable to the investor’s family: spouse or partner, children below 18 years of age, or financial dependents.

The Golden Visa investments are deemed to combat unemployment, boost the economy and bring in new talent.

The Government envisioned the Golden Visa program as a means to boost the Spanish economy, create new jobs, and attract new talent from abroad, considering that, as the Ley14/2013 notes, Spain has been going through an acute and prolonged economic crisis with severe social consequences. Between 2008 and 2012 almost 1.9 million companies were wiped out in Spain, more than 99.5% of which were companies with less than 20 salaried employees, against the creation of 1.7 million new companies. [Which deficit has been occurring in a ] critical jobless environment…

This situation justifies the need for a reform that will stimulate economic growth and reactivate the economy. (Unofficial translation.)

However, as the Spanish government has announced, the Golden Visa for Real Estate Investment is nearing its end. So far, no exact exact date for the termination has been given.

 

It’s not really all over for the Golden Visa

Ending the Golden Visa for Real Estate Investment does not mean abrogating the entire law; it will only amend it. The Golden Visa will still be obtainable via the other Golden Visa Investment schemes. (See “La Golden Visa en España se mantendrá, aunque con estos cambios,” in Funds Society, 18 April 2024.)

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Images
Featured image/itay-verchik, Pixabay, edited, framed, €-sign supplied.
Old aparment building/David Adam Kess, CC BY-SA4.0 via Wikimedia Commons
Press conference of the Minister of Housing and Urban Agenda/Pool Moncloa-José Manuel Álvarez

Unemployment vector/Mohamed Hassan from Pixabay. Edited.
New construction/Pexels, Pixabay. Edited.