Spain’s government has begun the process of ending its controversial ‘golden visa’ scheme. Under this scheme, foreign investors were able to settle in Spain very quickly.
In a cabinet meeting on Tuesday, ministers agreed that golden visas will not be issued to more people.
Through this scheme, a golden visa was available for buying a property worth five lakh euros.
In Spain, the Golden Visa scheme was launched by the conservative government of Mariano Rajoy.
During the economic crisis in Europe, the scheme encouraged foreign investment that Spain desperately needed. Spain’s property sector was hit hard by the crisis.
According to Transparency International, 62,000 people have received golden visas by investing in property in Spain by 2023, but other sources put the number even higher.
Almost half of the total number of golden visas (2712) were obtained by Chinese citizens, while 1159 Russians, 203 Iranians, 179 Americans and 177 British citizens received golden visas from Spain.
Under the Golden Visa scheme, foreigners could get a Golden Visa by investing 2 million euros in Spanish government bonds or investing in emerging Spanish companies.
However, the government says that only six percent of golden visas were issued for investments other than property.
Prime Minister Pedro Sanchez said the government ended the scheme to “guarantee that a home is a right, not a business.”
He said the majority of those who obtained visas bought properties in Madrid, Barcelona, ​​Valencia, Malaga, Lucknow and the Balearic Islands. These are all areas where the housing market is under severe pressure. It became almost impossible for people living or working there to find affordable housing and pay daily taxes.
House rents have skyrocketed in some parts of the country, such as Ibiza in the Balearic Islands.
Last year the government introduced a new housing law to keep rents low in areas where they had risen sharply.
Critics argue that simply abolishing the visa system will not improve things.
“The problem in the housing sector in Spain, whether it’s sales or rental, is not due to the golden visa, but due to the increase in demand and the shortage of housing,” said Francisco Enarta of Ideal Property Portal.
Meanwhile, the pressure from outside Spain has also increased. The European Union had asked its countries to end such schemes citing security concerns during the Ukraine war.
In 2022, the US also ended the housing-for-property scheme that was benefiting the elite.
Ireland ended its golden visa scheme the following year, while Portugal reformed it so that simply buying property no longer grants residency there.
What countries do people want to live in?
About 60 countries offer the Golden Visa, says Dr. Kirsten Sork, associate professor of political sociology at the London School of Economics and author of The Golden Passport Global Mobility for Millionaires.
About 20 countries enable citizenship by investment with legal provisions, and half of those countries receive more than 100 applicants each year, she adds.
“Turkey is the country that offers the most opportunities for citizenship,” Dr. Surak told the BBC. According to Dr. Surak’s research in the field, applications for Turkey’s Golden Passport scheme account for half of annual global citizenship sales.
“The largest housing through investment programs are offered in the Global South with Malaysia and the United Arab Emirates being particularly popular destinations,” she says.
Saint Kitts, Dominica, Vanuatu, Grenada, Antigua and Malta are also among those issuing Golden Passports.
The European Union (EU) is one of the most desirable destinations for Golden Visa seekers because the right to live and work in an EU member state allows for visa-free travel to Schengen Area states.
In 2020, 14 countries in the European Union were offering Golden Visa. Greece, Latvia, Portugal and Spain received more than 70 percent approval in the bloc. But many of these countries have banned the schemes.
In 2022, the UK government ended a scheme that allowed wealthy foreigners to settle in the country if they brought assets with them.
The following year, Ireland abolished its golden visa, while Portugal revised its own version, no longer allowing residence in exchange for property purchases but for capital transfers in funds and investment in research activities. This process was continued through
Why is Golden Visa in demand?
Golden visas and passports are very popular among wealthy individuals, who are looking for better business opportunities, suitable lifestyle, education or health services.
Lizzie Edwards, marketing manager of the UK-based company LaVida Golden Visa, told BBC Turk in an interview last year that ‘There is more uncertainty than ever before, and because of that, dual citizenship or passports. The need has never been greater.’
“Investor motivations vary, but common reasons for applying include security purposes, expanding visa-free travel and expanding global opportunities, including educational and business opportunities,” he said.
How do you get a Golden Visa or Passport?
The rules and regulations depend on the destination and type of investment. For example, Turkey offers a Golden Passport to foreigners who buy or are able to buy property worth $400,000 or more.
Some other countries like Luxembourg offer different routes for golden visa. Options vary from a minimum investment of $536,000 (€500,000) in an existing Luxembourg company to a deposit of $21.4 million (€20 million) in a financial institution.
Many countries also accept donations or investments in research and development activities.
One of the main motivations for governments to run these schemes is to enable capital migration into the country and boost the economy.
Between 2013 and 2019, 14.4 percent of Portugal’s foreign direct investment came through golden visas, according to a research paper by Dr. Kristen Sorek and Yusuke Suzuki published in the Journal of Ethnic and Migration Studies. The ratio was 12.2 percent for Latvia and more than 7 percent for Greece.
Why are these schemes controversial?
Campaigners warn of two main concerns over the schemes, which include corruption and fueling a housing crisis for local people.
Transparency International, a global NGO working against corruption in more than 100 countries, has warned that EU schemes are ‘not about real investment or migration, but about serving corrupt interests. ‘
According to Eka Rostomashvili, a campaigner at Transparency International, countries running such programs have some due diligence measures in place, but they are not always working as intended.
“There have been reports of people applying for golden visas or passports before or after being involved in corrupt or fraudulent schemes,” he told the BBC.
“Obviously, they see it as a kind of insurance policy against law enforcement (in their countries),” he said.
It has also been criticized by various institutions of the European Union. In 2022, the EU’s Committee on Civil Liberties, Justice and Home Affairs voted to ban the Golden Passport and asked third countries with visa-free access to the EU to end their Golden Passport schemes.
“Although money laundering is possible through these schemes, there are simpler and cheaper alternatives,” says Dr. Kristen Sorek.
“You can do the same with a student visa, it’s probably a lot cheaper,” says Dr. Kirsten. Same thing with business visas. This is not a particular concern for these programs.
An Organized Crime and Corruption Reporting Project investigation published in October 2023 revealed that a former Libyan colonel accused of war crimes and a Turkish businessman serving a prison sentence in Turkey were involved in Dominican fraud through these schemes. Involved in buying passports.
And in 2023, a review of golden visas in the UK commissioned by the Home Office found that ‘a small number of foreign investors were potentially at high risk of being linked to corruption or organized crime.’
Another major concern, highlighted by campaigners, is rising house prices. Although different countries offer a range of investment options, the majority of applicants choose to buy real estate, driving up property prices.
But research by Dr Kirsten Sork suggests that ‘in most countries its impact is limited. For example, Spain accepts about 2.000 applications per year and she highlights that in a country with 48 million inhabitants, 2.000 real estate transactions are negligible.
But real estate purchases are often concentrated in desirable areas, and certain towns and neighborhoods popular with foreigners may be more affected.
Antalya, a coastal city in southern Turkey, is one of them. Traditionally popular with Russian and Ukrainian tourists, Antalya became a permanent haven after the war in Ukraine broke out. Locals complain that increased demand for real estate has driven up prices.