Golden Visa: Once a “blessing”, now losing its luster – High rents and unaffordable real estate prices

Acquiring a home in Europe has become an elusive dream, with wages “frozen” while real estate prices keep rising.

Spain, Ireland, Portugal and Greece are among the countries that sought immediate solutions to the housing crisis, offering visas at the height of Europe’s debt crisis in 2012 to help cover budget deficits.

When Ana Jimena Barba, a young doctor, started working at a hospital in Madrid last year, she moved with her parents half an hour outside the city until she could save enough to buy her own house. But when he started looking at houses in the same village, almost everything cost more than 500,000 euros.

The sum — nearly 20 times the average annual wage in Spain — happens to correspond to the cost of the country’s “golden visa,” a program that offers residency to wealthy foreigners who buy property there. After a decade, the program has billions of euros in investment, but it also helped trigger a terrifying housing crisis for its citizens.

Faced with mounting pressure to tackle its housing crisis, Spain said this month it would scrap golden visas.

Spain alone has issued 14,576 visas linked to wealthy buyers investing in property worth more than €500,000.

But the prices they can afford are squeezing people like Dr. Barba from a market already greatly inflated by the rise of Airbnb and the lure of Wall Street investors.

“Access to housing must be a right instead of a profit-making enterprise,” Pedro Sanchez, Spain’s prime minister, said in a speech this month as he announced the end of the country’s golden visa program.

“Big cities face very tight markets and it’s almost impossible to find decent housing for those who already live, work and pay their taxes.”

Visas make it easier for people from outside the European Union to buy the right to stay temporarily, sometimes without having to live in the country. Investors from China, Russia and the Middle East flocked to buy properties through them, according to the New York Times.

In recent years, British nationals have followed suit in the wake of Brexit, snapping up homes in Greece, Portugal and Spain, while a growing number of Americans are trying to enjoy a lifestyle they can’t afford in big US cities.

However, golden visa schemes are being phased out or closed across Europe as governments try to reverse the damage to the housing market. And after Russia invaded Ukraine, EU officials urged governments to end them, warning they could be used for money laundering, tax evasion and even organized crime.

Portugal, which has received more than 5.8 billion euros in investment from the visas, amended its program in October to remove real estate as an investment to reduce speculative buying and cool the overheated housing market. An influx of foreigners has displaced thousands of low-income Portuguese citizens from their homes in cities such as Lisbon.

Golden visas and Greece

Greece, one of the last countries in Europe to offer a golden visa, is increasing its foreign investment limit to €800,000 from €500,000 in the Athens area and popular islands such as Mykonos and Santorini.

The country’s prime minister, Kyriakos Mitsotakis, acknowledged severe housing shortages and pressure on rental markets, especially around Athens, but said the government still wanted to attract investors. Greece attracted €4.3 billion in investment from the visas from 2021 to 2023 alone.

A report released by the Institute of Labor Economics in March said that visa programs have helped spur economic growth in the countries that offer them.

But governments must strike “a delicate balance between reaping economic benefits and safeguarding against potential risks,” including money laundering and uncontrolled gentrification, the report said.

Gentrification

Gentrification has been spreading across European cities for decades, but the rise of Airbnb and other short-term rental providers has accelerated the housing affordability crisis. This was particularly the case in countries hit by Europe’s debt crisis, where property owners found they could earn more by renting to tourists than to locals whose finances had been squeezed by austerity programmes.

In Greece, which initially granted foreigners a five-year residence visa if they invested 250,000 euros, many listings of apartments and houses in Athens and the Greek islands suddenly rose from bargain prices to 250,000 euros, well out of reach for most Greeks.

The scheme particularly enticed Chinese nationals, with many flying to Athens carrying suitcases loaded with cash. Chinese investment firms have also bought buildings in low-income neighborhoods and student housing areas, renovating apartments and reselling them to visa applicants. Today, entire blocks of flats even in once undesirable zones in and around Athens are largely owned by foreigners.

“The prices raised by the golden visas have not gone down,” Laura McDowell told the NYT. “The Greeks cannot respond.”