Vienna, Austria

The Impact of Residence and Citizenship Programmes on Real Estate Markets

By Helmut Seitz and Philipp Walch, Hasberger_Seitz & Partner Rechtsanwälte GmbH

The only three rules to be applicable in appraising real estate for me were always: Location, Location, Location. The interpretation was global: if you have a holiday property with a sea view, the value increases; if your logistic centre has access to railways, waterways, and roads, the value increases. The connection between the intended use of a piece of land and its bricks, steel, and concrete, and where it was situated, was the key figure of a real estate’s value.

This global rule now seems to have an exception due to residence and citizenship programmes, where countries offer the right to reside in their country or even become a citizen as consideration for an investment. These “Golden Visas” actually provide a lot of benefits to people who can afford such an investment: from freedom to travel, to having a plan “B” in case, for whatever personal or general circumstances, one must leave their home country. Considering that in emerging market countries with a (less) emerging democracy the possibility of gaining wealth on the one hand often combines with high political risks on the other hand, a second citizenship can be insurance against extradition, or any other not so democratic act.

Many countries are offering such programmes: from little Caribbean island states to member states of the European Union. The minimum investment usually starts at approximately USD 200,000. In order to examine the impact of these programmes on the real estate market, we would like to turn your attention to two European countries offering, and actively advertising, their programmes. We have chosen Portugal and its Golden Visa programme and Cyprus and its citizenship programme. What they have in common is that in both countries there is no (at least no relevant) obligation to really use the right of residence; the right of residence does not make you automatically a taxpayer there (as it would, for instance, in the Spanish programme); the rules for their programmes are very clear and easy to administer.

Portugal

The Portuguese Golden Schengen Visa is granted to an investor and his entire family (even adult children if they are still dependent on the investor’s income) for a minimum investment in real estate of EUR 350,000. This minimum amount must be paid as equity sourcing from abroad.

Since the programme started in 2012, the scheme has attracted over 6,300 applicants. According to published records, it has proved particularly popular with Chinese, Russian, and South African buyers. The total amount flowing into Portugal due to Golden Visa real estate investments has so far been more than EUR 4 billion.

While, in the first year after introducing the programme, inflation (according to the Portuguese House Price Index or “HPI”) decreased by 1.9%, by 2014, it had increased by 4.3%. From that moment on, Portugal’s property market skyrocketed. The 178,000 homes traded last year totalled EUR 24.1 billion, the highest value since 2009. According to the Instituto Nacional de Estatística, house prices climbed 10.3% last year, a trend that has been maintained for five consecutive years.

Cyprus

Cyprus markets its citizenship-byinvestment scheme as “the quickest, most assured route to citizenship of a European country”. Even though it´s one of the most expensive schemes, with required investments (e.g. real estate) of not less than EUR 2 million, its total amount of investments surpasses even the Portuguese, with EUR 4.8 billion since its start in 2013. Over the last couple of years, the Cyprus HPI has decreased, and it looks like it was “bound” to Cyprus’ general inflation rate, which also decreased from 2013 up to 2017.

The total number of high-end residential properties worth over EUR 1.5 million each, which were sold during 2018, reached 324. Their transaction value stood at EUR 810 million, with the highend residential property segment representing 19% of the total annual Cyprus transaction value.

According to the Department of Land and Surveys in 2018, a total of 4,367 properties in Cyprus were acquired by foreigners, with 67% (79% in Limassol) of those by non-EU buyers.

Summary

Residence for investment programmes do have a huge impact on a country’s real estate market. They serve as a catalyst to accelerate the pace at which the property market grows. They do not, however, increase the volume of the property market as a whole, but rather shift it more towards the high-end property segment.

So, in the future “Location, Location, Location” might have one more interpretation.


Helmut Seitz

Helmut Seitz

GGI member firm
Hasberger_Seitz & Partner Rechtsanwälte GmbH
Law Firm Services
Vienna, Austria
T: +43 1 533 0533
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.hsp-law.at

Hasberger_Seitz & Partner Rechtsanwälte GmbH is an Austrian independent, fullservice business law firm with a strong international focus. Since its foundation in September 1997, it has prided itself on a flexible approach to schedules and venues, close cooperation with GGI members from around the globe, and a work ethic defined by quick reaction times, efficiency, and commitment. It covers a particularly wide range of legal services in the fields of private and public law, providing customised solutions for business and private clients.

Helmut Seitz is a Founding Partner of Hasberger_Seitz & Partner, a Viennabased law firm. He has specialised in real estate transactions for more than 20 years and is Global Vice Chairperson of the Real Estate Practice Group.

Philipp Walch

GGI member firm
Hasberger_Seitz & Partner Rechtsanwälte GmbH
Law Firm Services
Vienna, Austria
T: +43 1 533 0533
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.hsp-law.at

Philipp Walch works with Hasberger_Seitz & Partner (HSP) as legal researcher and organiser of the Immo-Dienstag (“Real Estate Tuesday”), a twice-quarterly conference on current real estate topics hosted by HSP in Vienna and Kapp & Partners in Graz.
Philipp Walch

Philipp Walch

GGI member firm
Hasberger_Seitz & Partner Rechtsanwälte GmbH
Law Firm Services
Vienna, Austria
T: +43 1 533 0533
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.hsp-law.at

Philipp Walch works with Hasberger_Seitz & Partner (HSP) as legal researcher and organiser of the Immo-Dienstag (“Real Estate Tuesday”), a twice-quarterly conference on current real estate topics hosted by HSP in Vienna and Kapp & Partners in Graz.


Published: Real Estate Newsletter, No. 10, Autumn 2019 l Photo: A. Karnholz - stock.adobe.com

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