Revoking the ‘Golden Visa’: Implications for Spain’s Real Estate Market and Economic Sphere

Trade and Economics - April 22, 2024

On Monday April 8th, the Spanish President Pedro Sanchez, announced that the Spanish government has initiated the procedure to put an end to the “Golden Visa”, in order to guarantee citizens’ access to decent and affordable housing. This measure will to eliminate the granting of this document that allows access to the residence regime when investing more than half a million euros in real estate. As the President announced, “We will take the necessary measures to ensure that housing is a right and not a mere speculative business.”

This type of visa became popular in Spain back in 2013, after the 2008 financial crisis and the bursting of the Spanish real estate bubble. The fall in foreign investment made the government at the time, the Spanish Popular Party (PP), led by Mariano Rajoy, to install in 2013 this measure aimed at citizens from outside the European Union who intend to make an investment in Spain as a mean to obtain residency, and have full access to European countries and the Schengen area.

The “Golden Visa” has many positive aspects, these enable you to legally work and reside in Spain for a minimum of two years, without the need to reside in Spanish territory for its acquisition. Now, once obtained, this type of visa allows you to have complete freedom of movement within the Schengen territory is not contingent on prolonged stays or tax residency within any specific country.

The requirements to obtain this type of visa were gathered on the 14/2013 legislation, and the inversion to obtain it, can be one of the following. On the first hand, you can make an investment of at least two million euros in Spanish public debt, one million euros in shares or equity investments in Spanish capital companies with a real business activity, one million euros in investment funds, closed-end funds or venture capital funds incorporated in Spain or in bank deposits in Spanish financial institutions. The second option is the purchase of real estate in Spain, which requires a minimum investment of 500,000 euros per applicant. Lastly, you can own a business project that is developed in Spain and that is considered and accredited as being of general interest.

Although there are different options of acquiring the “Golden Visa”, as stated above, most of these are earned by making an investment on real state. As the data provided by the Ministry of Foreign Affairs, European Union and Cooperation to the Spanish news media outlet ElEconomista, 94% of the 580 million euros that were collected in Spain with this type of visa, were through the purchase of property.

But now that the Spanish Government has made public the reversal of this law established back in 2013, and it will no longer be a mean of obtaining residency permit, it has sparked a debate, since it’s a very important source of income, and its cancellation will cause a shift in the destination of investor’s capital. It will no longer be Spain, but now the investments will be relocated to other EU countries such as Italy, Greece, Malta or Hungary, which will provide these investors with full access to the Schengen area, being this their main goal.

With this measure, the government expects a normalization of the Spanish real estate market and of prices in middle-class and upper-class housing, to establish housing as a fundamental right rather than merely a speculative commodity and ensure equitable access for all. The government’s main aim is to reduce the upward pressure on real estate prices, which especially in tourist areas are blocking the access to housing for the middle and lower classes. On this note, Carlos H. Quero, Congress representative from the Spanish parliament group VOX, shared during his appearance at the Spanish Congress, in opposition to the Spanish Socialist and ruling party, PSOE, the following, “With your policies you have created the perfect storm for global capitalism to play monopoly with our cities, if today Blackstone is one of the main landlords in our country, it is thanks to you”, he shared. VOX’s representative continued stating that “If there are neighborhoods with more tourist apartments than children, it is thanks to you. And, if there are cities with more rooms for rent than whole apartments, it is also, thanks to you”.

The reversion of the legislation regarding the acquisition of the “Golden visa” is very tricky and involves many other issues and subjects to keep in mind, as it is not as simple of reversing the legislation to as it was, since this will cause a type of disruption in the Spanish real estate market. The lack of investors and their cashflow will most likely have a considerable adverse impact on the Spanish economy, for this reason, the Spanish government needs to study the consequences before putting it into practice, considering that these investors, as explained before, will allocate their investments in other EU countries, with Spain taking a back seat.