European Real Estate Investment

Most applicants to Citizenship or Residency by Investment programs opt to invest in real estate when the option is presented to them. Not only do they acquire a home, whether it be their primary residence or vacation home, but they also have the opportunity to make a return on their investment when they decide to sell their property after the initial obligatory holding period ends. In order to make a hopeful profit, however, research must be conducted to try to forecast the future housing market where one is investing. This is especially important given the volatility of property markets worldwide.

Many countries around the world (over 50 so far) offer residency permits in exchange for an investment into the country’s economy. Of all the investor immigration programs, Europe remains one of the most desirable places to obtain residency due to the political stability and, more importantly, the strength of European passports. EU citizenship grants the citizen the right to live and work anywhere within the European Union.

Real estate investments for most programs must be held for a minimum period of five years. It is therefore important to consider the value of your property investment over this period. Here we will compare the markets of three different European countries, that each offers their own immigrant investor scheme.

Spain 

Spain first offered real estate to immigration investors in 2013 whereby investors could obtain a Spanish residency permit for a property investment of at least €500,000. Spain was popular for expat property until the 2008 global financial crisis knocked the market into a downward spiral. Thankfully, things are now taking a turn for the better. The country was praised for its remarkable economic rebound by the International Monetary Fund (IMF). Property buyers from overseas are returning to Spain.

The property market for first home buyers hit rock bottom in 2014 in the prime areas of Spain’s main cities. Property prices have since then been steadily increasing along with the economy. In 2015, approximately 48,000 homes were purchased by foreign nationals in Spain, representing about 13% of the country’s total home sales. Although the real estate in Spain is considered a lagging market, the potential compared to other European countries is significant. Properties located in prime areas of Spain’s main cities would have appreciated 20% since the end of 2013.

Cyprus

Cyprus also introduced its investor immigration program in 2013 and has been reducing the minimum investment requirement ever since. The minimum amount started at €10 million, was slashed to €2.5 million in 2014, and was again reduced to €2 million this year. This reduction alone makes Cyprus an attractive option. UAE residents continue to flock to Cyprus thanks to its Mediterranean lifestyle as well as its proximity to the Middle East.

The price falls in the housing market are now decelerating after a seven-year slump. In 2014, prices decreased by 8% and in 2015 by 4%. As property transactions and residential construction increase, the housing market is starting to show some improvement. This can translate into a significant opportunity for foreign investors.

Growth is predicted for Cyprus, even though it is forecast at only a moderate growth rate in the next few years. Cyprus has reformed laws to protect buyers, and also eliminated all future capital gains taxes for those who purchase a property in 2016. These changes have increased investor confidence in this Mediterranean nation amidst continued economic recovery.

Malta

Malta’s investor immigration program allows for direct citizenship to be obtained for a minimum investment of €1.2 million into Maltese economy, including the purchase of a property for a minimum of €350,000.

Property prices are surging in Malta, with a 7.6% increase in 2014 and 4.9% in 2015. The investor program introduced in 2013 is partially responsible for this upward price trend as it targets high net worth individuals to invest in the country.

From the year 2000 to 2007, the Maltese property market experienced astronomical growth, with the overall housing price index rising by 79%. This trend ended in 2008 with the global financial crisis and prices began to fall. House prices rose again starting in 2013 due to the government’s launching of property-related measures, including the citizenship by investment program.

The Verdict

While some countries are experiencing faster growth in their real estate sector than others, there are other important factors to consider prior to choosing to invest in a country. The lifestyle, resident/citizen benefits (including healthcare), social environment, and overall economic state are but a few that should be taken into account.

In addition, program requirements and benefits should be weighed against one’s future plans. Are you looking for a second passport? While Cyprus and Malta offer citizenship for investment, Spain’s route to citizenship is a long one. Do you intend on moving to the country you are investing in? Note that while no physical residency requirement is required for Spain or Cyprus, investors interested in Malta must purchase a primary residence to be eligible for the program, and though they need not reside there 365 days a year, they must commit significant time there. These are a few questions that should be asked prior to making any investment decisions. These decisions, after all, affect yours and your family’s future.

If you are interested in investor immigration to Europe, contact our office today. We will help you find the best program based on your specific needs and circumstances.

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