Coronavirus sinks the Spanish Golden Visa scheme this year

Golden visa investments are down by half in the first five months of the year, led by a 64% decline in Chinese investors.

There were 113 Golden Visas granted in the year to the end of May, compared to 285 in the same period last year, according to numbers released by the Foreign Ministry.

The biggest declines came, as to be expected, from the two biggest source markets, China and Russia, which went from 180 to 65, and 21 to 6 respectively. Chinese investments were down just under 64%.

Table of Golden Visas issued in the first five months of 2020 compared to the same period in 2019, broken down by nationality. Table from Idealista.

Similar to other ‘residency-by-investment’ schemes around the world, the Spanish Golden Visa scheme offers residency, Schengen-area travel, and a path to long-term citizenship in return for investing 500,000€ or more of own funds in Spanish property, amongst other investment criteria, explained in this guide to Spain’s Golden Visa residency by investment scheme.

Chinese investors have dominated the market since the scheme was introduced, and were 67% of the market in 2019, which was itself a record year for the Spanish Golden Visa.

spanish golden visa residency by investment 2019 results

The current decline in visas makes perfect sense given the global lockdown that has disrupted travel, and the harsh lockdown in Spain lasting almost two months from mid-March that made it difficult to complete property purchases in Spain.

One vocal personality in the industry – Mikel Echavarren, the boss of estate agents Colliers in Spain – partly blames the current Spanish government and its populist agenda for the decline in interest. “In the coming months we believe that the grave economic situation in our country compared to our European neighbours will also have a negative effect, as well as the announcement of populist measures that logically have a negative impact on these investors,” he told Idealista news.

Daniel Cuervo, General Secretary of the APCE developers and builders association, has urged the government to reduce the investment threshold to attract more foreign capital at a time when Spain is going to need all the cash it can attract. “We have submitted a proposal to the government to reduce by half the investment threshold in property – that is to say, to 250,000€ – for a period of two or three years in order to attract again the investment in our country.”

The question is, how will the coronavirus crisis affect demand? When the virus is beaten, and travel is more or less back to normal, will foreign investors still be interested in Spain and its Golden Visa?

I’ve reported before how the EU hates these Golden Visa schemes, as does the Spanish left, now in power, so there are reasons to think the scheme’s days are numbered.

On the other hand, the Covid-19 crisis is going to leave Spain in bad economic shape, with public finances in tatters, making foreign investors even more important than even, even more than was the case after the financial crisis and real estate crash that began in 2008. The Golden Visa was introduced in the aftermath of that crisis to attract much-needed capital to Spain. Perhaps this crisis will see a fresh effort to attract foreign investors, however unpalatable the Golden Visa looks to the Spanish left.

My sources in the Chinese channel, which dominates the Spanish GV market, tell me that demand is still there, just dormant for now, due to travel restrictions, as Chinese investors will not buy sight unseen above 400,000€.

Greece has already opened to Chinese investors, and stolen a march on Spain, but Chinese investors are expecting a property market crash in Europe, giving them cause to wait for prices to drop.

China has its own economic problems, in part due to the virus that emerged from Wuhan and took the world by storm, but on the bright side wealthy Chinese investors are as distrustful as ever of their own government, and looking for safe investment havens in the Western world, whilst turning away from the US as relations between the two countries sour.

Assuming we are not on the threshold of a new dark age for globalisation, Chinese investors should be back in Spain when travel gets back to normal, once the virus is beaten, however long that takes.

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