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Golden Visas: The Investment Migration Industry Evolves Globally

In the midst of the Covid-19 pandemic, many people find the idea of a secondary residency or citizenship appealing. At the same time, many countries are interested in raising capital and bringing wealth across their borders to pay for social programs and keep their economies afloat—specifically if they rely on leisure and tourism for tax income.

Experts expect more golden visa programs to crop up because of the financial stress caused by Covid-19.

At the center of these interests are investment migration programs, in-demand in the U.S. and U.K., but now available worldwide in countries including Portugal, St. Lucia and Montenegro, granting residency or citizenship to foreign investors. In some cases, these schemes are known as “golden visas.”

Popularized after the 2008 financial crisis, residence- or citizenship-by-investment programs have undergone significant changes in recent years, in part due to pressure from governments to clamp down on immigration and require more transparency related to foreign investment. But even with these concerns, the supply-side of these programs has expanded—a trend that experts expect to continue, as more programs are likely to crop up because of the financial stress caused by Covid-19.

At the same time, there has been increased interest and demand for these sorts of programs from high-net-worth individuals who want easier global mobility, volatility management and investment diversification, including interest from people outside of the traditional countries.

“Our firm has seen a 49% increase in interest and inquiries from January to April 2020, compared to the same period last year,” said Paddy Blewer, the U.K.-based public relations director for Henley & Partners, an investment migration advisory firm. “And interestingly, there’s been a massive spike in interest from Americans, who have traditionally not been a big client market.”

The Programs: Rapid Expansion and Recent Changes

Residence-by-investment programs are not new. Canada established a Federal Immigrant Investor Program in the 1980s, the U.S. launched the EB-5 visa offering in 1990, and the U.K. soon followed suit. According to Henley Global, there are now investment migration programs in more than 100 countries—over half of which were set up after 2000.

Many of these programs were specifically launched after the financial crisis in 2008, when countries needed a way to support the local economy, said Kate Everett-Allen, the head of international residential research at Knight Frank. These countries opened their doors to high-net-worth individuals in exchange for a significant real estate purchase or other business investment. Cyprus created an investment program in 2012, Malta launched its investor program in 2014, and golden visa programs were introduced in Portugal, Spain and Greece.

But while they are common, about 80% of investor visas are still given out by a small group of high-income nations, including the U.S., the U.K., Canada, Hong Kong and Australia, according to Henley & Partners.

Following are updates on many of the more popular programs, most of which occurred in the past few years—in some cases, in the past few months.

The United States’ EB-5 Immigrant Investor Program

The EB-5 program was launched in 1990, offering a green card in exchange for an investment of at least $500,000 in a U.S. business. In November 2019, the investment threshold was increased, and the program now requires a $900,000 investment in a rural area or area of high unemployment, or a $1.8 million investment—up from $1 million—elsewhere.

Because the program has been so popular with residents of mainland China, and no country can have more than 7% of the visas (out of 140,000 annual employment-based green cards total), there was a 10-year backlog for Chinese citizens.

“We’re now seeing fewer applications from mainland Chinese investors and more from other jurisdictions, including India, Vietnam, Malaysia, Indonesia, and other countries we didn’t historically see,” said Chad Ellsworth, a New York-based partner at immigration law firm Fragomen. Experts say this increased interest in EB-5 and other residency-by-investment programs from emerging market countries, where there is new wealth and an increasing number of high-net-worth individuals, is natural, and in part a way to skirt tightening regulations around global movement.

The U.K.’s Tier 1 Visa Program

The Tier 1 visa program, which is often called a golden visa, was launched in the early-1990s as a way to simplify routes to U.K. residency and citizenship. As of 2014, foreign applicants have to invest a minimum of £2 million in the U.K. In return, they could apply for citizenship in five years. Up the investment to £5 million or £10 million, and that wait drops to three or two years, respectively.

Mr. Ellsworth noted that while in the past, people who wanted access to the U.K. may have sought citizenship through Malta or Cyprus, because of Brexit, they are now looking at this program instead.

European Residency Programs: Portugal, Spain and Greece Portugal’s golden visa program, launched in 2012, is currently surging. The program offers investors who purchase a property for more than €500,000 in a city or a bit less in a low-density area the opportunity to get a fully valid residency permit and apply for citizenship after six years. It also provides a 10-year tax abatement on worldwide income.

In February 2020, the Portuguese Parliament approved a budget that included new laws that would exclude properties purchased in the country’s two major cities, Lisbon and Porto, starting in 2021. To get their golden visa, investors would need to purchase in lower-density zones.

There is more to these Portuguese programs, Mr. Blewer added, including a series of policies, laws and tax benefits meant to attract international tech entrepreneurs to set up their European hub in the country.

Overall, this program has been incredibly successful, Ms. Everett-Allen said, noting that it has attracted more than €5.1 billion in investment since its inception for a total of 8,736 residency permits—52% of which were granted to Chinese applicants.

Spain launched just after Portugal in 2013, and similarly requires a €500,000 investment, but in this case, investors must wait 10 years to apply for citizenship. Like Portugal, Spain also offers a major tax benefit, with no tax on foreign-source income for non-domestic residents.

Greece, which closed its immigration process due to the coronavirus pandemic, recently reopened the golden visa process to stimulate investment. There are a couple of options in their permanent residence program. One requires a minimum €250,000 investment in a real estate property; another a minimum €400,000 capital contribution to a real estate investment company that will invest exclusively in Greece. Investors can apply for citizenship after seven years of residency. The program, in general, has recently been popular with the Chinese, Mr. Ellsworth said.

Citizenship Programs that Offer EU Access: Cyprus, Malta and Montenegro According to Ms. Everett-Allen, the European Commission publicly criticized Cyprus, Moldova and Malta for how lax their residency-by-investment programs were in 2019, noting that they were worried that investment funds could be used for corruption or money laundering. As a result, Moldova canceled its program.

Cyprus has recently suspended its citizenship by investment program, effective 01 November, 2020 following reports of abuses of a the program. Malta is set to launch a revamped Malta Individual Investor Program with significant changes. In addition, it will be implementing new residence regulations which may lead to citizenship and which take into consideration the European Commission's concerns and recommendations.

The newest addition, launched in 2019, Montenegro requires a €450,000 minimum real estate investment in new development projects in the coastal region in return for citizenship, according to Mr. White. However, Montenegro is not currently part of the EU. The country is looking to meet the EU requirements, but that is not expected until at least 2025.

Caribbean Programs: St. Kitts and Nevis and St. Lucia

St. Kitts and Nevis has the oldest residency-by-investment program, launched in 1984. For $250,000, investors can be on an immediate track to residency.

St. Lucia, which launched their citizenship-by-investment plan in 2016, requires a $300,000 investment, at which point investors can similarly be on an immediate track to residency. Recently, the country introduced a new way of acquiring citizenship, paying off the country’s debt, Mr. Blewer said, noting that this program was announced a few months ago and will last until next year.

According to Paul Williams, the CEO of La Vida Golden Visas, with clients from 80 countries, the interest in Caribbean programs dipped in the end of March and throughout April, but then bounced back strongly in May, June and July. “There’s a lot of demand for citizenship in the Caribbean right now,” he said.

And, Mr. Ellsworth added, much of that new demand is coming from Americans.

The Investors: A Changing Landscape, With New Motivations and Interest

The main driver of residency-by-investment programs has always been global mobility and visa-free travel on that country’s passport, according Mr. Blewer, who said, historically, Henley & Partners has advised businessmen in their 40s and 50s from West Africa, Southeast Asia, India, China or the Middle East, who are the first generation in their family to have significant wealth.

A typical investor might be someone who wants to freely travel throughout the EU or the U.S. without acquiring multiple visas—either for business or leisure—and bring his extended family along.

Other key drivers of the residency-by-investment programs have always been educational and career opportunities, tax breaks, personal security, global asset diversification and a probable return on investment for real estate purchases.

But then came the coronavirus pandemic, Mr. Blewer said, and right before it, increased regional volatility events, such as the unrest in Hong Kong and environmental pressures in Southeast Asia. “The result is that there’s a growing understanding that investment migration is useful for volatility management and as political risk insurance,” he said.

Like in the years after the 2008 financial crisis, there’s been a significant uptick in interest related to investment migration, Mr. Blewer said. And these are not people who plan to immigrate from their home country and never come back.

Mr. Williams agreed, and added that while in the past, a second passport was the most important aspect of a citizenship- or residency-by-investment scheme, what Covid-19 has changed is that people are now interested in the residency benefits as well, such as health care.

And among those newly interested, Mr. Williams said, are American clients, a group that has “really, really risen this year,” with Portugal, Antigua and other spots in the Caribbean being where they are most often looking to go. Some American clients, in particular, are worried about not being able to travel freely with an U.S. passport anymore, in part because the country has not been able to keep the pandemic under control.

Overall, Mr. Ellsworth said, Covid-19 has shown high-net-worth individuals how quickly borders can be closed and stay closed. “They’re now seeing value in having a more permanent status in a foreign country”—a trend that he thinks is likely to continue.

A Changing Industry

Recently, Henley & Partners said they’ve seen more interest from people who want to diversify their investment portfolio, invest and operate globally, and create a new inheritance and identity for their family. “You could argue that the industry is growing up,” Mr. Blewer said, noting that this once discreet process is now a transparent and public-facing institutionalized professional services industry.

This is a step in the right direction, as Ms. Everett-Allen noted that this push for full transparency around taxes and property ownership has intensified in recent years.

While it’s impossible for investment migration to help anyone escape Covid at the moment (since most people are not physically traveling), it has led to increased interest, engagement and sales. Some interested parties hope that if they put in an investment migration application today, it will allow them to move more freely in a second or third wave of this pandemic—or allow that freedom when another similar event hits in the future.

Looking Ahead: More Growth and Interest Expected

Mr. Blewer said that after 15-plus years of constant growth, which stems from both the demand and supply-side of the equation, investment migration is on course to become an asset class in and of itself. In a post-Covid world, Ms. Everett-Allen expects that many countries will want to prolong these programs to bring in capital after a massive economic downturn. She expects that we might even see some new programs, too.

Barbados and Bermuda are already offering incentives for people to work remotely through a 12-month work visa. And according to a recently released Knight Frank global buyer survey, how governments handled the Covid-19 crisis is already affecting the attitudes of second-home buyers.

“Governments will be looking for ways to attract investment,” she said, noting that fiscal stimulus measures are going to have to be paid for somehow. “These programs offer one way to replace their coffers effectively.”



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