The Golden Visa program has been popular in Spain and throughout Europe for the last ten years but it looks like that program is winding down in most EU countries. Already, Portugal, the UK, Ireland and the Netherlands moved to eliminate or drastically prune back their own programs. It seems the writing is on the wall.
It is now the turn of Spain. Maybe. The widely discussed plan, which has been appearing in the press all this year, is to offer amendments to the law which established the Golden Visa back in 2013.
This was set to happen in September when parliament resumed. Alas, Spain has a very complicated parliament at the moment with a barely workable minority government. The lead party in the coalition, PSOE, has been unable to get enough support for the amendment.
Back in July, it seemed certain that PSOE and their coalition partner, Sumar, were definitively moving towards eliminating the country’s golden visa program. On July 24, 2024, the PSOE registered an amendment in Congress to begin this process.
However, that was withdrawn when it became clear it would fail. They then tried to insert it into another omnibus law on judicial efficiency and consumer protection. But this law already has 1,000+ amendments to work through. It also seems an unlikely path. The jockeying could go on for some time.
Looking back to earlier in the year, the discussion was that they would do like Portugal and eliminate the real estate component of the Golden Visa. Currently a residential real estate investment of €500,000 allows one to apply for an immediate one-year residency with the right to work and access Spain’s social services.
That visa can then be renewed for two years, then another two years. After five years you can apply for permanent residency. After ten years you can apply for Spanish citizenship. However, PSOE and their partners then moved to eliminate the Golden Visa program in its entirety. No form of wealth based visa queue-jumping was to be permitted.
It might not matter what they wanted in the end but it seems to be the case that the threat of its elimination has sparked something of a buying spree. People with enough money to meet the criteria are rushing to get in before the opportunity disappears.
Housing Is The Issue
I have recently written on the controversy surrounding housing in Spain, tourist rentals and the rising costs associated with insufficiently transparent and well thought-out regulation. That has led to housing becoming a national conversation and to protests, many of them quite large.
There is no doubt that the current state of housing is both atrocious and a complex problem. Young people in particular are forced to start independent lives later as a result of a lack of affordable housing.
The housing crisis in Spain has reached alarming levels. A recent study by the Pompeu Fabra University (UPF) and the Association of Promoters and Builders of Catalonia (APCE) revealed that only 15.9% of young people aged 16 to 29 have managed to move out on their own. This is 7.3 points lower than a decade ago.
The article written about the study further revealed that the average age at which young Spaniards leave their parents’ home is now 29.5 years. In Europe, the average age is 26 years. This suggests that there are specific problems being felt in the Spanish real estate sector and broader economy.
To be fair, the study suggests, the delay is also influenced by other factors, including a decline in marriage rates, widespread access to higher education, and the loss of purchasing power of the salaries of young people. In other words, we can’t simply blame rising housing costs, though this is obviously a contributing factor in the study.
All That Glitters…
The Golden Visa program, was first introduced in 2013 by Mariano Rajoy’s conservative government. It was designed to attract foreign capital during the brutal economic crisis that followed the 2008 collapse of the housing market.
Over the past decade, the program has granted residence permits to approximately 15,000 foreigners who purchased properties worth more than €500,000. As I’ve written previously, the program brought in €1 billion per year in direct investments.
However, the program has not worked as initially intended. Of the 15,450 golden visas authorized since 2013, an overwhelming 95% (14,576) were granted for real estate purchases. Only a tiny fraction were used for other types of investments, such as business projects, share purchases and bank deposits.
This imbalance is perceived, fair or not, as having contributed to the current housing crisis. The acquisition of housing by foreigners has increased significantly in recent years. In some cities, such as Malaga and Barcelona this, along with tourism rentals, has led to tensions with locals. They feel priced out of the market and that downtown areas have become de-Spanishized.
With the current controversy around housing prices, a program that contributes to housing speculation looks bad – even if the stats suggest only 1,500 people are taking advantage of the program every year. That is literally statistically insignificant in terms of annual home sales. But that perception is why there seemed to be wide support for ending the program across the political spectrum
In addition, non-partisan political groups and NGOs have also criticised the program, arguing that it creates an unfair system where wealthy foreigners can easily obtain residency while many immigrants seeking work face deportation.
These are all valid concerns. The residency system should be fair and not just something that can be bought by the wealthy. It is also obvious that imbalances in the housing market need to be addressed.
However, simply ending the Golden Visa program won’t resolve those problems. They are deeper, structural, and require a multi-pronged strategy. All this really does is to send a message that the government is going to put the brakes on luxury real estate price growth.
The danger is that such symbols are a substitute for real policy action and they do more damage than good by sending out discouraging signals to investors, builders and workers in related industries.
Sad But Not Disastrous
It has to be said, even if it is currently unpopular: the Golden Visa Program played an important role in bringing money and jobs to Spain. This was especially true in the dark depths of the housing crisis that hit Spain especially hard.
The measure of the benefits it brought can’t just be seen in the raw numbers. 15,000 probably doesn’t seem like much in a country of almost 48 million people. But it has to be viewed in the context of the many levers that were applied to attract people and investment to Spain.
In other words, we can’t view the Golden Visa program on its own. It dovetailed with the push to grow the Spanish tourism sector as well, for instance. This is controversial now and there’s no denying that adjustments need to be made. But it is not a small thing that after 2013, when tourism was at its lowest point since 2006, that sector grew steadily. In 2013 the tourism sector generated 110 billion euros. That number in 2023 was 164.5 billion euros.
In other words, the turn outwards to bring in money from abroad was successful. The Golden Visa program was part of that success. It’s understandable that the government is now trying to send a message that it wants to prevent the housing sector from overheating. Nobody wants to go back to the dark days between 2008-2013.
Eliminating the Golden Visa might be a part of rebalancing the Spanish economy, especially in housing, even if its effect is largely psychological. But the hope is that they don’t bend too far in the other direction. We don’t want to undo the hard work that has been done in the last decade.
The coming months will be critical as the amendment goes through the legislative process. Or dies an ignominious death. Its future is definitely uncertain.
As we await these developments, it’s worth considering the broader implications of the policy shift we’re seeing to cool housing prices, especially rental housing, and rein in tourism. While it may help alleviate some pressure on the housing market, it could also impact Spain’s ability to attract foreign investment. We need to strike the right balance and monitor the effects of this shift.
with thanks to Adam Neale
