Spain To Dangle Automatic Residency Carrot For Foreign Homebuyers

The Spanish government plans to offer automatic residency permits to any foreigner who buys a house priced at more than 160,000 euros ($203,845), reported the Associated Press, in an effort to sell off hundreds of thousands of unsold property left over from the nation’s 2008 real estate bubble.

The Spanish government plans to offer automatic residency permits to any foreigner who buys a house priced at more than 160,000 euros ($203,845), reported the Associated Press, in an effort to sell off hundreds of thousands of unsold property left over from the nation’s 2008 real estate bubble.

The proposal, announced by Spain’s Trade Ministry Secretary, Jaime García-Legaz, on Monday, would target Russian and Chinese investors, who presently face difficulties in buying a house in Spain, as they were not European Union residents.

García-Legaz noted that there was “already a strong demand for Spanish real estate” among these buyers, which could help the nation clear more than 700,000 unsold homes, which were built during the height of Spain’s property boom.

According to Spanish Prime Minister Mariano Rajoy, the residency proposal though has yet to be finalised by the parliament. Rajoy however stressed that Spain “needs to sell these homes,” as getting them off the market could help revive the nation’s devastated construction industry.

In September this year, the Bank of Spain estimated that the total level of ‘toxic’ property loans held by Spanish banks were valued at over 184 billion euros ($231 billion). Though the government has since approved the creation of a “bad bank” to absorb these assets, they are also now trying to drum up interest among foreign investors in participating in its bad bank and will meet with five banks this week, sources told Reuters.

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José Luis Suárez, a real estate specialist and professor at the IESE business school in Madrid, told the New York Times that the new residency plan for foreigners might be “a step in the right direction.”

[quote]“The secondary home market in Spain could still have a bright future, but that will need to be mainly because of foreigners,” he said.[/quote]

But Spain’s second largest union, the UGT, criticised the proposal, saying that immigration policy should be based on the needs of the labour market.

[quote]”It wants to attract foreigners who are obviously rich and able to buy and can supposedly remain in Spain without working with the aim of getting rid of a stock of houses that are largely in the hands of the banks,” said the UGT in a statement.[/quote]

Miguel Hernández, a real estate specialist at the IE business school in Madrid, also questioned whether the government’s plan would attract many more Chinese buyers.

“The Russians have certainly been busy buying in holiday areas like the Costa del Sol, but the Chinese interest seems to have been much more in industrial areas rather than for coastal or other residential properties,” he said.

Nevertheless, if Spain does go through with its plan, it will follow in the footsteps of other ailing European economies who have eased their residency requirements to attract foreign homebuyers.

Ireland and Portugal, for instance, now offer residency papers to foreigners buying houses worth more than 400,000 euros and 500,000 euros, respectively; while buyers in Latvia can receive residency permits if they purchase real estate in the capital of Riga worth €140,000 or €70,000 in the countryside.

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