Dr. Juerg Steffen is CEO of Henley & Partners and author of definitive books on high-net-worth relocation to Austria and Switzerland.
The Covid-19 pandemic has had far-reaching effects on many aspects of our lives, and particularly on mobility and economic activity. Many industries have suffered, whereas others, such as the investment migration industry — which encompasses residence and citizenship by investment — have grown. Just as the dust appeared to be settling, the Omicron variant emerged — a clear indication that investors and governments alike need to prepare themselves for any eventuality. One reliable means of doing so for both groups is investment migration, whereby investors acquire an alternative residence or second citizenship in return for making a significant investment in a host country.
Once niche, citizenship planning and investment migration are now an increasingly core component of wealth management strategies around the world, and there has been strong growth in both the numbers of applications from individuals and of governments setting up programs. During times of economic crisis as we are now enduring, countries with established programs have benefited from the alternative revenue stream. During a December panel discussion at Henley & Partners’ 15th Global Citizenship Conference, the Honorable Mark Brantley, Premier of Nevis, stated: “If you were to ask what saved St. Kitts and Nevis during the pandemic, I would say citizenship by investment. This experience has demonstrated that citizenship by investment has a place in this world, particularly for small countries like ours, and for countries that do not have access to vast resources.”
Any kind of instability generally results in increased demand for relocation options, which meant that 2021 was a record-breaking year in terms of interest and applications. By the end of November, Henley & Partners had received a remarkable 69% more enquiries than in the whole of 2020, which itself had broken all previous records.
One of the other significant drivers of the recent surge in interest and uptake has been digitization. The lockdowns forced many host countries to innovate, making remote applications possible for the first time in many cases, leading to higher numbers of enquiries and applications.
Just as in the aftermath of the 2008 financial crisis, the Covid-19 pandemic has created a pressing need for capital among governments around the world as they seek to revive their economies. This represents a perfect backdrop for investment migration programs.
So in the global rush to attract foreign direct investment and scarce talent, new offerings are appearing in interesting places — El Salvador is the latest country to launch a program.
What’s more, average financial requirements for existing investment migration programs could fall as countries compete for capital. In response to the pandemic, several Caribbean nations that host citizenship by investment programs, such as St. Kitts and Nevis, announced reduced investment requirements for a limited time. They also added new benefits to their programs, such as making them available to extended family members. Meanwhile, Costa Rica reduced the financial contribution required for its investor visa by 25%.
It’s not surprising that Henley & Partners’ government advisory practice has been approached by an unprecedented number of governments requiring advice and assistance as they seek to design and set up programs and make existing initiatives more appealing to potential clients. The next few years look set to be a buyer’s market, which should make investment migration products even more attractive to a range of clients.
Working from home has become much more commonplace since the onset of the pandemic, with many people tempted to work remotely from another country once international travel became easier.
Several countries were quick to capitalize on this trend, with at least two dozen digital nomad programs — which allow people to legally live and work in a country for extended periods — appearing since March 2020. While digital nomad visas can be attractive choices for people who enjoy transient lifestyles and who are able to use technology to work remotely, investment migration programs offer permanence and stability for investors and host countries alike.
Many investment migration programs include the option to invest in real estate in return for residence or citizenship. Investors acquire a sizeable asset with the potential to increase in value as well as the ability to live in a new country and move around more freely — something that can be extremely valuable in times of turbulence.
An interesting implication of the abovementioned trend towards remote working is that during the pandemic many western economies experienced an urban exodus for the first time as city dwellers decamped to rural areas to benefit from less cramped living conditions. Thanks to remote working and e-learning, many people now have a much greater choice about where to live with their families while retaining their highly paid jobs.
Remote working also has a significant role to play in boosting investment migration, which in turn could play a part in rural regeneration. Traditionally, countries’ main real estate markets have attracted most investment. One of the great benefits of investment migration for host countries is its ability to direct capital to places that might otherwise remain unnoticed.
For example, Europe needs to redirect real estate investment away from overheated markets into places that have been overlooked — generally from the main cities to smaller ones. And this is already starting to happen: since 1 January 2022, residential real estate investments in Lisbon, Porto, and the Algarve region are no longer considered eligible to qualify for the Portugal Golden Residence Permit Program, although commercial properties remain eligible.
Portugal’s measures may well be replicated elsewhere. If governments introduce real estate-linked investment migration options that channel investment into rural areas to make them more attractive places to live, both for their existing residents and investors, that would be a win–win situation for everyone.
Just a decade ago, only two residence by investment programs — the Singapore Global Investor Program and the now-defunct Hong Kong Capital Investment Entrant Scheme — included fund options, whereby investors acquire permanent residence in return for investing in an approved fund that typically invests in financial assets such as equities or bonds.
Then, a few years back, some European countries began to introduce investment fund options as part of their residence programs, but they attracted limited interest. Before the pandemic, the number of applicants choosing fund options was negligible. This is slowly changing, however, and the investment fund option is growing in market share.
There are now several funds to choose from in Europe, including in Greece, Italy, Portugal, and Spain. Their prospective financial returns may not be stellar, but they come with the added benefit of securing permanent residence in Europe and all the associated benefits that entails.
Funds are increasingly being seen as an attractive investment vehicle for those looking to gain residence in a European country but who do not necessarily wish to relocate. Such investors are attracted by the relatively rapid, hassle-free nature of a fund investment as they can be much quicker to close than buying a property, which can take several months.
Each investor and their family have unique requirements, and there are many programs on offer across the globe — most with several investment options — to help them meet their needs. The benefits of being able to choose one’s domicile are self-evident in what is a hugely unstable time. We believe that investors seeking a new residence or greater freedom to travel should act now — they may have a lot to gain.
But it’s also important for governments to act fast. Many countries need to shore up their finances quickly but designing and setting up viable programs is not something that can be achieved overnight. Clearly, governments that adjust their policies to allow foreign investors to settle with ease will win the competitive race for both revenue and talent in 2022.