Debunking the Myth: Europe’s Housing Crisis

Europe faces a challenging housing crisis, with house prices increasing nearly 50% from 2015 to 2023. In recent months there has been much debate around the role of investment migration programs in real estate market price developments, with some arguing that they exacerbate the issue. However, the evidence clearly shows that these claims are unfounded. Instead, broader economic forces, including supply-side constraints, interest rate policies, and the growth of short-term rentals all play a far greater role.

Investment migration’s true impact on housing markets

Despite the perception that investment migration is the main contributor to rallying property prices, its actual influence on housing markets remains negligible. In Portugal, Golden Visa-related transactions accounted for a mere fraction of overall property sales — less than 0.1% of total transactions, and in Spain, less than 9.7% of high-value foreign real estate transactions  qualified for investment migration, demonstrating that the bulk of the market operates independently of these programs. In Malta, the housing market remains primarily driven by a mix of local demand and EU-based foreign buyers rather than investment migrants. In addition, the Maltese population expanded by more than 30% in a decade, mainly driven by third-country nationals, which served as a much larger contributor to the demand for housing. Crucially, real estate transactions linked to investment migration occur predominantly in the luxury segment, well above the price range of affordable housing, further dispelling the myth that these programs price locals out of the market.

EU nationals drive real estate demand in Europe

One of the most overlooked aspects of this debate is a demand analysis of real estate in Europe. The largest cohort of buyers of properties in Portugal and Spain are EU nationals, rather than investment migrants. Eliminating these golden visa programs will not significantly alter market dynamics, as demand from European investors will continue to drive housing prices in sought-after locations.

Even taking a longitudinal approach towards property prices, one will realize that real estate price increases predate the introduction of residence and citizenship by investment programs. Between 2000 and 2008, property prices across the EU surged owing to cheap credit and speculative real estate investment, neither of which were linked to investment migration. Following the post-2008 global crisis market correction, housing prices rebounded, particularly in urban centers where demand remains consistently high.

Weighing up the benefits

Beyond the skewed real estate debate, investment migration needs to be seen within its much broader economic impact. These programs bring substantial capital inflows that contribute to public revenue, infrastructure development, and job creation. Between 2011 and 2019, investment migration programs generated over EUR 21.4 billion across the EU, with Portugal alone benefiting from EUR 6.5 billion in foreign capital. These funds support vital economic sectors, including construction, real estate services, and legal and financial industries, creating thousands of jobs and stimulating broader economic growth. Their fiscal contributions help fund public services and social welfare initiatives, further integrating investment migrants into the economic fabric of the host nations. In Malta, the proceeds from such programs played a critical role in allowing the country to support the economy during Covid-19, making it one of the last in the EU to enter and first to exit from a recession.

Terminating programs is not a solution

It is also often overlooked that investment migration programs can be tweaked to better align with and support key national objectives. For instance, Portugal revised its Golden Residence Permit Program to channel investment into productive sectors, directing funds into job-creating industries instead of residential real estate. Rather than banning these programs outright, governments should take similar approaches, linking foreign capital directly to economic development. Such initiatives can also help increase housing stock through funds that support the restoration and regeneration of existing and abandoned properties.

As evidenced, the notion that investment migration is a principal cause of housing crises does not hold up to scrutiny. The true pressures on housing affordability come from supply shortages, shifting market dynamics influenced by short-term rentals, and macroeconomic trends that extend far beyond the impact of a small number of high-net-worth investors.

The debate needs to be anchored around a more robust, data-first approach that recognizes the benefits of investment migration while implementing targeted measures to increase housing supply and manage speculative market pressures. If the aim is truly to improve housing affordability, banning investment migration is not the answer. Instead, governments should focus on sustainable solutions that balance foreign investment with local housing needs with a focus on the supply-side of the market.