Dominic Volek is Group Head of Private Clients and a Member of the Executive Committee of Henley & Partners
Real estate-linked investment migration programs take luxury property investment to the next level. Over and above the real estate asset, they provide additional benefits such as the right to travel visa-free to more jurisdictions, the ability to live in politically stable and secure countries, and the opportunity to acquire additional citizenships.
Over the past 12 months, supply chain disruptions, the relentless war in Ukraine, high inflation, and soaring energy prices have battered markets. We have witnessed the US dollar reach record highs as the euro and pound fell to historic lows. Similarly, cryptocurrencies that had been on a bullish trajectory in the early twenties plummeted, creating havoc for private and institutional stakeholders globally. These major fluctuations have led many investors to turn to lower-risk asset classes such as real estate, that offer security and portfolio stability during these very uncertain times. And investment migration-linked real estate offers far more than simple bricks and mortar.
A prime example is the Spain Residence by Investment Program — one of Europe’s most popular residence by investment routes. In exchange for a minimum EUR 500,000 real estate investment (in one or several properties), in addition to a Spanish residence permit, one of the perks is the right of free movement in Europe’s Schengen Area. The residence permit applies to the main investor, spouse or partner (including unmarried or same-sex unions), all economically dependent descendants, and parents over the age of 65. Although there is no requirement to relocate, many do, and for those who don’t, the property can be sub-let. After ten years of lawful residence (two years for Sephardic Jews and anyone of Sephardic Jewish descent as well as citizens of 22 Ibero-American countries, Equatorial Guinea, and the Philippines), resident permit holders can apply for citizenship of this vibrant EU country.
As high-net-worth individuals face multiple risks to their capital and lifestyles, demand for alternative residence and citizenship programs is mounting. These affluent individuals want to secure pathways to better options to gain assurance that, in the face of further disruptions, they would be able to protect their families and their business interests. One of the principal risks is typically higher taxes, and when there are abrupt government changes this risk grows both exponentially and imminently.
The looming threat of tax policy overhauls has made many wealthy investors explore alternative residence options in jurisdictions with favorable tax environments, which also have real estate investment options, such as Cyprus and Greece.
Cyprus has one of the widest networks of double tax treaties in Europe, a low corporate tax rate, almost no withholding taxes, and several personal income tax incentive schemes designed to cater to wealthy individuals. Cyprus’s residence by investment option requires a minimum investment of EUR 300,000 plus VAT into real estate and is popular among investors from Asia to the Middle East.
One of the top alternative residence options in Europe, the Greece Golden Visa Program requires a minimum real estate investment of EUR 250,000 to be eligible for a renewable five-year residence permit. Affluent individuals and expats who choose to relocate to Greece under the program also benefit from numerous tax incentives. Golden Visa investors who opt to transfer their tax domiciles can pay a lump-sum tax of EUR 100,000 for 15 years, regardless of their foreign-sourced income, making Greece an attractive option. Effective 1 August 2023, the real estate investment will double to USD 500,000 in certain parts of Greece, including most of Athens, Thessaloniki, and the islands of Mykonos and Santorini, so now is the perfect time to acquire Greek residence by investing in an alternative home in Europe. After seven years of lawful residence, subject to meeting the legal requirements, Greek Golden Visa holders can apply for citizenship of this idyllic Aegean nation.
Beyond Europe, affluent individuals are showing great interest in the newly launched Namibia Residence by Investment offering. To apply, investors must acquire a luxury residential property at President’s Links Estate, a residential and golf estate in Walvis Bay. The minimum investment is USD 300,000 for retirees, or USD 365,000 for those under 60. Renowned for its natural beauty, Namibia is one of Africa’s most politically stable countries and holds great appeal to investors who have foreign income streams as taxes are generally only applied on locally sourced income.
Global investors seeking tax-effective jurisdictions are also considering the UAE Residence by Investment program, whereby they can obtain a 10-year renewable residence visa by purchasing a property worth a minimum of AED 2 million (approximately USD 550,000). Wealthy individuals are flocking to the metropolises of Dubai and Abu Dhabi, which offer dynamic business hubs, zero income tax, an expansive network of double-tax treaties, and no wealth taxes.
Millionaire populations are rising in wealth hubs across Africa, Asia, and the Middle East. According to The Centi-Millionaire Report, Vietnam and India are expected to see staggering 95% and 80% growth rates in their respective centi-millionaire populations within the next decade. These up-and-coming outbound investor markets are showing interest in Caribbean investment migration solutions, many of which require real estate investment, such as the Antigua and Barbuda Citizenship by Investment Program and the Dominica Citizenship by Investment Program that stipulate a minimum USD 200,000 in property.
Another highly sought-after Caribbean option is the St. Kitts and Nevis Citizenship by Investment Program, which offers an attractive property market in a country with a pro-business and crypto-friendly legal framework. Applicants can invest USD 200,000 in an approved real estate development, or USD 400,000 in a private residential property, both resalable after seven years.
By obtaining additional citizenships and passports through real estate-linked investment migration, investors can enter more territories visa-free and also gain permanent access to Caribbean safe havens for their families. With rising geopolitical tensions and environmental pressures turning up the heat worldwide, wealthy families are seeking an insurance policy against risk and strategizing their escape plans.
The 20th century saw a record surge in wealth due to globalization and technological advances. Today we are witnessing the transfer of this wealth to the next generation of millennials, Gen-Zers, and even Generation Alphas, many of whom have never worked in the family business or lived in the birth country of their forerunners.
Panama, a global financial center, is often earmarked as a viable real estate-linked golden visa solution for international families as it offers the right to live in a tax effective and cosmopolitan country. It is also in close proximity to both the North and South American markets, which could serve an entrepreneurial family’s business interests perfectly.
Across the Pacific, the Thailand Elite Flexible One Program, with a minimum real estate investment of THB 10 million (approximately USD 320,000), grants residence status for five years in this bourgeoning economic center, where a low cost of living and high quality of life converge. There is also the option to upgrade to another program after two years.
Our entire work-life ecosystem has metamorphosed rapidly in the past few years. Many industry leaders and C-suite executives now spend part of their year working from tropical climates in the Indian Ocean or managing their empires from sun-kissed Mediterranean seafronts without being limited to the cities where their corporate headquarters are based. The ability to operate remotely has allowed affluent individuals even greater opportunity to explore real-estate linked investment migration solutions that provide the optionality of a second residence that acts as an ancillary office, and the potential yields that property investments bring.
Mauritius has been garnering interest from businesspeople from mainland Africa and beyond, predominantly due to its business-friendly regulatory frameworks, its attractive tax incentives, and its openness to investment. Globally-mobile investors that wish to secure their own piece of paradise can opt to invest a minimum of USD 375,000 in a property that qualifies under the Mauritius Residence by Investment Program. This will guarantee their access to this international financial hub and also offers a lucrative source of passive rental income, as Mauritius has a very healthy property market both for short- and long-term leases.
Location independent working was accelerated during the Covid lockdowns as we all had to adopt digital tools and technology in our professional and business spheres. Our homes morphed to multi-purpose environments, and this has not receded with the pandemic. This has not only impacted where we choose to buy our homes but also how, and the smartest way for affluent individuals to invest is to wrap their property purchase in an investment migration solution that serves their particular needs. By building a portfolio of alternative residences and citizenships, investors can safeguard their business interests, lifestyle, and capital.
In addition to Greece, other popular real-estate linked programs in Europe are in Malta, Portugal, and Spain. Malta’s Granting of Citizenship for Exceptional Services by Direct Investment Regulations, allow for the granting of citizenship by a certificate of naturalization to foreign individuals and their families who contribute to the country’s economic development — part of this contribution includes either a minimum real estate investment of EUR 700,000 or a five-year lease of EUR 16,000 per annum.
Through real estate-linked investment migration solutions, investors stand to gain not only a new property, but enhanced optionality, more security, and greater peace of mind for their families. They diversify their portfolios in multiple ways — in addition to the inherent diversity in real estate investments, investment migration, which is a new asset class in and of itself, also offers geographical diversification to minimize risk and maximize opportunity. In the current global climate of volatility, it makes complete sense and investors are advised to incorporate real estate-linked residence and citizenship planning into their wealth management strategies.