Those providing investment migration services in the current turmoil are seeing high net worth clients, especially in emerging markets, accelerating their search for second citizenships based on how well or poorly their own countries are coping with the health crisis.
Recent figures show residency applications to certain European destinations have spiked in the wake of pandemic disruptions. Applicants for Portugal’s “golden visa” programme rose by almost 50 per cent in the first quarter of 2020, according to London-based Henley & Partners, a firm that advises on residency-through-citizenship programmes. Applications to Cyprus reportedly skyrocketed by 250 per cent for the first quarter; and programmes in Turkey and Greece also drew strong demand, the firm said.
So-called golden visas have long been a sensitive area in wealth management and this news service has written extensively about them, including criticisms that they are little more than citizenships-for-sale and potentially easy targets for money laundering. Practitioners say such fears are mostly unwarranted.
Some European countries offer a path to citizenship for as little as a $280,000 initial investment, and most applicants choose property-linked migration as the route in.
The route offers "a unique hybrid investment opportunity” with a second residency and citizenship, multiple yields from the property, and "the option to relocate if they need too,” Juerg Steffen, CEO at Henley & Partners said.
Three months into the lockdown, and many wealthy clients are reconsidering their global mobility options and doing "post-pandemic planning," the firm said. Some practitioners suggest golden visa programmes are going to become even more a preserve of the ultra wealthy post COVID as matchmaking becomes more focused on how well countries have managed the crisis and countries become more selective about who they invite in.
Portugal runs one of the most active residency-investment programmes in Europe, and in the early stages of the pandemic handled it well. One or two weeks behind its Spanish neighbour, it learned from some of Spain's mistakes. The vast majority of those applying for residency there are doing so through property purchases rather than transferring capital or setting up a business. The programme has netted the Portuguese government around €5 billion in the past eight years; the minimum investment for residency there is €350,000, leading to full citizenship after five years.
Greece and Turkey are also sparking interest. According to Henley & Partners, 5,000 investors have received Turkish citizenship through residency investment up to April this year, with 4,000 property transactions completed in January alone. Interest has risen sharply there since the government reduced the minimum threshold for investment migration from $1 million to $250,000 in late 2018.
The US and EU countries, including the UK, are being seen as safe landing places based on the massive bail-out response from governments and central banks. They are relatively stable legal jurisdictions (the uncertainties about Brexit over the past couple of years did dent the UK programme somewhat, however). With fewer fiscal levers to pull, responses from emerging market economies have not been nearly as robust. Their healthcare systems too are arguably going to buckle in the longer term until a vaccine is found.
Mohammed Asaria, managing director of Range Developments, a company which works with clients applying for access to the US through the Caribbean and Grenada’s E2 investment programme, said that his firm has not seen a slowdown. "What has changed is the type of buyer, where he is coming from, and what his motivations are,” Asaria said on an Investment Migration Council webcast organised from Geneva last week. The former HSBC investment banker said that his Dubai-based business grew out of the Arab Spring in 2011, and COVID-19 is similarly disruptive forcing wealthy families and business owners to quickly develop a Plan B. Owners are examining what stimulus measures are lacking in their own markets that could create the spectre of civil unrest, rising crime, even the reliability of electricity supplies.
“If you look at the mindset of certain investors, they are sitting in India or Pakistan or parts of South East Asia, where their business has come to a sudden economic holt, and they are saying, ‘When I restart, do I want to restart with all the challenges that are around me or do I want to economically migrate my business and personally migrate to the United States?' That is a discussion we are having daily with investors.”
Conversations now are not just about residency anymore but about obtaining a second citizenship “that could become their primary citizenship given what is happening in their emerging market," Asaria said.
Processing day-to-day cross-border residency requests has also become a lockdown challenge.
“Embassies are closed, powers of attorney are not possible, and biometrics are impossible,” said Frederico Seixas, sales and marketing director at Portuguese Investaureum, a real estate venture that sources prime heritage properties, such as monasteries and old warehouses, for resident visa seekers.
“What we are learning from this crisis is how to become more efficient in working remotely,” he said. “The banks and immigration services are all applying themselves to getting all these steps and processes happening remotely. We are people of the world and used to working remotely, but many in the region, the banks, the lawyers, the notaries, are not used to this situation. At the end of the day we are all going to come out of this crisis a lot more efficient,” he said.