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Golden Visas In Time Of Crisis: Advisors' Perspectives

Jackie Bennion

29 April 2020

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 , 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 in Cyprus, said demand for property there has dropped by 40 to 50 per cent in transactions terms. Clients can still buy a property in Cyprus entirely online but their biometrics data is holding up the residency side, he said. Biometrics is the only reason clients need to visit Cyprus to complete their investment and “it needs to be resolved” is the message we are sending to local government. The country has a similar residency programme to Portugal's but less active as Cyprus sits outside the Euorpean Union's free-movement Schengen agreement.

Tourism on the island, which accounts for around 20 per cent of GDP, could drop off by 60 to 70 per cent for the year, Dokuchaev said, and he doesn’t expect borders to open again before September. Beyond that, he anticipates the market bouncing back vigorously in 2021. It raises the question of how attractive these offshore centres and their residency programmes will remain if they are also highly dependent on tourism.

Also concerning clients more actively shopping for second residencies is how states are pushing back civil liberties, including some of the hyper surveillance measures in place to track the virus spread. "When someone gains powers, they don’t usually give them up," Asaria said, and a lot of high net worth individuals are anxious about this.

Dokuchaev said economic cracks are beginning to show in Russia, a territory he is familiar with, where he says up to 20 per cent of small and medium sized business could go bust without government support from Moscow, “which they are not getting,” he said. “It is good for us in property investment, because Europe is their top destination choice.”

Businesses providing lifestyle services to Russia's elite, are those most likely to close, he said, "which means your lifestyle is going to suffer if you want to stay in Moscow.” Dokuchaev said his business has seen a small increase in passport clients so far, where the only obstacle is travel bans preventing property inspections. He expects to see more interest from Russia and the Ukraine as the business picture further deteriorates there.

No country is immune from worries about what lies on the other side of the pandemic, including higher taxation, rising inflation, tougher capital controls, and depreciating currencies, but “these are much more challenging day-to-day in emerging markets, whether you are wealthy or not,"  Asaria said.

Given the massive destruction of wealth during the past two or three months, he belieives that the residency programmes which will benefit the most will be those with the best cost benefits, and sees these being increasingly the preserve of HNWs as the market shakes out. “It is not going to be reserved for the person scraping together his last 100,000 dollars... It is really the HNW individual, who is going to do a total cost-benefit analysis of where is the best jurisdiction for his family."

Asaria said the need to travel will return but needs to be more than just visa-free travel. "Just going to a client with an investment product that allows you to travel the world without a visa, that sales pitch isn’t there anymore. You need economic migration for your business and personal migration for you family."

Seixas agrees. What matters now are “jurisdictions where your family is protected, where your kids can still attend school, where you can still maintain your business, and where your employees will be subsidised and helped by the government. That is also a very important factor now" …. All this will be very important in the near future in seeing how economies recover, he said.   

Parag Khanna, founder of the Henley Passport Index that ranks the world’s passports according to the number of destinations holders can access visa free, has warned how COVID-19 is going to shift human geography. "As the curtain lifts, people will seek to move from poorly governed and ill-prepared places to more proactive countries with greater resilience and better medical care,” he said. The index lists 199 passports that offer access to 227 travel destinations and provides users with the latest shifts in passport power.

Having a strong passport will take on new relevance after the crisis for those fortunate enough to choose where they want to live and invest. In normal times, Japan offered the most desirable passport in terms of non-visa access to other countries. The US and the UK currently rank eighth, offering non-visa access to 185 countries, alongside Norway, Belgium and Switzerland. European countries, not surprisingly, fill the top ranks of those offering the most visa-free travel. Interestingly, Germany and South Korea, both praised for how they have managed the health crisis so far, rank equal third in the passport power list, just behind Japan and Singapore.

What remains is how much appetite people will have for travel once the virus is contained, and from a health and privacy perspective, what new migration entry restrictions they might face, including health certificates that show vaccination history and exposure to the coronavirus. Darwin and Orwell are duelling it out.

Carrying health certificates was common in the 20th century following the global flu pandemic, and health security will no doubt shoot up the agenda when countries next negotiate their visa waiver programmes. Researchers are already looking at countries that have very high non-visa rankings, such as Bulgaria, Cyprus, Liechtenstein, Luxembourg, Malta, Romania, and Slovakia but low health security scores, relating to how robust their health systems are to withstand a public health crisis. Those health index scores are going to count for a lot more on the other side of the pandemic.