On 16 February as part of a real estate reform package the Portuguese government announced an end to its golden visa scheme.

For the best part of the past decade, rich people from outside the EU could look at the map and pick one of three countries selling EU passports: Bulgaria, Cyprus and Malta. Malta continues doing so, despite the EU Commission launching infringement procedures against it. But while the so-called “golden passports” era draws to a close, golden visas are here to stay. 

Portugal, Spain, Greece and Malta attract billions of euros to their real estate markets by offering “Residence-by-Investment” schemes to foreign investors. In Portugal, this investment reached €5.8 billion in the past decade, and almost all this money went to real estate. In Greece, around 9,000 non-EU citizens have acquired residency this way since 2014, investing approximately €3 billion in real estate, a sector starved for cash after the financial crisis. 

The opaque origin of golden visa funds, however, is a growing concern. Schemes are increasingly under scrutiny and seen as avenues for global kleptocrats and others with funds of questionable origin to receive a free pass across the Schengen zone. In March, the EU Commission issued a recommendation urging member states to establish strong checks to prevent security, money laundering, tax evasion and corruption risks associated with golden passports and visas. The commission also proposed a ban on golden visas for Russian and Belarussian nationals following Russia’s invasion of Ukraine.

Despite such fears and countries like Portugal and Greece introducing new measures to crack down on the schemes, Europe’s golden visa marketplace is thriving. 

Investigate Europe found that more than 50% of those who received golden visas in Portugal since 2012 are from the world’s top 30 money laundering jurisdictions. Anti-corruption campaigners say the figures – accessed via freedom of information requests – show the “complete recklessness” with which golden visas are issued in the country. 

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Portugal’s ineffective reforms

Prime Minister Antonio Costa said in November that Portugal’s golden visa programme must be reassessed. But the Socialist Party, which supports him, recently blocked parliamentary initiatives to scrap golden visas, instead asking for a careful analysis of the programme’s merits.

At the end of 2021, the government did introduce reforms of its regulation. They removed the main criteria to apply for golden visas: real estate investments in Lisbon or Porto, where housing prices are rising faster than most other European cities. Portugal also raised the required investment from €250,000 to €500,000 – the Greek government soon followed suit – in an effort to limit the number of applicants. 

Now, visa seekers cannot buy an apartment in the coastal cities. But they can buy shares in a real estate company that owns houses in these same cities. What seemed to be a measure to prevent real estate speculation in Lisbon and Porto, is actually an open door to the same kind of investments. With one difference: the real estate developers are in control of this new business opportunity.

Rita Silva, president of Habita, a housing rights NGO, who is writing a PhD on real estate tax incentives, explains: “Instead of the golden visa applicants investing directly by buying a building or a house, they invest in units of participation of a real estate investment fund.” It is simple, she says, “and it is all on the Internet, out in the open: how to get around the ban on the direct purchase of property investment in Lisbon.”

After five years, golden visa holders can apply for citizenship while only needing to spend 14 days a year in the country.

The high investment threshold is leading to ever higher real estate prices. “I interviewed a property developer for my PhD research,” Silva explains. “He told me he didn’t sell houses, he sold visas. And then he told me ‘I have to raise the price, it’s mandatory.’ Why? ‘Because they are not buying the house. They are buying the visas.’ I think this really encourages price increases. These kind of incentives in themselves favour speculation.”

Money laundering risks

Data accessed from the Portuguese Immigration Department (SEF) reveals that since 2012, 29,666 people obtained residence permits within the scope of Portugal’s golden visa scheme: 15,620 of these came from the world’s top 30 money laundering jurisdictions.

Portuguese authorities had up until now only disclosed information about the countries of origin of those who had requested a resident permit for investment (golden visa).

Investigate Europe accessed official figures, including data on the country of origin of citizens who obtained a residence permit through a family reunification scheme. Immediate family members of citizens granted a golden visa can apply for residence permits. Nearly two-thirds of those granted permits since the programme’s inception in 2012 have come from this route.

In total, 18,486 individuals were allowed into Portugal this way (from 11,180 successful golden visa requests). Over half of these, 9,835, are nationals of one of the 30 jurisdictions with the highest money laundering risk in the world, according to the Basel AML Index.

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High-risk countries from where the most applications were filed include Vietnam, Pakistan, China and Cambodia. China represents 47% (13,861) of investors and their families. Other prominent nationalities include Brazil, Turkey, South Africa and Russia. It is also noteworthy the sharp drop in residence permits issued to Russian citizens. Although they haven’t disappeared completely, the numbers dropped from 105 in 2021 to 12 in 2022.

Globally, there is an intense fight over which countries should or shouldn’t be on the list. High-risk nations draw most attention, but money laundering concerns remain for a host of other, often overlooked jurisdictions. 

Transparency International Portugal says the data indicates how SEF have granted golden visas with “complete recklessness”. “The lack of due diligence… since 2012 may have allowed free entry to Portugal and the EU to an undetermined number of kleptocrats and people who have made their wealth illegally in countries with poor anti-corruption and anti-money laundering performances, or with an insufficient respect for human rights,” executive director Karina Carvalho says.

‘Golden visas a disaster for Athens’ 

In Greece, another magnet for investment migration, authorities consider golden visas a money laundering risk by default. This awareness, however, has zero practical implications.

Around 9,000 non-EU citizens have acquired “Residence by Investment” in Greece since 2014, investing approximately €3 billion in real estate. 

The Greek real estate sector has been widely criticised due to the absence of suspicious transaction reports. In comparison, Norway, a country with half the population of Greece and no golden visa programme, last year filed 1848 suspicious transaction reports in the real estate sector. 

Economist Tryfon Alexiadis was a senior tax collector before moving to politics and serving as vice minister of finance under the Syriza government in 2015. At the time, the golden visa programme was just taking off. “I am very cautious about this kind of capital, because a lot of it comes from illegal activities,” he says. “It may be related to arms trade, smuggling, or trafficking.”

After prodding by the EU Commission, Kyriakos Mitsotakis’ conservative government announced last year changes to its own golden visa programme. The changes aimed to limit investments in central Athens and other sought-after areas.

So far, the effect of the measure is the opposite: a dash for real estate contracts by investors, mainly Chinese, eager to secure their visas before May, when the required investment doubles from €250,000 to €500,000. The government claims this change will “free up apartments for locals”. But analysts predict that investors will simply move elsewhere, making housing unaffordable there, too. 

“The golden visa has been a disaster for Athens,” says Εfstathia Rapti, a real estate broker at the Athens firm Cityscape. “Especially some Chinese who bought without even seeing the flats. A few thousand flats were sold, and now many are vacant, do not pay land tax or contribute to the general expenses of the buildings.”

Anastasios Vappas, on the other hand, welcomes the investments. The vice president of Pomida, a homeowners union, says the problem of disappeared owners should not be pinned down to golden visas. “Every building has one of those missing owners, it’s a very common problem,” he says.

A golden investment opportunity?

Last summer, a similarly speculative, off-plan investment proposal in Portugal landed in the inbox of John, a technology entrepreneur in California. “A unique, historical boutique hotel development project in Évora, that offers a yield investment and qualifies for the ARI Golden Visa minimum investment of €280,000,” read the email. For John, the prospect of living part time in Portugal interested him, not least from a tax perspective. Intrigued, he contacted a Portuguese financial expert for advice. “The investment seems a bit expensive but if the golden visa is the objective, it might make sense,” he was told. 

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John, who asked not to be identified by his real name, was asked to buy 4% of a private company that owns a hotel project. But the hotel isn’t built yet, and the business details seemed far too ambitious. The consultant wrote that, for example, the average cost per square metre is €4000 – almost double normal prices in the Évora region, which is a UNESCO world heritage city in the interior of Portugal. The hotel’s business plan foresaw an average occupancy rate of 85% in the fifth year. The financial advisor considered this to be “overvalued by approximately 20%”. In the end, John declined the opportunity but his story illustrates how golden visa schemes can distort real estate prices and contribute to inflated valuations.

Money, but little for locals 

An analysis of 300 contracts for the acquisition of property by golden visa applicants in central Athens between 2017 and 2019 showed that the vast majority was bought at twice or three times the “objective value”. But the mechanism by which golden visas raise prices is not merely a factor of supply and demand. 

“Golden visa transactions are a small part of the market, not enough to push up prices on their own. But they do influence prices by driving up expectations,” Thodoros Mitrakos, former deputy governor of the Bank of Greece said at a recent conference on housing costs. 

Former finance minister and head of MERA25 party, Yanis Varoufakis, describes the Greek golden visa programme as “a way for people from outside the EU to go and live in Berlin”. The residence permit, like in Portugal, allows entire families, including the applicant’s spouse, children and even parents, to reside legally anywhere in the EU.

“The result was that house prices went up, but the money never came to Greece. If you are a Chinese person and you buy from a Greek who also has an account in France, the money goes from the Chinese bank account to the French bank account, bypasses Greece completely, only a very small amount, the stamp duty stays here,” Varoufakis says. “When the Airbnb is hired out, the money goes from the American tourist to the French bank account. The Greek state gets a small percentage, what, 12%, but the bulk of the money never comes to Greece.” Any job creation that comes with it, he says, is often minimal and mainly limited to cleaning jobs.

A market illusion

Strictly speaking, this is not true. Lawyers, real estate agents and various middlemen also profit. In Cyprus, which until 2020 offered investors not just residence but also passports, the president himself was accused of profiting, since many contracts were arranged by his own law firm. When this was revealed, Nikos Anastasiadis defended himself by saying that the contracts were only dozens, not hundreds, as reports claimed. He also claimed that since he was elected in office, in 2013, he has cut all ties to the law firm that he founded and that bears his name.

Golden visa investments also create short-lived jobs for renovation crews and turnover for home improvement shops. In Greece, they also nurture the illusion of a healthy market, where none exists. 

This may be the biggest reason why governments in crisis countries are fiddling with Residence-by-Investment schemes, but are deeply reluctant to scrap them. Greece is plagued by a debilitating lack of investment in construction and real estate by the forces of the local economy, which were the main drivers of the dynamic sector up until 2010. The financial crisis may be over but neither industry has recovered. Incomes are now too low and too unstable for young couples to afford their own homes, while bank loans are one sixth of pre-crisis averages. And so the continuation of golden visa programmes, even with muted reforms, allows governments in Greece and Portugal to avoid addressing the underlying malaise in their respective economies.

What is more: Attracting foreign direct investment in every way has been among the most important tasks the Troika assigned Greece as a condition for the bailout loans. This mindset persists today. The Greek government did not answer requests for comments. But, perhaps the questions should be directed to the EU Commission instead. If attracting golden visa investments is fraught with risks, what is the strategy for bringing the real estate and the construction sector in the former crisis countries finally back on their feet?

Editing: Chris Matthews
Graphs: Marta Portocarrero