REAL ESTATE

Spain may give residence permits to foreigners who buy homes

Measures would apply to houses worth over 160,000 euros

Idea aimed mainly at Chinese and Russian markets

Spain is considering automatically granting residence cards to foreigners who buy homes valued at over 160,000 euros as part of efforts to reduce the vast stock of unsold housing built up during a property boom that has turned to bust, the secretary of state for trade, Jaime García-Legaz, said Monday.

The measure is aimed mainly at the Chinese and Russian markets, the official told reporters.

“We have proposed to other ministries that non-residents who acquire a home in Spain valued at over 160,000 euros should automatically be granted a residence permit,” García-Legaz said. “We are thinking of markets such as China and Russia, where there is growing demand for housing in Spain.

“In a few weeks’ time, a reform of the law regarding foreigners will be put in place to reactivate overseas demand and contribute toward reducing the stock of housing,” the official said. He added the arrangement would mirror similar agreements established in Portugal, Ireland and the United States.

García-Legaz said the valuation figure would be set with a view to sparking an increase in demand for residence permits. “You can’t place a lower price limit because this would generate massive demands for residence permits with housing being the excuse to obtain them,” he said.

The official said that given the state of the economy and credit restrictions, domestic demand for houses has stagnated.

Portugal grants residency to foreigners who buy a property valued at over 500,000 euros

The housing market has been in a slough for the past five years, with unemployment now at over 25 percent and bank lending curtailed by a lack of liquidity brought on by the spike in Spain’s risk premium. House prices have fallen by about a third from their peaks around the start of 2008. The stock of unsold new housing units as of the end of last year stood at some 670,000.

Foreign Minister José Manuel García-Margallo told Congress earlier this month that the government was speeding up processing residence permits for foreigners acquiring real estate assets in Spain.

Prime Minister Mariano Rajoy confirmed that the government was studying the measure but added that no decision had been taken. He said it was important to reduce the stock of unsold houses in the country.

It is not yet clear how Spain would implement the proposal, but it would involve creating a special temporary residence permit for such investors as Portugal did last August.

The Portuguese law grants residence rights to foreigners who buy a property valued at over 500,000 euros, to those who transfer one million euros to the country and to those who set up a company that hires more than 30 employees.

The difference is that people with this profile do not have to spend at least six months and a day a year in Portugal as is the case with other foreign residents. Instead, after having made their investment, they only need to spend 30 days a year in the country in the first year of residence and 60 days in the second.

The chairman of the Spanish Bar Association (CGAE), Carlos Carnicer, said the measure proposed by the government is open to arbitrariness and abuse. He described it as a “patch” to resolve a concrete situation but one that is insufficient to resolve the overall problem of the housing market in Spain.

“What we need to focus on is a solution that involves general laws to resolve general problems,” he said.

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