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Economy

Spain woos investors with residence permits

Spain's measures against the country's real estate crisis are getting ever more desperate. Now the goverment hopes to lure foreign investors with promising residence permits. However, critics strongly condemn the plan.

The houses are on the Spanish coast, around big cities, or out in the countryside. They stand in various states of completion after first going up during the boom years. Today, they are a symbol of the country's deep crisis.

In 2006 alone, some 900,000 apartments were built in Spain. Back then, real estate agents and construction companies cashed in on the boom, people were eager to buy, and prices for houses and apartments went through the roof. After all, banks were handing out cheap credit. Even people who didn't have any capital of their own, and essentially couldn't afford to shop for real estate, got credit from the banks. Most buyers simply assumed that prices would continue to rise. But then the bubble burst. It's estimated that around 1 million apartments are empty. Since the beginning of the crisis, prices are estimated to have dropped by more than 30 percent.

Aiming for Chinese and Russian investors

Apartment for sale (photo: Bodo Marks /dpa)

There are plenty of houses for sale, but few willing to buy them

The Spanish economy still depends on the construction sector, though. Now the government and the real estate sector are hoping for help from abroad. Madrid has even come up with an incentive.

"We have made a proposal," explains Jaime Garcia-Legaz, government official with the Economics Ministry, "that foreigners who buy an object for more than 160,000 euros [about $208,000] will automatically get a residence permit."

He says the initiative was primarily aimed at Russian and Chinese investors who would otherwise need a European Union visa.

Spanish Prime Minister Mariano Rajoy believes "the building sector has to get ahead again. The buildings have to be sold - and at proper prices."

Juan Rosell, president of the CEOE trade association, welcomes the plan, saying, "We've got to look into everything that could increase the real estate business."

Widespread criticism

However, the CO union sees things from the point of view of class politics. The government would make access for wealthy foreigners easy while curtailing the rights of foreign workers.

The opposition isn't sold on the plan, either. Marisol Perez Dominguez, immigration spokeswoman for the socialist PSOE party, accuses the government of linking residence permits with economic interests.

"Instead, they should stem the tide of immigration so we won't have more and more empty apartments while more and more people are on the street," she says.

Protesters in Spain (photo:Alberto Di Lolli/AP/dapd)

Spain has seen massive protests against the government's austerity measures

Immigrant organizations have also criticized the idea.

Gilberto Torres of immigrant group Ferine calls the plan "a mockery for the many thousands of people who for years have worked in Spain and now have to leave because they can no longer pay the rates for their apartments."

During the boom years, many immigrants from Latin America bought overpriced real estate. When the crisis hit, they were the first who lost their jobs. Now they're faced with eviction.

Torres is sure that the government's incentive will only work to the benefit of people who have a lot more spending power than the average member of the population. Latin American immigrants would be disadvantaged. And they are the ones in a particularly bad situation.

There's also criticism from the Spanish anti-racism organization SOS. It describes the plan as "another step by the government to settle immigration by purely economic criteria."

SOS adds that while the government previously sought out immigrants who would work, now it wants ones who will invest in real estate.

No blueprint

The plans have not been finalized yet. But Spain would not be the first country to introduce such regulations. Countries including Portugal, Ireland, the US and Canada already make it easier for investors to gain residency. Portugal changed its immigration laws in August. But there, getting residency requires a real estate investment of more than 500,000 euros. So far, though, there has not been a run on Portuguese property.

People buying real estate are mostly looking for a stable and profitable investment. When neither of those factors is given, then even the prospect of a residence permit won't make people spend their money. And getting an EU visa is not necessarily a problem for the wealthy, anyway.

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