Madrid: Destination Of Choice For Wealthy Investors

5 March 2015 – Expansión

For the first time, the Spanish capital enters the top 20 on the list of locations preferred by wealthy individuals for investing their capital.

The improved perception of the economy and the possibilities for obtaining returns on investments have placed the Spanish market and more specifically its major cities, Madrid and Barcelona, amongst the destinations of choice for investors with estates worth more than $30 million (€26.8 million).

Specifically, Madrid is ranked at number 18 on the list of large investors’ favourite locations around the world.

“Firstly, vulture funds make purchases, then institutional investors arrive and finally the wealthy individuals come”, explains Humphrey White, Director of Capital Markets at Knight Frank in Spain.

Amongst the attractive features of Spain’s cities, Mr White highlights the price of their luxury properties, which are much more affordable than those of other European capitals. Thus, according to Knight Frank’s report, with one million dollars, an investor can purchase just 20 square metres of residential property in London, 50 m2 in Paris and 68 m2 in Rome, whereas in Madrid he/she can acquire 133 m2. “If you have a lot of money, you can achieve a very attractive return from luxury housing in Spain. The highest prices currently stand at around €10,000/m2, compared with the levels they reached at their peak of €14,000/m2”, explains Alberto Costillo, Managing Partner of the Luxury Residential Department at Knight Frank.

Nevertheless, the price of luxury housing increased by more than 5% in Madrid in 2014. “It is worth noting that the price of premium property in Madrid rose by 5%, in contrast with the downward trend in Europe, where prices decreased by 0.4% on average. We expect this trend to continue”, says Kate Everett-Allen, partner in International Research at Knight Frank.

By country, wealthy investors from Mexico, Colombia, Argentina and Venezuela tend to opt to buy property in Madrid, whereas other millionaires, such as the Russians, prefer Barcelona and other coastal regions. Importantly, Spain’s cities have an opportunity in the Russian market, given that more than a third of the wealthy investors from that country have indicated that they intend to leave Russia during 2015, according to findings by The Wealth Report.

London

Although Spain has now entered the elite ranking of locations desired by millionaires, the first position on the list is held by London, which ousted New York a few years ago as the most favoured destination. New York moved down to second place; Hong Kong is ranked third. In terms of where these wealthy investors live, London leads that list too, for another year, with 4,364 resident millionaires, followed by Tokyo with 3,575 and New York with 3,008.

Meanwhile, Madrid is home to 544 individuals with estates worth more than 30 million dollars, whilst 438 live in Barcelona. “There are 63 new millionaires in Spain this year and one third of them are living in Madrid and Barcelona”, says Humphrey White.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Only 490 Homes Sold In Exchange For “Express Visas”

17 February 2015 – El Mundo

The Government has raised €369 million in 15 months from its offer to grant residency to those buying property for more than €500,000.

Spain does not attract as many foreigners as Portugal does through its program.

The controversial express visas that the Government introduced through the Entrepreneurs Act, in order to raise foreign capital, have only attracted 530 international investors in the 15 months since the legislation came into effect, according to data provided by the Secretary of State for Trade. The millionaires that have moved to Spain in exchange for a residency permit have invested only €446.8 million, of which only €369.7 million has been spent on house purchases.

These figures are much lower than those recorded in Portugal for its golden visa program. The neighbouring country has managed to secure more than €1,100 million for the 1,649 golden visas that it has granted (figures to November 2014).

Given the limited interest from the very investors that the Government sought to attract by granting them permanent residency in an EU country, and given the suspicion with which the European Parliament views these types of programs, the Government is preparing rules for the enforcement of this legislation which, amongst other things, will give more guarantees to investors.

The so-called golden visas were approved, not without controversy, in the summer of 2013 as part of the Entrepreneurs Act. The idea of the Executive was to attract foreign investment through these permits and whereby reduce the huge stock of housing in Spain. As a result, it was decided that residency permits would be granted to those investors buying properties worth more than €500,000 (excluding taxes) and those deciding to invest significant quantities in Spanish company shares, domestic bank deposits, public debt or any other general interest project.

A year and three months after the Act came into force, the program has only facilitated the sale of 490 properties (out of a total of 830,000 properties sold during this period), according to the National Institute of Statistics (el Instituto Nacional de Estadísticas or INE) and investors have been incentivised to close only 29 transactions to purchase shares and another 12 transactions of general interest, according to data from the Secretariat that reports to the Ministry of the Economy.

Portugal has had more success with these visas and the key reason for this lies in the fine print of the legislation, which is more favourable for investors. “In Spain, we grant residency in exchange for investment, rather than nationality for investment like in other countries. Moreover, in Portugal, it is possible to become a citizen once you are a permanent resident. By contrast, in Spain, permanent residency only lasts for two years, rather than five years, which means that documentation must be renewed and residency justified on a more frequent basis”, explains Pamela Mafuz, Associate in Employment at Baker & McKenzie.

However, Portugal’s first-mover advantage is also behind its success. “Portugal was able to get ahead and be one of the first to implement this policy and that always has a positive influence” says Borja Ortega, Director of Private Wealth at JLL.

Whilst in other countries, such as Malta, there has been a lot of overseas publicity about the existence of the programs to grant visas to rich people, the Spanish Government has barely promoted its initiative, partly for fear of controversy.

Most of the beneficiaries of the visas granted to date are Russian and Chinese citizens. But, Baker & McKenzie report that their office also receives lots of questions from investors interested in these visas from the Persian Gulf, Egypt and Jordan.

“Many Latin-American investors are also interested in purchasing property (in Spain), due to the special bond that they have with the country. But, for them the visa is usually a secondary consideration because they tend to have other means of obtaining residency”, says Margarita Fernández, also an Associate at Baker & McKenzie.

Just like with the large funds, the majority of the investors seeking golden visas want to buy homes in big cities. “Housing is in highest demand. Specifically, single family homes and in terms of location, the region of Madrid is clearly the preferred destination”, says Ortega.

Original story: El Mundo (by María Vega)

Translation: Carmel Drake