The rapid rise of Real Estate in investment migration

Video transcript

1. What role does Real Estate play in investment migration?

The pandemic has changed the way a lot of people live and reshuffled their priorities. It’s also been widely reported that the investment migration space has become far more popular. We’ve witnessed a huge increase in enquiries at Henley & Partners, and globally, the industry is in very good shape and thriving. Real estate investment has proven to be a highly popular option for those HNW’s considering a sensible and attractive investment migration solution. Real estate investment often allows people to qualify for alternate residency and citizenship, and the majority of countries, more than people often realize, actually offer real estate-linked investment migration opportunities. It’s fair to say that for most HNW’s, real estate will have likely played a considerable part in their wealth generation and hold a considerable percentage of their personal balance sheet - and that it is an asset class that they are familiar and most comfortable with. In the long term, and historically, real estate has been a proven track record of attractive growth and returns. If you combine the outcome of getting an alternative residency and citizenship, with an attractive real estate investment opportunity, it becomes somewhat of a compelling proposition.

2. What are the variations of Real Estate investment between Programs?

It’s important to remember that countries have different laws and regulations. When we’re comparing countries and programs, we’re not comparing apples with apples, especially when residency and citizenship are different in themselves. However, some key criteria that I could point that are different between programs and countries are, well, firstly, the minimum investment amount. For example, in Spain, to apply for a Spanish golden visa, a minimum investment threshold of EUR500,000 is required. Whereas in Saint Kitts and Nevis, a citizenship by investment application requires a minimum investment of USD200,000. The type of properties that qualify also varies – e.g. commercial, residential hotels, and serviced apartments. In some countries and programs, only off-plan residential property can actually qualify. Another variation is governmentapproved projects. For example, most Caribbean programs, and in Montenegro, the property investment must be in a government-approved project. These are typically off-plan and have international operating brands associated with them, and in a location where the government is seeking to promote development and tourism. The geographical location of a property within a specific country is another variation. In Montenegro, in the north, the minimum investment criteria is EUR250,000, whereas in the capital, Podgorica, and also the coast, the minimum investment criteria is EUR450,000. Portugal is another example where geography within a country plays a part. For the golden visa program in Portugal, no residential property in Lisbon, Porto or the coast qualifies as of Janaury 2022. For a real estate investment to qualify in these regions it must be a commercial property. However, residential properties still qualify in the lowdensity areas in Portugal, which are often referred to as the ‘interior’. An another example is that in Malta, for the majority of investors that are choosing to acquire real estate to qualify for residency or citizenship, there are no geographical restrictions or zones that limit where they have to invest on the island. The type of ownership is another variation, for example, some programs such as Grenada and Portugal, permit co-ownership of real estate. Whereas in Malta, it must be a freehold property The holding period of property represents another interesting variation between countries and programs. And by this, I mean, the minimum amount of time that an investor must hold on to an acquired property before selling it, or liquidating it, without jeopardizing their application for residency and/ or citizenship. By means of example, Saint Kitts and Nevis, the holding period might be seven years. Antigua is five years. Whereas in Montenegro, the holding period could, in theory, be be the very next day after you receive title. As you can see, there are a lot of variations between the programs, some more nuanced than others, but as with real estate, there are always permutations, and each investment migration program has its own restrictions and limitations

3. How does the Best Real Estate Investment Migration Index work and why did H&P do it?

Henley & Partners have put a lot of effort it into the Best Investment Migration Real Estate Index. And we’re really pleased with the coverage and the exposure that it’s received. It’s a very considered and industry-specific index and it highlights the 16 most important residency and citizenship programs that offer real estate as one of its investment qualifying criteria. The index itself is made up of more than 30 parameters and has over 300 data points, which essentially produces a score. This score can then be used to compare each program according to the key considerations that investors typically take into account. Some of the property-specific parameters I’ve already mentioned, but they include the minimum real estate investment threshold, the rental returns, the transaction costs associated with buying and selling properties, and the holding period. Some of those are the key property criteria, but the index also takes into consideration factors such as the country’s reputation, its quality of life, the GDP of that country, the residency or citizenship requirements, and the cryptocurrency friendliness. A lot of parameters are taken into consideration. And to answer the question about who this is useful for, or why it’s useful, it’s very complex for a client or a potential investor to consider all the parameters. And we, via this index, have created a very user-friendly tool and platform whereby curious investors can get all the information at their fingertips and in one place. They can play around with the parameters and adjust it according to their own specifications and their priorities. A really useful tool that is helpful and insightful, and ultimately helps investors and our clients make the right decision according to their needs and their wishes.

4. What are the highlights of the results of the Index? Any surprises?

Congratulations must go to Dubai for claiming first place in the inaugural index. It is not a surprise that Dubai came out on top. Property acquisitions by foreign nationals have been galvanized in the country recently, and that is largely due to its reputation as being such a safe and secure place to reside. It’s also got a strong economy with attractive employment conditions. This combined with attractive property rental returns and probably the fact that it’s more affordable to live than some other international centers, has helped Dubai claim top spot. It is interesting to note that Europe dominated the top five in the index. Spain, Montenegro and Turkey all affirmed why they’ve been such popular investment destinations for savvy real estate investors in recent years. Other countries that often top the ranking for lifestyle, such as Portugal, Thailand, and Greece came in fifth, sixth and seventh respectively, with the quality of life helping them secure such a highranking spot. Not surprisingly, the popularmprograms of Cyprus and Malta ranked very highly in certain categories. And then the index also took into account the five popular programs in the Caribbean; Saint Kitts and Nevis, Grenada, Dominica, Saint Lucia and Antigua. These five programs have traditionally been very popular for HNW investors that are looking for greater mobility and have limited travel access with their current passport. The index really takes into account the different nuances of real estate in these five Caribbean countries. It’s important to point out that citizenship by real estate investment in these Caribbean countries starts from as little as USD200,000.

5. Why is the combination of an alternate residence or citizenship with an attractive property investment a compelling proposition?

It really has proven to be a compelling combination and the data supports this. Investing in real estate-linked migration is more than just buying a property. Many high-net-worth individuals and many of our clients at Henley & Partners have started, and are well underway with their post pandemic strategic planning. Many global investors are engaged in this right now. They’re looking at asset allocation and diversification. And whilst real estate has always probably formed part of their diversification, I think that when a real estate investment is linked with the ability to get an alternative residency or citizenship, then it becomes very attractive. The main benefits of real estate can be from the core asset appreciating in value, attaining attractive rental returns and yields, in addition to the underlying investment. But when that is linked to improved global access and mobility, increased security, as well as the ultimate hedge against political and economic and market instability, it proves to be very compelling. While real estate investment has always been a smart decision, perhaps real estatelinked investment to migration is an even smarter decision.