The end of the Golden Visa in Spain and its impact on the Balearic Islands

The Spanish Government's announcement on April 8 regarding the abolition of the Golden Visa for real estate investments has generated an intense debate about its impact on the real estate market, especially in provinces such as the Balearic Islands.

Golden Visas for real estate investment have accounted for 94% of the Golden Visas granted since 2013, though it is worth remembering this type of special residence authorizations can also be obtained if the non-EU foreigner invests more than 2 million in Spanish public debt or 1 million in shares of Spanish companies or deposits in national banks.

For the time being, it seems that the limitations planned by the Executive are only focused on the elimination of the Golden Visas for real estate investment. However, for the time being, it has only proceeded to announce its elimination, without knowing when this measure will be implemented and, therefore, when it will be effective. However, it is expected that the elimination will take place in the near future.

The Golden Visa, which offers residence permits to non-EU foreigners who invest €500,000 or more in the purchase of a property, has been an important part of the real estate scene both in the Balearic Islands and in the rest of Spain.

The PP Government introduced the Golden Visa in 2013 with the aim of stimulating the Spanish economy and promoting foreign investment in the real estate sector, following the real estate crisis suffered in Spain. Since then, the popularity of this residence authorization has been on the rise, with a total of 10,528 authorizations granted for real estate investment of more than €500,000 between 2016 and 2023.

According to data from the Real Estate Yearbook of the Property Registrars, 9.7% of foreign purchases made in 2023 exceeded €500,000 in amount. Of the more than 87,000 transactions carried out by foreigners for this amount last year, 50.4% corresponded to non-EU citizens and, within the latter, only 3,273 applied for the Golden Visa.

As far as the Balearic Islands are concerned, the concession of Golden Visas for real estate investment by non-EU foreigners amounts to an average of around 300 per year, according to estimates by the Balearic National and International Real Estate Association (ABINI). It must be said that these real estate purchases by non-EU foreigners who subsequently apply for the Golden Visa, represent in the Balearic real estate market only 2% of the real estate purchase and sale operations, that is to say, a negligible percentage and that will have practically no impact on the price of housing in the Balearic Islands or on the possible access to housing by residents.

The main beneficiaries of the Golden Visa in the Balearic Islands have been the British, severely affected in the limitation of freedom of movement through the Schengen area after the United Kingdom left the European Union due to Brexit. In addition, a small group of American investors has also been part of the beneficiaries of this residence authorization. However, the weight of Chinese and Russian investors in the Balearic Islands is practically non-existent.

The elimination of the Golden Visa raises particular concerns for the real estate market in the Balearics. Experts point out that the granting of these authorizations is not directly related to the problems of access to housing for local residents, however, their elimination will have a significant impact on the market and the local economy, as it will affect the attraction of foreign investment in the Balearics and will divert the interest of foreign investors to other countries that still maintain similar residence authorizations for investment, such as Greece, Malta or Italy. This will have an impact on urban development, economic activity and the labor market in the Balearic Islands.

In economic terms, Golden Visas have contributed to the growth of the real estate sector in the Balearic Islands, stimulating the construction and sale of properties, as well as generating additional revenue through associated taxes. Many other sectors will be affected by the elimination of this authorization, such as the construction, interior decoration and catering sectors.

In conclusion, the end of the Golden Visa in Spain and its potential impact on the Balearics poses significant challenges for the property market and the local economy. While the Government justifies the removal of Golden Visas to address concerns about property speculation and to promote genuine investment and access to housing for young people, we believe that the removal will do nothing to affect potential access to housing for residents and will instead have a negative impact on foreign investment in the Balearics.

Maite Blas Janssens
Illeslex Abogados

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