Europe rolls out red carpet for rich foreigners

Recession is spurring governments to offer residence permits to the rich

By Jonathan Eyal, The Straits Times, 7 Dec 2012

LONDON - Confronted by the deepest economic recession since World War II and record unemployment figures, European countries are shutting their doors to new migrants.

But for high net-worth foreigners, governments are falling over each other to lay out the welcome mat.

The British government now operates an explicit price list for different levels of wealthy individuals, and advertises the tariffs accordingly.

In the past, those who had at least £1 million (S$1.95 million) to "invest" could be admitted for settlement in Britain but had to wait five years before becoming permanent residents.

Since last year, however, Prime Minister David Cameron's government has begun offering those who have £10 million to spare a permanent residence visa after being in the country for only two years, while those with £5 million have to wait three years.

Rich people jumped on the offer: Applications from the very wealthy jumped by 78 per cent to 419 in the 12 months to the end of June this year, from 235 in the same period a year earlier.

According to data from the UK Border Agency, 24 per cent of them were Russian nationals, and another 23 per cent were Chinese millionaires.

And the beauty of the British scheme is that those who wish to move with their dependants to the United Kingdom do not need to do anything special with their money, apart from investing it in residential property, or UK shares and stocks.

"The property boom in prime central London is being driven by overseas buyers. More than 60 per cent of all sales above £2 million are currently going to overseas purchasers," said Mr Liam Bailey, an executive with Knight Frank, one of Britain's top real estate agents.

Permanent residencies are prized because once granted, they are rarely withdrawn, and lead to eventual naturalisation.

Britain is not alone in its efforts to attract rich foreigners. Other European countries are eyeing them despite a traditional reluctance to advertise such schemes.

The thinking was that the sale of residence permits was, supposedly, something only the much- maligned "tax havens" were guilty of.

Until recently, things were kept deliberately nebulous.

The myth was maintained that the cash that rich foreigners brought with them was for "investment" rather than simply for the purchase of an immigration permit.

And rarely was the precise amount of cash required specified: British home secretaries, for instance, had the discretion to decide on a case-by-case basis.

The idea behind this secrecy was that, while money talks, real wealth whispers, so if you had to ask how much money you need for settlement in the UK, the scheme is not for you.

That reticence has gone, and the UK may soon face competition from Spain, which is considering undercutting the British by offering rich foreigners instant permanent residence permits, provided they buy local homes.

"We have proposed that non-residents who acquire a home in Spain valued at over €160,000 (S$254,000) should automatically be granted a residence permit," said Mr Jaime Garcia- Legaz, Spain's Secretary of State for trade.

"We are thinking of markets such as China and Russia, where there is growing demand."

Last year, housing purchases by foreigners rose 6 per cent from the year before. Purchases by Russians rose nearly 28 per cent, to 1,757 units. Chinese buyers bought 868 houses last year, up 7 per cent from the previous year.

Spain's move is understandable, for the country's housing market has been in a slough for the past five years.

House prices have fallen by about a third from their peak at the start of 2008, and the stock of unsold new housing units stands at some 670,000.

Anything that reduces the number of unsold homes not only minimises the losses suffered by Spanish banks, but may also revive the national economy.

For the moment, Spain's leaders remain apprehensive about the public's reaction.

While Foreign Minister Jose Manuel Garcia-Margallo told lawmakers that the government was determined to "speed up" the processing of residence permits for rich foreigners, Prime Minister Mariano Rajoy has been careful to say that his government was only "studying" the measure.

Still, even if Spain does not act, others will.

Neighbouring Portugal recently adopted a scheme that grants permanent resident status to any foreigner investing €500,000, half of Britain's minimum requirement.

How much for PR 

UK: Foreigners with £10 million (S$19.5 million) to spare can apply for a permanent residence visa after being in the country for two years. Those with £5 million can do so after three years.

PORTUGAL: Any foreigner who invests €500,000 (S$797,000) is granted permanent resident status.

SPAIN: Is considering giving foreigners who buy a home worth over €160,000 a residence permit.