Spain plans to offer residency permits to foreigners who buy houses priced at more than 160,000 euros ($203,845) as part of its efforts to revive a collapsed real estate market and divest itself of hundreds of thousands of unsold homes.
In announcing the proposal on Monday, the Spanish trade secretary, Jaime García-Legaz, said it was aimed in particular at Chinese and Russian investors who might face difficulties buying a house in Spain because they are not residents of the EU.
García-Legaz noted that Spain was following in the footsteps of Ireland and Portugal, two other ailing euro zone economies that have sought to spur their housing markets by easing residency requirements.
Spain normally grants visas that are valid for up to 90 days to citizens of countries that are outside the EU. The residency permits for foreign home buyers would be for a much longer period of time but would not be open-ended. That detail has yet to be decided. The permits would also not grant the buyer the right to work in Spain.
The proposal is to be discussed in the coming days by the Spanish government. Asked on Monday about it, Mariano Rajoy, the prime minister, said while no final decision had been made, it was important for Spain to reduce its stock of unsold homes — “and not at the disproportional valuations of previous years”.
According to government data, there are about 700,000 unsold homes on the market as a result of a property boom that came to an abrupt halt in 2008. The bursting of the property bubble dealt a severe blow to the construction sector, which had been one of the main engines of the economy, and left the country’s banks with a crippling pile of bad loans.
The banking crisis reached its peak in May, when the government nationalised Bankia, a leading real estate lender, to keep it afloat. A month later, the magnitude of Bankia’s property-related losses and the collapse of other, smaller banks, led Madrid to ask its euro zone partners for a bailout of the banking sector of up to 100 billion euros ($128 billion).
Mortgage defaults have continued to climb. On Monday, the Bank of Spain said that in September the level of bad loans held by Spanish banks had reached a record 10.7% of their total loan portfolios, equivalent to 182 billion euros.
José Luis Suárez, a real estate specialist and professor at the IESE business school