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Spain through the looking glass

Fire sales r us

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The Spanish government is mulling over plans to offer residency to any foreigner willing to fork out at least €160,000 for a house or apartment in the country, Spain’s trade secretary Jaime García-Legaz said on Monday.

Speaking before business leaders about plans to help flog off some of the 700,000 plus vacant homes in Spain, García-Legaz pinpointed the burgeoning interest from Russian and Chinese buyers in Spain’s second home market. He said the government would spend the next few weeks studying changes to immigration rules which could see residency granted to non-EU citizens who are able to stump up the requisite amount of cash.

By Tuesday, this story was in The Times and from there it spread around the (English-speaking world) like wildfire. As early as Wednesday morning, the following notice was posted in one of my Spain-related LinkedIn groups:

SPAIN is opening the door to foreigners obtaining residence upon acquisition of property for just €160,000. We are offering prime distressed sale opportunities where people requiring legitimate residence in Spain may acquire 4 to 6 year old, “prime” property at 25% to 30% below cost…There is clearly a short window of opportunity to make some serious savings, and sort out ones immigration status!

While all of this talk is a little premature given the initiative is still firmly at the working group stage, the cash-for-residency idea is clearly generating exactly the sort of excitement the Spanish government wants.

At first glance, the proposal also makes a lot of sense. There are nearly three quarters of a million houses sitting empty in Spain and locals just aren’t buying. Although house prices have fallen 33 per cent since the crisis began here, most people either have no funds or no way to access credit. Those few Spaniards who are still in the market for property are circling like vultures as they wait for prices to slide even further. For now, the property market is in a coma and if it weren’t for the presence of cashed-up foreigners snapping up deals along the coast, the life support machine might have been switched off long ago. So why not give a little push to the economy by selling of some of stock that you can’t shift otherwise?

The plan is certainly better than the idea put forward by Spain’s peak banking body (the AEB) on Monday. In a press conference, the association’s president Miguel Martín said the way to solve Spain’s housing crisis was to build more houses and offer more mortgages. That’s right. They want to throw more money at the problem.

But there are still a couple of big question marks over the government’s plans. Here’s the first. On Monday evening, the trade secretary García-Legaz spent a quarter of an hour assuring the listeners of Cadena SER radio that the proposal had “nothing at all to do with the employment market” and that those foreigners who gained Spanish residency by buying one property here would have – in ningun caso (under no circumstances) – the right to work in Spain. He then told listeners that these new residents wouldn’t be able to send their children to school here or access the country’s hospitals.

Now presumably García-Legaz was trying to reassure the public that any new residents entering Spain via this new initiative wouldn’t represent any kind of economic burden. But the reasoning is very odd. It’s a little like inviting someone to live in your home and then telling them they can’t use the bathroom or the kitchen. In its current form, the result of the cash-for-residency proposal will be the creation of a class of – admittedly relatively wealthy – second-class residents who are not entitled to the privileges enjoyed by other people living in Spain. These people will end up living parallel lives, unaffected by, and disinterested, in the country where they are living. And what sort of people will want to reside in Spain under those conditions? The answer is rich people, of course.

For this is the real problem with Spanish plans to offer residency in exchange for property purchases. The process commercialises immigration. And this is exactly why Spain’s non-government forces and many immigrant groups have lined up against the idea.

Speaking to El Diario, the head of Spain’s National Federation of Immigrant and Refugee Associations (FERINE) Gilberto Torres said the move with its focus on Chinese and Russian buyers was discriminatory and would only serve the interests of the banks and big capital.

Meanwhile, Alla Didkoska, the spokesperson for Spain’s Slavic immigration group Cumbre Eslava and a Russian by background, said it wasn’t honourable to sell residency permits to rich Russians who came to Spain for a few weeks every year to enjoy the sun. Instead, the new plans were a slap in the face for the many people who had spent years working hard to make a life in this country.

Also speaking to El Diario, Alfonso Chao, member of the Committee for the Education and Integration of Chinese People in Spain said the move appeared to target the Forbes World’s Richest People list and had nothing to do normal Chinese people. ‘And if the move does target Chinese people living in Spain, what Chinese person is going to buy a second home? It makes no sense,’ said Chao.

Spain’s housing initiative comes in the wake of similar moves by Portugal and Ireland but introduces a far lower cash threshold than the €400,000 and €500,000 outlays required in those two countries.

Spain is increasingly popular among Russians tourists with 797,800 visitors from Russian visiting the country from June and September this year (44 per cent up from 2011) according to new Russian figures cited in the Financial Times on Monday. The latest Spanish figures put the year-to-date rise in Russian tourism at 41.3 per cent.

There are some 250 estate agents in Moscow dealing exclusively with the Spanish property market.

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Written by georgemills25

November 22, 2012 at 13:35

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