Several EU governments offer non-EU nationals residency by investment, but scandals in the sector and the cost of living crisis are pushing countries to reconsider such exchanges.
Some countries have scrapped these schemes altogether, others raised the bar or no longer accept investment in real estate alone.
Amid these changes, Malta continues inviting non-EU nationals to exchange a rather modest investment in real estate for a right to travel and live in the EU. It is time to ask, cui bono, or, who benefits?
Residency by investment programmes are known as 'golden visas'. They invite affluent individuals to obtain a long-term visa for themselves and their families by injecting money into the visa-selling country’s economy.
That can take various forms: job or start-up creation, purchase of government bonds, charitable donation, real estate investment, or a mix of these.
Currently, Cyprus, Greece, Hungary and Spain offer the real estate investment route to a golden visa, but from available sources it appears that only in Malta purchasing or renting real estate above a certain price is a necessary condition.
In many countries the focus on real estate is explained by the schemes’ origins. Spain, Portugal, Cyprus, Greece and Ireland experienced a market crash in the late 2000s. Attracting foreign nationals to buy failing real estate projects or financial instruments was an attractive alternative to bailouts.
Meanwhile, Malta launched its golden visa in 2016, when its economy was booming and real estate trade flourished.
It did not need saving.
Using a mix of publicly available and exclusive, previously unpublished sources, the Daphne Caruana Galizia Foundation has analysed data on the workings of the Maltese golden visa scheme. The findings, published in a research report, show that the process by which the scheme came about was riddled with controversies.
High-ranking officials have become golden visa intermediaries (agents) or worked with such agents; individuals and companies active in various parts of the golden visa ‘supply chain’ are being tried for corruption in different countries.
What is less known is that golden visas spur real estate sales, but workers in this sector do not benefit – their salaries are declining. Golden visa buyers also avoid spending more than strictly necessary. The rental or purchase thresholds imposed on them to qualify for the visa lead them to compete with average residents for limited housing units on the islands.
The Maltese scheme benefits Chinese nationals with capital to spare. China does not recognise dual nationality, but golden visas allow them to travel and send their children to schools in Europe
As they do so, they pay real estate companies that are often closely linked with golden visa intermediaries – lawyers and other professionals shepherding their applications.
The analysis by the foundation is so far the most holistic attempt to answer the who benefits question about the Maltese golden visa.
Set up when Malta was luring China to invest in various sectors, the Maltese scheme benefits Chinese nationals with capital to spare. China does not recognise dual nationality, but golden visas allow them to travel and send their children to schools in Europe.
Origin of wealth is checked for the main applicant only, although several generations can apply at the same time. Nearly nine out of ten Maltese visa-buyers hail from China.
Given this market, Chinese-owned companies became key intermediaries in selling golden visas. In multiple golden visa countries analysed, they hire local lawyers and establish real estate agencies. Anecdotal evidence shows that profits from these operations float in offshore corporate structures and/ or flow back to China.
The scheme also gives a boost to the real estate industry. But visa-buyers are unlikely to independently browse rental listings, so visa application and real estate services are often in the same hands.
In other countries, notably Portugal, Spain and Greece, visa buyers’ impact on the real estate sector has become politically problematic and governments initiated reforms – but not in Malta.
In 2022, members of the European Parliament adopted a resolution with proposals to reform the golden visa market across the EU.
Among these proposals are “in-person interviews with the applicants and a thorough verification of how the applicant’s wealth was accumulated and is related to the reported income”, prohibition of joint family applications, and regulation of intermediaries.
For the latter, the parliament demanded “a Union-level licensing procedure for intermediaries”,“a prohibition on combining the consultation of governments on the establishment and maintenance of [residency by investment] schemes with involvement in the preparation of applications”, and sanctions on non-compliant intermediaries.
Only 12 members voted against the resolution – a third of them were Maltese.
If enshrined in laws, all of these rules would have profound implications on the Maltese golden visa “supply chain”. Any scrutiny would prompt uncomfortable questions.
But the commission has not proposed such legislation.
Daiva Repeckaite is an investigative reporter with the Daphne Caruana Galizia Foundation, the Malta NGO fighting for press freedom and anti-corruption measures, named after the Maltese journalist murdered by a car bomb in 2017.
Daiva Repeckaite is an investigative reporter with the Daphne Caruana Galizia Foundation, the Malta NGO fighting for press freedom and anti-corruption measures, named after the Maltese journalist murdered by a car bomb in 2017.