Cyprus became the latest euro zone domino to teeter in 2012 just when the worst of the crisis appeared to be over. In March 2013, a compromise rescue plan backed by euro zone finance ministers called for Cyprus to wind down one largely state-owned bank, Popular Bank. The raid on Popular Bank was intended to raise most of the 5.8 billion euros that Cyprus was required to raise as part of the bailout.
Chinese buy property in Cyprus to gain EU permanent residence
After cash-strapped Cypriot government offers permanent residency to big investors, wealthy Chinese flock to buy property
One of the first things you see after landing at Larnaca airport in Cyprus is an advertisement for a property development company. It is in Chinese.
It will soon be carnival time in the city of Pafos on the south-west coast of Cyprus - and this year's theme is China.
"Everything will be Chinese," says Pafos mayor Savvas Vergas in his office in the pretty, whitewashed city hall, fronted by classical Greek pillars. "Meals … folklore … Everything will be on Chinese culture."
The carnival will be a way of celebrating a most unusual boom in a country which, like others in southern Europe, has been stricken by the euro-zone crisis. Property prices in Cyprus have fallen by around 15 per cent since 2007. Yet an official survey published last month found that between last August and October more than 600 properties, 90 per cent of them in Pafos, were sold to Chinese buyers.
"The real growth came after August because that was when the government made clear the terms and conditions for third country nationals to get permanent residence," says Giorgios Leptos, a director of the Leptos property group and president of the Pafos chamber of commerce and industry.
The opportunity to secure permanent residence in an EU member state is a huge attraction for Chinese because it offers them visa-free travel throughout the union.
Lisha Tang, a young client at a Beijing property firm, is relishing the prospect.
"A house in Cyprus means travelling freely in Europe, which is great for young people," she says.
And not just for young people: older Chinese who obtain permanent EU residence can put their children into European schools and visit them without difficulty. According to the 2012 Hurun Report, 85 per cent of China's 1.4 million US dollar millionaires plan to send their children overseas for their education.
To obtain permanent residence in Cyprus, investors from outside the EU have to spend at least €300,000 (HK$3.1 million) on a property. They must also prove that they have no criminal record and are in good financial standing and agree to deposit €30,000 for a minimum of three years in a local bank account. Their permit normally arrives in about 45 days.
Cyprus is not the only EU state to be exploring this way of reinvigorating a stagnant property market. Last year, Ireland and Portugal also offered residency to foreigners who bought property worth more than a certain amount. In November Spain's trade minister said his country was intending to follow suit in an attempt to clear his country's vast backlog of unsold homes.
For the European Commission, the question of whether to grant residence to non-EU citizens remains entirely a matter for national governments. Conditions for the entry of investors into the EU are currently not harmonised.
Francois Godement, head of the China programme at the European Council on Foreign Relations, says: "I can see an issue cooking up here.
"I see intelligent and talented young Chinese whose presence in Europe might be to our benefit who run into problems when they try to stay. Yet there are immigrant businesspeople who don't seem to have any problems [in getting the necessary paperwork]."
But, he adds: "Where it really becomes a problem is where the country granting residence is part of [the] Schengen [agreement on freedom of movement of people]. That is quite problematic. That is going to raise eyebrows in Brussels and elsewhere. Cyprus is not in Schengen."
Buying a new life...
How does a foreign investor obtain residency in an EU country?
Offers permanent residency in return for an investment of €300,000 in a single property and a €30,000 deposit in a local bank account every year for three years. Immediate family members are also eligible for residency, with the deposit of an additional €30,000 each.
Offers residency to those buying a property worth €500,000 and holding it for five years. A five-year residency permit, which also grants free access to the 26-nation Schengen area, is granted, which can lead to permanent residency and later citizenship. Family members can also acquire the permit.
Offers a two-year residency permit to the applicant and family members followed by a renewal for a further three years (which can lead to permanent residency and citizenship) in return for either:
- A one-time payment of €500,000 into a public project benefiting the arts, sports, health or education
- A €2 million investment in a low-interest immigrant investor bond, subject to conditions
- A €1 million investment in venture capital funding in an Irish business for a minimum of three years
- A €1 million mixed investment, 50 per cent in property and 50 per cent in government securities
Considering residency for those investing more than €160,000.