As Canada closes its door, Spain puts out the welcome mat

Many people from Hong Kong and the mainland may have been dismayed by Canada's decision to terminate a programme that granted residency to those who provided interest-free loans of HK$5.5 million.

But when one door shuts, another one opens.

The Spanish government recently enacted legislation that grants residency to overseas nationals who invest a minimum of €500,000 (HK$5.33 million) in real estate. This has led to a surge in interest and we are already beginning to see small groups of such investors arriving, chequebooks in hand.

Chinese developers may also secure options for blocks of flats and sell the units to purchasers in China, who would then be eligible for Spanish residency.

Spain has been behind the curve on this issue. Portugal, for instance, has had a similar system up and running for a year and it has proved very popular.

Many regions in Spain suffer from oversupply, particularly in the residential market. This should not be unexpected considering the levels of construction before 2008.

Furthermore, unemployment in these areas can exceed 25 per cent, even higher among the young. This may stifle demand and prices for years to come.

It is relatively easy to find discounted units and many are being marketed in Hong Kong. But many are poorly located, lack vital services or form part of largely empty developments.

Quality investments are harder to find but do exist. The best value on offer is in the mid- to high-end, and also in the centre of Madrid and Barcelona.

These areas have been less affected by overdevelopment and in many cases there is now a shortage of supply. Not surprisingly, prices are starting to rise.

Commercial property also throws up some interesting opportunities. Prime yields are double or triple those in Hong Kong and capital values are less than half what they were five years ago.

Given attractive pricing and an improved economic outlook, investor interest from Hong Kong and the mainland has certainly risen, although it remains in an embryonic phase.

But all that glitters is not gold. In order for demand to translate into higher investment volumes, more professionalism must be brought to the table. Cheap and cheerful is no longer the order of the day and if Spanish vendors are looking for increased Asian interest, better quality properties must be offered.

However, despite the economic crisis that clouded Spain in recent years, it remains one of the largest European economies and lies second only to the United States in terms of tourism receipts. It also acts as a gateway to Latin America and enjoys trade agreements with many of these countries, whereas agreements are now negotiated unilaterally across European Union countries.

Edward Farrelly, national director of Business Development, CBRE Spain