Who wants to buy a home in the world's worst-performing markets right now? Even at seemingly giveaway prices, what could possibly entice a sale in places where values have disintegrated and no sign of recovery appears anywhere on the horizon?
Throwing in freebies is a marketing ploy that can work, but free steak knives won't cut it. How about if the prize was residency?
Spain is the latest cash-strapped European country preparing to give away citizenships in return for property sales. In November, its government announced a plan to offer permanent residency to any foreigner buying a house or apartment worth more than €160,000 (HK$1.62 million). The move is an attempt to relieve a glut of stagnant housing stock across the country, estimated at more than 1 million homes.
The scheme is expected to be highly popular with non-European Union buyers, as Spanish residency would allow foreign nationals to freely move around the Schengen zone, which includes France, Germany, Sweden, Finland and the Netherlands.
It also undercuts similar schemes in other EU countries where foreigners can gain residency, with a property spend of €400,000 in Ireland, and €500,000 in Portugal.
Chinese and Russian buyers are expected to be keen on this fast track to Europe. However, Spain's proposal is for a residency visa only. Access to public services, such as health and education, will not be included, while foreigners will need to provide proof of income and the ability to support themselves.
Is the plan likely to work? Barbara Wood, of The Property Finders agency in Andalucia, believes so. "The domestic market is basically frozen due to high unemployment and mortgage drought, and Spain realises any movement in the market is coming from the overseas buyer," she says. "Numbers from overseas have grown steadily since 2010, and this year is on target to show significant growth from 2011."
Visa rules for non-EU citizens are thought to be a disincentive to overseas buyers, but a lot of the unsold stock is the type of property they like, such as coastal apartments. "It is hoped that loosening the rules will encourage more non-EU buyers. There are also some real bargains in city suburbs," says Wood, who believes Spain's proposal to offer such a low minimum purchase price "looks like a smart move to make Spain more attractive to a wider market".
A lot rides on this scheme. "The construction industry in Spain is in total paralysis, new planning approvals are almost zero and, although there are one or two signs that in the very best areas new projects are coming to the market, the government is desperate to bring a level of recovery to the building sector," Wood says. Its collapse is a big contributor to the unemployment figures. They know that until the current stock of completed-but-unsold property is mopped up, they have no chance."
That stock is also the type of property that the banks are holding and, until it is gone, the banks are not lending, so there is a bottleneck. "And it is the case that people hoping to buy at or near the minimum price point of €160,000 will be buying this kind of property, although with the price falls of the last few years, there will also be resales in that budget," Wood says.
Chinese and Russian buyers now account for 8 per cent and 4 per cent of the Spanish property market, respectively. British buyers, on the other hand, own 13 per cent of the market, although this has fallen from 17 per cent in the 2008 boom days.
"The example from Russia is that in the mid-1990s buyers were exclusively extremely wealthy," Wood says. "What has emerged in the last five years is that more middle-class people are interested in buying a holiday home or investment. The first thing is always the tourist market - it is tourists that become buyers - and the Russian tourist market to Spain has doubled in two years to about 1.2 million this year and growing. I think it is assumed that as China develops a bigger and wealthier middle class, the same will happen."
Based on the inquiries Wood's company has received since the proposal was announced - from the United States, New Zealand, Russia, China and the Middle East - she believes there is potential for it to make a difference. However, she notes that much of the unsold stock has already gone in the best areas. "I believe that by the end of 2013 it will be greatly reduced, with only the least attractive remaining."
Wood says overseas buyers should be aware that if the property is rented out, income will be subject to tax.
Buyers who spend more than 182 cumulative days in Spain each year will be considered fiscally resident.
If it is a holiday home, any rental income should be declared and there will be annual property taxes to be paid.
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