Golden Visa property prices: Lessons for Cyprus
Golden Visa schemes can distort property prices by attaching the value of residency rights to a minimum investment threshold, according to research from Portugal that raises important questions for Cyprus and its €300,000 permanent residency programme.
In Portugal, property transactions became increasingly concentrated at the €500,000 Golden Visa threshold, with researchers identifying an additional price premium of approximately €38,000 for properties around that level.
João Pereira dos Santos, Assistant Professor at ISEG, University of Lisbon, explained in an interview with Economy Today that the findings demonstrate how investment-linked residency schemes can influence property valuations and market behaviour.
However, he cautioned that the research does not suggest all Portuguese property prices increased by €38,000 or that the Golden Visa programme was solely responsible for the country’s housing affordability crisis.
Speaking to Xenios Mesaritis, the economist examined Portugal’s decision to remove property purchases from its Golden Visa scheme, the potential consequences of Cyprus’s previous citizenship-by-investment programme and the safeguards needed ahead of possible Schengen accession.
How Portugal’s Golden Visa affected property prices
Research conducted by Pereira dos Santos and his colleagues found that, following the introduction of Portugal’s Golden Visa, the excess concentration of residential property transactions at exactly €500,000 increased by approximately 60%.
By comparing properties around the €500,000 eligibility threshold with those around another prominent price point, €450,000, the researchers found that transaction prices relative to tax-assessed property values increased by approximately €38,000 at the Golden Visa threshold.
The findings suggest that linking residency rights to a specific property investment amount can influence both transaction prices and the expectations of buyers and sellers.
Importantly, the effect was identified within a relatively expensive segment of the housing market, rather than across Portuguese residential property as a whole.
Portugal was also experiencing several other developments during the same period, including rapid tourism growth, the expansion of short-term rentals, exceptionally low interest rates and limited housing construction.
Interestingly, researchers also identified a concentration of transactions among Portuguese buyers who were not eligible for Golden Visas.
According to Pereira dos Santos, this suggests that a highly visible investment threshold can influence sellers’ minimum acceptable prices and shape expectations among other market participants, even when they are not directly involved in the residency programme.
Why Portugal removed property investment from Golden Visas
Portugal initially attempted to reduce housing market pressures through geographical restrictions rather than eliminating property investment from the programme altogether.
From January 2022, residential property investments ceased to qualify for Golden Visas across much of mainland Portugal, with the property route effectively redirected towards inland areas.
The objective was to move investment away from regions experiencing the greatest housing pressures while encouraging territorial cohesion.
However, in October 2023, Portugal introduced a more extensive reform under its Mais Habitação housing legislation.
The changes ended new Golden Visa applications based on the previous property investment routes and unrestricted capital transfers.
Portugal did not abolish residency by investment itself. Existing permits and eligible pending applications were protected, while new investors were directed towards alternative investment categories.
These currently include job creation, €500,000 investments in scientific research, €250,000 contributions to arts or cultural heritage, €500,000 investments in eligible non-property investment funds, and €500,000 investments in Portuguese companies combined with job creation requirements.
Pereira dos Santos said the distinction is economically significant.
Although the research cannot establish whether eliminating property investment was the single best policy response, because it does not assess all the programme’s benefits, separating residency rights from residential property purchases offers a clearer way to prevent those rights from being reflected in housing prices.
Such benefits could include tax revenues, employment associated with property transactions and other economic activity.
Why regional restrictions and quotas may not be enough
According to the economist, regional investment thresholds can reduce pressure in one property market while redirecting demand towards another.
This could be particularly problematic in smaller markets where housing supply cannot respond quickly to increased demand.
Furthermore, any clearly defined monetary threshold risks creating a new price point around which transactions become concentrated.
Quotas address a different issue by limiting the overall size of an investment programme, but they do not remove the incentive to inflate prices for properties that remain eligible.
Affordable housing contributions could provide another option by requiring investors to bear part of the housing-related costs generated by their investment activity.
Nevertheless, Pereira dos Santos argued that if the primary objective is attracting foreign capital rather than subsidising property transactions, investments with stronger productive or social benefits would be preferable to residential property purchases.
He also emphasised that removing property investment from Portugal’s Golden Visa programme did not resolve the country’s housing crisis.
Housing indicators have continued to rise sharply, reflecting wider pressures including constrained supply, planning restrictions, construction costs, tourism, migration and other sources of housing demand.
Did Cyprus’s citizenship scheme affect affordable housing?
Cyprus operated a citizenship-by-investment programme until 2020, with much of the investment linked to high-value property purchases.
Pereira dos Santos identified three questions that would need to be examined to establish its impact on the wider housing market.
The first concerns whether the programme increased the prices of properties directly eligible for citizenship.
The second is whether it changed the types of properties developers chose to build.
Even if investment demand initially affected only luxury homes, developers may have responded by redirecting land, capital and construction capacity towards larger or more expensive properties intended for foreign investors.
The third question is whether these effects spread into the wider housing market through land prices, construction costs and competition between different housing segments.
The economist warned that simply comparing Cyprus’s property market before and after the programme would be insufficient, because other economic developments may have occurred simultaneously.
Instead, researchers would ideally combine administrative records of citizenship-by-investment beneficiaries with comprehensive Land Registry transaction data.
These records would need to include transaction values, locations, buyers’ nationalities and property characteristics, alongside building permits, completed developments and floor areas.
The central affordability question, he explained, is not whether luxury villas purchased by wealthy foreign investors became more expensive.
It is whether the programme changed the quantity, location and types of housing available to ordinary Cypriot households.
Foreign technology workers and pressure on rents
Cyprus has also actively attracted foreign companies and their employees since 2021, particularly in the technology sector.
Pereira dos Santos distinguished this approach from passive property investment schemes, noting that companies establishing genuine operations bring employees who need somewhere to live.
Consequently, the initial impact of such arrivals would be expected in the rental market, particularly in neighbourhoods favoured by relocating workers.
Where incoming employees receive relatively high salaries or employer-funded housing allowances, their willingness to pay may significantly exceed that of existing residents.
In areas where housing supply responds slowly, this additional demand is likely to translate primarily into higher rents in the short term.
Over time, developers may respond by constructing additional housing, which can be beneficial where suitable land is available.
However, the composition of new developments may also change, with builders increasingly targeting higher-income international employees rather than local middle-income households.
Additional pressures may emerge through higher development land values, construction wages and building costs.
Unlike passive property investment, however, the relocation of productive businesses can generate wider economic benefits, including employment, salaries, tax revenues and demand for local services.
Cyprus’s €300,000 residency threshold under scrutiny
Cyprus currently offers permanent residency through qualifying investments starting at €300,000, with property among the available investment options.
Drawing on Portugal’s experience, Pereira dos Santos suggested examining whether transactions are disproportionately concentrated around this threshold.
However, he stressed that a large number of transactions at €300,000 would not, by itself, demonstrate market distortion.
Property prices naturally cluster around round numbers. In Portugal, concentrations already existed at €450,000, €500,000 and €550,000 before the Golden Visa programme.
What became unusual after the programme’s introduction was the additional concentration specifically at the eligibility threshold.
Another important warning sign would be geographical concentration of residency-linked investments.
National figures could conceal significant pressures in individual districts or neighbourhoods, particularly in a relatively small housing market such as Cyprus.
The economist suggested that a more meaningful measure would be the proportion of newly supplied housing purchased through the programme in a particular area, rather than the programme’s share of all residential transactions nationwide.
He recommended publishing the number and value of residency-linked investments by investment category, transaction value and geographical area.
With appropriate confidentiality safeguards, programme records should also be linked to Land Registry data to help distinguish the effects of residency-related investment from broader foreign demand.
Schengen accession could increase investment demand
Cyprus’s potential full accession to the Schengen Area introduces another consideration for the country’s permanent residency programme.
If accession increases the mobility benefits and attractiveness of a Cypriot residence permit, demand for qualifying investments could also rise.
Pereira dos Santos stressed that monitoring arrangements and clear indicators should be established before accession rather than after potential market effects become visible.
He called for transparent, publicly accessible data infrastructure that would allow citizens and journalists to monitor transaction concentrations at both national and local levels in real time.
Clear indicators should also be defined in advance to guide reviews or adjustments to the programme if market distortions emerge.
Once property prices have adjusted and developers have committed to construction decisions, reversing the resulting effects becomes considerably more difficult, he warned.
Also read: Holguin in Cyprus: Meeting with Christodoulides and Erhürman in focus
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