Limiting the Program of Temporary Residence Permits for Foreigners Based on Real Property Investment in Latvia

Abstract

Abstract. There exists sharp competition amongst nations regarding the increasing foreign investments; therefore, nations are willing to offer foreign investors and their families some type of political bonus, such as temporary residence permit, permanent residence permit, or even citizenship. The simplest way to entice investors is to offer them and their family members temporary residence permits in exchange for investments -simply by purchasing real property (via the so-called "Golden Visa" program). Such a program was launched in Latvia in 2010; however, significant limitations were placed on it in 2014. This research (1) compares the "Golden Visa" programs in different countries in the world, (2) determines the impact of the program on the real property market of Latvia, and (3) searches for the main reason why limitations were applied to the temporary residence permit program in 2014, which resulted in a significant decrease in the international investments in Latvia (this part of

Are golden visas a golden opportunity? Assessing the economic origins and outcomes of residence by investment programmes in the EU

“…Greece is the sole, but significant, exception where the scale of the programme could indeed destabilise the property market. As real estate investment tends to be concentrated in specific locales (Friedland and Calderon 2017;Viesturs, Pukite, and Nikuradze 2017), regional and city-level data are necessary to further identify whether more limited destabilisation is occurring in particular areas.…”

“…To date, only two reports have investigated real estate market impact, and then only with proxies or limited timeframes. Viesturs, Pukite, and Nikuradze (2017) examine the Latvian case by looking at the change in property transactions involving foreigners across a time when the government doubled the minimum requirements for investing in real estate. Using a difference-in-differences approach, they deduce that the decline in demand for RBI led to a decline in real estate purchases by foreigners.…”

“…In 2014, the government raised the minimum investment amount for its real estate option from €142,000 in urban areas and €71,000 in rural areas to €250,000 nationwide. Drawing on data in Viesturs, Pukite, and Nikuradze (2017), we can see that this caused a large decrease in applications, as numbers dropped from 5600 in 2014-1400 in 2015. At the same time, the proportion of foreigners in real estate transactions fell from 15 percent to 10 percent.…”

Who wants to buy a visa? Comparing the uptake of residence by investment programs in the European Union

“…However, the entrepreneurial side of the program did not yield as many economic benefits as intended, particularly in cities (Ley 2003). Furthermore, investors show a preference for placing their money in urban areas (Friedland and Calderon 2017, Viesturs et al 2018, Ley 2010) and for investing in real estate -even when cheaper options are available (Surak and Tsuzuki n.d.) These issues also affect debates about whether countries should grant residence in recognition of a passive investment in itself (Shachar 2017;Parker 2017) and whether this will lead to positive or negative economic outcomes (Adim 2017;Christians 2019;Scherrer and Thirion 2018). Though these issues are important, the stakes are very different if, for example, a country approves less than ten applications over a decade, as is the case in the Netherlands, or if a country grants residence permits to nearly 10,000 individuals in a single year, as did Latvia in 2018.…”