From July 1, non-EU citizens in Hungary will be able to obtain a residence permit for 10 years. Many European countries are currently stopping similar programs. What tangible effects will the project have? Has Hungary learned from the mistakes of others?
Until now, anyone who bought a property in Portugal for 350,000 to 500,000 euros, depending on the popularity of the area, received a long-term residence permit. Regardless of whether the applicant came from China, Russia, India or the USA. The situation is similar in Spain: Here, too, the threshold for purchasing property was 500,000 euros. The very successful Greek program had a minimum investment amount of 400,000 euros. In Portugal alone, the 12,178 residence permits brought in 6.4 billion euros.
The slow death?
What these "residence-by-investment" programs have in common is that they no longer exist or no longer exist in their original form. Countries such as Bulgaria and Ireland have discontinued their "Golden Visa" programs altogether, some as early as 2023. Greece has doubled the required investment amount. The other remaining countries have also tightened the requirements.
Although the Golden Visas flushed billions into the countries concerned with tens of thousands of applicants, sales were stopped abruptly in some cases. What were the reasons for this?
Reasons for the decline
Firstly, Brussels criticized the apparently lax conditions imposed by some countries. As long as the money was flowing, they were obviously not looking too closely. Of course, the question arises as to whether, with the EU's external borders effectively open, there is really any danger from those who bring considerable resources with them.
Spanish and Portuguese parties from the more left-wing spectrum complained that the sharp rise in property prices was mainly due to increased demand from foreign buyers. Local buyers could no longer afford apartments because Russians and Chinese were buying everything up at moon prices, they said. On the Spanish market, 3,060 properties worth 4.8 billion euros changed hands in this way between 2018 and 2022. The additional buyers have certainly driven up demand and therefore prices. However, it is also true that property buyers with a Golden Visa only accounted for a very small proportion of all real estate transactions. However, considering that foreign buyers presumably preferred the best locations and tended to be able to afford them, it can be assumed that there was indeed a certain amount of price pressure in the upper segment. The other side of the coin is the additional consumer spending generated by the influx of wealthy foreigners into Mediterranean cities.
Hungary in the starting blocks
From July 1, Hungary will also be offering residence permits for third-country nationals. These are initially valid for 10 years and can be extended for a further 10 years. In addition to the investor, (spouses) partners, underage children and economically dependent parents also benefit from this unlimited right of residence. The residence permit also entitles the holder to visa-free travel throughout the Schengen area.
This solution is of interest to three groups of people: The smallest group are people who actually want to move to Hungary, for whatever reason. The second group are wealthy business people from third countries who have had to take the long and rocky road of a business or tourist visa on their previous business trips to Europe. Such a visa application can take 3-6 months, possibly several times a year. With an investor visa, the issue is settled for 10+10 years. The third and probably largest group of applicants will receive their residence permit purely as a Plan B for security reasons. Those who live in autocratic countries or in countries where the economic situation is desolate or where war is raging, long for a safe haven. The EU, including Hungary, is currently an attractive destination.
What are the rules of the Hungarian Golden Visa?
To obtain a Golden Visa for themselves and their family members, investors have two options: Either they invest €250,000 in a Hungarian real estate fund or they buy a property directly for at least €500,000. Both investments must be held for at least five years. At the end of this period, they can sell the investment but retain their residence permit until the end of the tenth year. However, in order to be able to apply for an extension for a further ten years, an investment must be in place at the time of the extension. One of the advantages of the Hungarian product, in contrast to Portugal for example, is that there is no minimum period of residence in Hungary. You can come, but you don't have to.
Has Hungary learned from the mistakes of its neighbors?
40 percent of the funds collected by real estate funds must be invested in Hungarian residential real estate. As a result, many new apartments will be built, which reduces the price pressure on the housing market. This clever move significantly increases the sustainability of the program and at the same time reduces the criticism of domestic homebuyers who have missed out.
In addition, the threshold for buying a home is so high that foreign buyers only get in the way of domestic buyers in the top price segment. An outcry on a broad front is therefore not to be expected.
Whether the calculation works out in the end will depend on whether investors prefer to invest in funds or purchase property directly. Some may think that the size of the investment answers this question. This is not the case. The citizens of some countries have lost confidence in the stability of institutions to such an extent that they only trust their own four walls, but not a fund, which they believe could suddenly disappear. Although this in no way does justice to the high stability and the very good and long-term performance of Hungarian real estate funds, it must be accepted as an opinion.
If many investors opt for the funds, a lot will be built, including small apartments, with all the benefits for the economy and the population. The programs of the countries mentioned above did not have this element. If many opt for their own property, the approximately 8-10 thousand apartments and houses currently on offer at prices starting at €500,000 will certainly become more expensive, with little impact on the segments below.
So it remains exciting.
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