The CBI Index: investing in real estate for citizenship

Most citizenship by investment jurisdictions incorporate a real estate component into their programmes. In some, like Cyprus, investment in real estate is mandatory, while in others, like the Caribbean island-nations, it is an option that applicants can weigh against monetary contributions, or, in some cases, business investments or the purchase of government bonds. Malta is unique in giving applicants the possibility to either purchase or rent a residential property.

From an applicant’s perspective, having to provide evidence of a real estate transaction presents a programme shortcoming, as the applicant must inevitably attend to all the complex procedures associated with becoming a property owner or leaseholder. There is a silver lining to every cloud however, as applicants who are required to buy or rent real estate are generally given very few restrictions on location or property type. Generally, all that is required is a private residence.

From a country’s perspective, the decision to provide flexibility within the framework of a fixed real estate requirement presents both benefits and drawbacks. This dichotomy is exemplified by Cyprus.

Under Cypriot law, successful applicants for citizenship by investment must purchase a residence worth at least €500,000 ($585,000), which they must hold for the remainder of their lives. Most applicants also choose to make an additional three-year €1.5m investment in residential real estate – Cyprus’ most affordable route to citizenship. 

The result has been a surge in demand for homes, beginning with luxury apartments in waterfront areas and trickling down to the heart of the island. A report by PwC, based on information from the Department of Lands and Surveys, noted that sales of residential property worth €1.5m or more rose by 69 per cent between 2016 and 2017, and by more than 132 per cent between 2013 and 2017 (Cyprus relaunched its economic citizenship programme in 2014). On average, property sales across all of Cyprus increased by 24 per cent between 2016 and 2017. Of the 8,734 sales recorded in 2017, 27.5 per cent were made to non-Cypriots – a near-33 per cent increase from the previous year.

Growing demand for homes has inflated property prices and boosted construction, generating certainty for proprietors and incentivising their spending. At the same time however, Cypriot wages have failed to keep up, remaining stagnant for almost a decade. Those without the resources to purchase property have thus fallen back on rental properties, in turn increasing rent prices. This has caused distress to the locals who can no longer afford to buy, and sometimes even rent, real estate in coastal Limassol and other desirable cities around the country. 

Applicants for economic citizenship in the Caribbean are not required to invest in real estate, yet, should they decide to, their choice would be confined to government-approved projects, usually limited to shares of resorts and hotels, or units within those developments. 

The Caribbean has no private residence requirement, and only a minority of programmes offer applicants a choice of apartments, houses, or condominiums. The consequence has been an unmistakable trend towards the contribution option, but, when real estate investments are made, they have had an overwhelmingly positive effect on local populations. 

With each investment in a luxury resort come jobs – first in construction, and then in upkeep and services – new options for tourists, and a raised international profile, both for the nation itself and for the region overall. And, as the investor and the local citizen look to two different markets for their real estate, the impact on local purchasing power is far less direct.