As regular readers of this blog know, we are very much down on Hong Kong as an international business center. See Hong Kong for International Business: Stick a Fork in It (August 13) and Hong Kong for International Business: Stick a Fork in It, Part 2 (October 22). We have seen and we believe we will continue to see international businesses reduce their footprints in Hong Kong, leave Hong Kong, and stop setting up in Hong Kong. Put simply, why should a country with daily violence, tear-gassing, and rising government oppression be on anyone’s list for their company headquarters or even as an arbitration venue? Hong Kong’s allure was its stability and its freedom from the CCP. Both of these things are and will continue to slip away, and with that Hong Kong’s primacy as Asia’s international business center will slip away as well.
Which brings me to the subject of today’s post. There is an old saying about lawyers which is an old saying because it is so true: Lawyers do well when times are good, we just do not do well when everything stays the same. Somewhat paradoxically, Hong Kong’s decline has been very good for our law firm’s Spain lawyers. The South China Morning Post (Hong Kong’s leading newspaper) did a story today on people fleeing Hong Kong for Spain, entitled, More Hong Kong investors are eyeing Spanish property as gateway to permanent residency in EU. All true.
Per the SCMP:
Hong Kong buyers are discovering the investment opportunities Spain’s property market has to offer, as well as the route it provides to permanent residency in the European Union.
Inquiries have doubled in recent months even as pro-independence protests in Catalonia raise eyebrows, said Lily Siu-Rambaud, managing director of Madrid-based property agency Epic Asia.
She said initially she had one client buying property under a residence permit programme – or acquiring a “golden visa” – but now she had seven clients who were finalising deals that will also allow them to eventually gain permanent residency.
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With Hong Kong mired in its worst political crisis in decades, a rising number of Hongkongers are looking for permanent residency options should they wish to move overseas in a hurry.
Other agents have also seen increasing interest in Spanish property from mainland Chinese and Hong Kong buyers, among others.
Overall, foreigners have bought 100,000 properties in Spain so far this year, an increase of 4 per cent, and accounted for about a fifth of all property transactions in the country.
Since 2014, more than 1,700 Chinese nationals have been granted golden visas, accounting for more than a third of the total approved applicants.
“Investors are attracted to the stunning architecture and the lifestyle afforded by living close to the Mediterranean Sea, the Sun and award-winning beaches,” said Sebastian Nieblas, chief executive of Amrein Fischer – Marbella Luxury Properties, which is part of Leading Real Estate Companies of the World.
The SCMP article lists Madrid, the Balearic Islands, the Canary Islands and the Valencia/Alicante region, as the leading areas in Spain for real estate investment by foreigners.
In September 2013, the Spanish parliament approved a new law allowing non-EU investors to apply for a Spanish residence permit and by extension for a Schengen visa. The objective of the law is to attract entrepreneurs to Spain and to stimulate foreign investment in Spanish real estate, public debt, and job creation.
What this all means is that real estate buyers can gain a Spanish residency visa by spending a minimum of €500,000 on a real estate property purchase or purchases in Spain.
A resident permit applicant must not have entered or stayed illegally in Spanish territory or have been refused entry to any of the Schengen countries, be 18 years or older, have no criminal record, be covered by medical insurance in Spain, and have sufficient economic means to cover personal and family living expenses. A spouse and children up to 18 years of age can secure their own visa and residence permit later so long as they too have a clean record and health insurance. In other words, it isn’t that tough.
Once granted, the initial Visa will be for one year and then after the first year, investors can apply for authorization to live in Spain for two more years, renewable for an additional two years if the investment requirements have been maintained or increased. This means the investor can buy and sell properties during this period but the investment threshold of €500,000 needs to be maintained. The renewal application must also evidence that the investor travelled to Spain at least once in the previous 12 months. This visa method will enable an investor to reside in Spain for five years with the possibility of getting permanent residency and, later on, Spanish nationality. That this visa has no minimum stay requirement for renewal means that investors can remain tax residents outside of Spain, while at the same time benefiting from Spanish residency and the freedom of unlimited travel and stays in the EU.
Spanish residency, and with that the ability to travel freely in the European Schengen area, is a major attraction for many non-EU investors, but confusion over various aspects of the program has so far kept the number of visa investors lower than anticipated. But now that the Spanish government has worked out most of the kinks, and with Spain’s economy (and real estate market) slowly working its way back, the number of those seeking these visas is rapidly increasing.
Our firm — in conjunction with the Spain law firm of Monereo Meyer Abogados — has offices in Madrid, Barcelona, and the Balearic Islands, from which we service Spain’s entire real estate market. Four of our lawyers from the United States are in Spain right now because we — along with a number of our Spain based lawyers — will today and tomorrow be putting on free seminars on “Doing Business in the United States.” Go here for more information on these webinars and to sign up. All of the lawyers leading this event speak at least some Spanish and two of them also speak Mandarin.
I mention these events not just to plug them but because our having publicized them has somewhat not so surprisingly led to a large increase in people from Hong Kong and from Mainland China reaching out to us for legal assistance in going into Spain via Spain’s Golden Visa Program and otherwise. The United States having recently done so many things to make getting US investment visas more difficult has not exactly hurt Spain’s Golden Visa program either.
I find it quite funny, somewhat ironic and quite enjoyable to see our law firm so well-positioned to handle this sort of work. I say this because our posts on the demise of Hong Kong have angered many and many of the angered have asserted that we are pushing “the Hong Kong is on the decline,” along with the US-China trade war will not be resolved narratives (See e.g., Repeat After Me: There Will Be No US-China Trade Deal) so as to improve business prospects for our own international lawyers. I virtually never bother responding to these sort of ad hominum attacks but I would always wonder how it was that our detractors had concluded that a law firm so well known for its China practice and this, its China Law Blog, would financially benefit from foreign companies and individuals leaving Mainland China or Hong Kong.
But with the recent and almost certain to be sustained uptick in Chinese and Hong Kong interest in Spain I will go on the record for admitting that we are and will continue to benefit from the foreign this foreign exodus. It only remains to be seen whether increased business in Spain will offset our decreased business in China. Either way, if you are in Spain please stop by to see us in either Barcelona or Madrid this week.