Golden Visa down but housing prices keep going up

The new rules for Golden Visa have started to show their teeth. Applications are fewer and when the deadline of the 31^st of August expires, we anticipate a sharp decline in the number of applicants. The threshold for property investments areas such as central Athens and the southern and northern suburbs had already been doubled to €500,000 but no decrease in prices was recorded.

Golden Visas have been the usual scapegoat of otherwise well-meaning politicians who felt they had to do “something” with rising property prices in countries such as Portugal, Spain and Greece. The actions taken have been spectacular, but results have been poor. This is because the medicine administered was, alas, for the wrong disease; the property market is still ill.

Rising prices are more the result of low supply and rising incomes after the crisis these countries faced, rather than the imported demand arising from the respective Golden Visa Programmes. This situation is anticipated to continue as the economic outlook improves and interest rates deescalate. It is now clear that unless drastic measures are taken to increase the supply of housing development land the problem will persist and get worse.

Although the scarcity of development land is a major contributor to rising prices, the sharp rise in building costs and the shortage of labour are the other two main culprits. Unfortunately, only a change in technical specifications can offer some hope here. The use of dry construction at the expense of wet one is one of the measures that are being taken, but again labour shortages are not easy to deal with, especially in times of falling unemployment. The only way labour shortages can be faced is by using imported labour e.g., by attracting experienced Asian labourers from the Gulf offering European wages and working conditions. However, the popular surge against immigration may hamper such measures.