By Amanda Smit, Head of South, East and Central Africa at Henley & Partners

International real estate has always been a reliable asset class, demonstrating decades-long returns, which has enabled affluent individuals to protect and increase their wealth while diversifying their portfolios. Another form of investment geared towards security of a different nature is gaining in popularity - an investment that secures the protection of one's freedoms, family, and future. This form of investment is broadly termed investment migration. Through the exchange of capital for residence or citizenship rights in another jurisdiction, investors acquire a residence permit or alternative citizenship, providing them and their families with access to new markets, more secure healthcare systems, top-tier educational institutions, and a suite of investment and personal opportunities for present and future generations.

An attractive real estate option that promises more than just property

In the current context of significant global instability triggered by the COVID-19 pandemic, many strategic global investors are already engaging in post-pandemic planning, assessing their wealth portfolios and opting to diversify via real estate-linked investment migration programs. The appeal is that they offer a hybrid investment that includes alternative residence or citizenship in addition to all the traditional real estate upside. Investors acquire a sizeable, profit-yielding asset with a unique volatility hedge: increased global access.

This surge in interest in investment migration-linked real estate comes as the latest edition of The Wealth Report, published by Knight Frank, reveals that at 27%, property continues to constitute the largest proportion of investment portfolios held by ultra-high-net-worth individuals (UHNWIs). The report also points out that residential investment is a growing phenomenon that is establishing itself as its own global real estate asset class.

European real estate ⎯ the optimal long-term proposition

There is a growing tendency among wealthy investors to diversify their portfolios by geography as well as by asset type, as noted in Julius Bär's 2020 Global Wealth and Lifestyle Report. The report confirms that the past five years have seen a surge in the demand for second homes in European cities, with buyers seeking out properties for their own part-use, which they can otherwise rent out.

In the recently published Henley Passport Index Q2 Update, FutureMap founder Dr. Parag Khanna predicts that the COVID-19 pandemic will prompt many to reconsider their global mobility options. He argued that the combined effect of the COVID-19 pandemic on public health, the global economy, and social behavior may lead to deeper shifts in our human geography - and our distribution around the world - and that as the curtain lifts, people will seek to move from poorly governed and ill-prepared places to more proactive countries with greater resilience and better medical care.

Europe's economic resilience, health security, and predominance of liberal democratic institutions make it the destination of choice for HNWIs and will continue to do so post pandemic. There are dozens of countries around the world that offer residence-by-investment (RBI) or citizenship-by-investment (CBI) programs, and a significant number are European countries. Well over half of EU member states host RBI programs, and most are linked to property investment. For instance, Greece, Ireland, Portugal, and Spain all offer RBI programs, while recent newcomer Montenegro offers a CBI program. The Mediterranean island nations of Cyprus and Malta offer both CBI and RBI programs that are regarded as the most credible and attractive programs worldwide.

European RBI and CBI programs have always been favored by wealthy investors because they allow EU residence and the concomitant freedom of travel within Europe's Schengen Area. Although the current global lockdown has rendered global mobility a hypothetical concept, in the post-COVID-19 era, there is no doubt that travel freedom will once again be a significant drawcard.

Portugal ⎯ A growing international hub for real estate investment

Before the World Health Organization announced the COVID-19 outbreak a pandemic, applications for Portugal's popular Golden Residence Permit Program were on the rise. The first quarter of 2020 saw a 25% increase in interest in the program, with actual applications up by almost 50% compared to the same period in 2019. According to the latest Portuguese government data, 95% of applicants to its Golden Residence Permit Program chose to invest their funds in real estate as opposed to capital transfers or business, injecting approximately EUR 5 billion into the country's economy over the past eight years.

The minimum real estate investment requirement for the Portugal Golden Residence Permit Program is EUR 350,000, and the permit enables one to apply for full citizenship after five years. All real estate sectors have witnessed a significant growth through foreign investment across all markets, ranging from large institutional investors to high-net-worth individuals, including Golden Residence Permit applicants.

Cyprus ⎯ real estate investment provides a Mediterranean base

Cyprus offers one of the most sought-after CBI programs in the EU, with an option to commit at least EUR 2 million to the purchase or construction of real estate. For those seeking an alternative Mediterranean island residence, the most affordable qualifying investment for the Cyprus Permanent Residence Program is the purchase of real estate with a total market value of at least EUR 300,000 plus VAT.

Turkey and Greece see a significant uplift

In the period leading up to the COVID-19 pandemic, the real estate markets in other parts of Europe were also attracting considerable foreign interest, with much attention concentrated on nations offering residence- and citizenship-backed property options. Last year, for instance, almost 46,000 foreign nationals invested in real estate in Turkey following a decision to reduce the minimum investment threshold of its citizenship-by-investment program from USD 1 million to USD 250,000 late in 2018. Early 2020 saw the trend for foreign real estate investment in the region continue, with almost 4,000 overseas buyers purchasing houses in Turkey in January alone. To date, approximately 5,000 investors have acquired Turkish citizenship via investment, making it one of the most popular programs in the world despite the relatively modest power of the Turkish passport, which gives its holders visa-free or visa-on-arrival access to 111 destinations, according to the latest Henley Passport Index rankings. In Greece, where RBI is available through the purchase of real estate priced at EUR 250,000 and upwards, demand has been equally significant.

A wise property investment that also brings you peace of mind

Around the world, foreign governments have responded to the ever-increasing mobility of HNWIs by coupling property investment opportunities with sought-after residence or citizenship rights. In the post-COVID-19 future it is likely that more sovereign states will seek to design and set up programs as a means of securing increased foreign direct investment. As a result, the rise of global property investment is expected to increase, with more investors looking to buy property overseas, particularly in Europe. Once the COVID-19 crisis has been curbed and travel restrictions lifted, global mobility and international access will continue to be essential hedges against asset-value volatility and wider market challenges.

The current crisis has taught us all that we need to be better prepared for future shocks. Real estate−linked European investment migration programs are a reliable back-up plan for turbulent times, providing investors with unparalleled safety, security, stability, and opportunity, including access to major money markets. As a tried-and-tested hedge against volatility, securing alternative residence or citizenship through purchasing real estate in Europe is one of the safest, smartest, most sustainable investments at this time.

The potential gains from investment migration-linked real estate over the lifetime of the investment are trifold: the core value of the asset, rental yields, and global access as an ultimate hedge against market and political volatility. As many investors have already demonstrated, investing in real estate is smart, but investing in investment migration-linked real estate is even smarter.