Why Americans suddenly want a Spanish Golden Visa
This blog has writen a lot about the Spanish Golden Visa program, and how it compares with other Golden Visa programs in Europe (it’s arguably the best). The past year we had a number of calls from UK investors interested in buying Spanish property. They were all worried about losing their rights to work in the EU post Brexit.
This summer, the situation shifted. In July and August 2018 we received a large number of calls from US investors. Not only are they entering the Madrid real estate market in unprecedented numbers, but they have introduced a brand new financing technique that will allow them purchase Madrid real estate, and receive a Spanish Golden Visa, without paying US taxes!
Why do Americans suddenly want a Spanish Golden Visa?
The Trump Effect
Truth is, Americans have been exploring alternative citizenship options since Donald Trump was elected to office. For example, New Zealand saw a 70% increase in applications for citizenship by Americans in 2017. Post Trump, Canada and Australia also saw large increases in citizenship applications from Americans. Initially, Americans were interested in these countries as they speak English. After the large influx of citizenship applications many of these nations, like New Zealand, tightened their requirements.
In light of this, US citizens are looking elsewhere. Due to its close proximity to Mexico, most Americans learn at least some Spanish in school. Most major cities, like Los Angeles, New York, Houston and Miami, have large Spanish speaking populations. In fact, more people in Miami speak Spanish in the home than English. Couple this with the fact that most of the people that speak Spanish and reside in Texas or California have dual US/Mexican citizenship and the case becomes even more compelling. This is because due to a special treaty, citizens of Mexico and other Latin American countries are eligible for Spanish citizenship after just two years of residency.
Once they start casting the net further, Spain is the logical choice. It is in Europe, has an excellent infrastructure and still enjoys a relatively low cost of living. This is an interesting anecdote, but also puts things in perspective regarding costs. Parking spaces in New York City have become so expensive that some are selling for $1 million. If a New Yorker wants to leave the United States, buying an apartment in Madrid for 500,000€ seems like a relatively cheap option. For almost half the cost of a parking space, they could get EU residency, the right to work in the EU and be on track for EU citizenship.
Do you want to learn more about the requirements to get a Spanish Golden Visa? If so, arrange a free consulation today with one of our Property Shoppers.
The Supreme Court effect
Many Americans were very alarmed when Trump took office, but had faith in the Checks and Balances system. In short, this refers to a part of the US Constitution that divides the US Government into three seprate, independent branches: legislative, executive, and judicial. In the beginning, it looked as if the courts would be independent enough, and strong enough, to withstand Trump being Executive in Chief and the Republicans controlling Congress.
The Supreme Court has made some of the most ground breaking laws in the United States. In the past it legalized abortion (Roe vs. Wade), legalized gay marriage and, most recently, overturned Trump’s travel bans. However, with the recent departure of Anthony Kennedy, Trump will be able to appoint another Justice to the Supreme Court. This will mean the Supreme Court will also be Republican dominated for years to come. For many US Citizens, this is the final straw. One woman we spoke with, who is actively looking to buy an apartment in Madrid, stated,
“I cannot, in good conscience, allow my daughers to come of age in a country that will likely see the repeal of abortion rights within a few years. It is the final straw.”
The exchange rate factor
Although the underlying fundamentals were favorable for Americans to invest in Madrid real estate, in early 2018 the US dollar was weak, relative to the euro. In March, 2018 this started to change and the euro lost ground against the dollar. It slid until May, 2018 when it appeared to find support at the level of $1.16 per 1.00€.
Then, in late July, 2018 Donald Trump started a trade war with Turkey, doubling steel and aluminium tariffs. Simultaneously, Washington pushed Ankara to release Evangelical Christian pastor Andrew Brunson, who is being held on terrorism charges. The following day, Turkey doubled tariffs on key imports from the US, including passenger cars, alcohol and tobacco.
The loser in this was Turkey. The country had borrowed heavily to fund a massive construction boom. The trade war with Donald Trump was merely the catalyst that sent the Turkish lira into freefall. It took many exchange rates around the world with it, including the euro. In a few days it dropped 3% against the dollar.
US investors act very strategically
Many US buyers had been watching the exchange rate closely, waiting for an opportunity to purchase euros. Moving2Madrid has one client that had been tracking the dollar/euro exchange rate for months. The dollar hit a high, she bought a lot of euro and started seriously shopping for an apartment in Madrid. She had been “kicking the tires” on a number of flats for months, so was poised to buy when the exchange rate turned in her favor. She has already placed an initial offer on a property (contrato de arras) and will close in September, 2018. Then she will immediately start the paperwork to obtain her Spanish Golden Visa.
A tax free Spanish Golden Visa?
Another investor has taken things even further. She has discovered how to purchase an apartment in Madrid without paying US taxes, through her 401(k) plan.
What is a 401(k) plan?
Very few American have pensions. Most keep their retirement money in 401(k) plans.
A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account. – WSJ.com
This investor had the idea to purchase an aprtment in Madrid through her 401(k) plan. She brought the idea to Moving2Madrid, which we thought was fantastic. We have worked closely with her, the IRS and the Spanish Government to make it happen. We expect to close the deal within a month. When everything is signed, this blog will write a feature article, detailing her experience.
If you wish to learn how you can purchase a Madrid apartment through your 401(k) plan, contact us today to learn more about the process.
The answer is . . .
Americans wanting Spanish Golden Visas isn’t a recent phenomenon. Many began researching other citizenship options when Donald Trump was elected. Although many initially looked into English speaking countries (primarily Canada and New Zealand), a large percentage of Americans speak Spanish and started learning about the Spanish Golden Visa program. These investors have proven patient and savvy. They waited for the euro to drop and used state-of-the-art investment tools to make their purchases as cost efficient as possible. It will be interesting to see what they come up with next!
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