Do you have a plan B? The “investment migration” trend

Market Overview

The investment migration market has grown from $ 2.9 billion in 2011 to $ 21.4 billion today.

• The industry is set to double in size over three years.
• Demand for Residency and Citizenship-by-Investment programs (RCBI) from international private clients is estimated to be growing by over 20% per year.

Before selecting an investment location, investors should consider the outcome of their investment (residency or citizenship), the type of investment required, processing times, any long-term commitments demanded by the program and any restrictions on dual nationality.

According to the 2021 Investment Migration Executive Survey, interest in Residency and Citizenship-by-Investment has increased significantly since the start of the Covid pandemic.

The pandemic has undoubtedly acted as a driver of growth, putting a spotlight on the many benefits of strategic residence and citizenship planning.

Overview of the Investment Migration Industry

At no other time in our history has humanity been as mobile as we are today.

• According to the International Air Transportation Association, the number of airline passengers that have flown in 2019 was 4.5 billion passengers.
• A typical person moves, on average, 12 times during their lifetime. Increasingly, these moves are occurring outside of one’s place of birth.
• More than 250 million people now live and work outside the countries in which they were born.
• There are now almost 47m dollar millionaires in the world:
  • Including over 18.6m Americans, 4.2m Chinese, 3m Japanese, 2.2m Brits and 2.1m Germans.
  • The wealthy are acquiring alternative residency and citizenship like never before – worldwide.

There are three main propositions in the RCBI marketplace:

Reasons for alternative Residency or Citizenship:

Impact of COVID-19 on this Sector

Who would have thought at the turn of 2020 that an invisible virus would become the story of the year, killing hundreds of thousands within six months and placing the global economy in a coma? Borders have proliferated within Europe to a degree unmatched even during the so-called refugee crisis. Two-thirds of the world’s fleet of airplanes have been grounded as passenger air traffic has fallen to rates last seen half a century ago.

When it comes to investment migration, the pandemic has underscored the critical differences between citizenship-by-investment and residency-by-investment, so often treated together, as well as the distinction between citizenship and mere passports. It also raises questions about how supply and demand will transform in this unusual market.

What does the pandemic mean for millionaire mobility through investment migration?

Microstates in the Caribbean will become ever more dependent on citizenship-by-investment (CBI) as a revenue source until such time as tourism, their economic mainstay, makes a comeback. Even economically more robust and more diversified economies, such as Malta, where CBI is a smaller proportion of government revenue, the allure will remain as other parts of the economy contract.

The supply side of the market will remain strong, if not expand. The crucial question is where? The most recent entrants in the market have been more sizeable states than its mini pioneers, with the UAE and Turkey now attracting investor citizens, and Egypt in the waiting room now that it has passed a law to facilitate investor naturalization.

The key issues that emerge concern what naturalization offers and how these rights are secured.

• Traditionally, demand for citizenship-by-investment has turned on what the status secures outside the granting state, principally (a) in terms of visa-free mobility, but also (b) rights to residency and settlement in a country or block of countries (such as the EU), thereby providing an “insurance policy” and (c) access to business and education opportunities. Of these, COVID-19 has highlighted how fragile the mobility aspect can be. The current fence of travel bans is part of the reason. More significant are the quarantines, a far greater concern, for countries will continue to screen entrants for temperatures for much longer and require those with fevers or testing positive to self-isolate. A quick trip abroad is simply not worth the risk of losing weeks in confinement.
• The “one percent” – in US terms, families with incomes above $420,000 – is an extraordinarily mobile set, especially at its upper end. But those without access to private jets are now revamping their globe-trotting lives.

People will think twice before queuing at an airport and hopping on a plane. Flights will be fewer and more costly. We all now know how much can be accomplished on Zoom and without jetlag or waiting. Even if holiday travel recovers, lockdowns have proven that much business travel is surprisingly expandable.

This is why we might see residency-by-investment (RBI) grow at the expense of citizenship-by-investment (CBI).

• The 1% from the Global South is thinking about not where their next business meeting will be but where they might want to position themselves and their family for a more extended period: they want a “Plan B” insurance policy.
• This typically means big, wealthy, English-speaking countries with a track record of foreign settlement, namely, Canada, Australia, New Zealand, the United Kingdom and the USA are sure to attract new residents.

The long history of famous passive residency-by-investment programs in these regions makes them known quantities. But in recent years, Europe has emerged as a second desired area, ticking several boxes of interest as well, particularly given the privileges provided by the Schengen treaty.

• The COVID-19 travel restrictions have shown that wealthy countries will allow their citizens and those holding resident status to enter.
• As such, a residence card secured through investing in a business, real estate, or bonds is enough to get one across an otherwise closed border.
• For those worried about being stuck, the so-called golden visa programs in places like Portugal, Spain, Greece and Ireland offer options for maintaining a toehold in a country where one might want to spend time when other travel opportunities are limited.

This does not signal an end to citizenship-by-investment. Indeed, citizenship will always confer more privileges than mere residency status alone, but mobility demands are likely to change, with the weight shifting from present mobility and border crossing ease to future mobility and a Plan B. The result will be an expansion of demand for RBI in wealthy and highly-sought countries.

• COVID-19 supplies a test case for assessing the extent to which interest beyond a mere “golden passport” matters.
• In watching developments, it will be essential to keep in mind the impact of market segmentation on both supply and demand. The Caribbean memberships that facilitate visa-free access to Europe may see a more considerable dip in numbers than those countries that grant a much greater bundle of rights as members of the EU or the Middle Eastern options that offer business and residence possibilities.
• The decline in the desirability of mere visa-free access will explain part, but not all of the stories, as costs are important too. The less expensive Caribbean offerings attract a subset of the one percent that has been particularly hard hit by the coronavirus: those with wealth in the low millions, generated through entrepreneurial activities. Indeed, COVID-19 has dealt a blow to their businesses, which they will be shoring up over the next few years.

Under such conditions, citizenship options and other secondary considerations fall by the wayside as expendables that can be cut during tough times. The super-wealthy one percent of the one percent – more likely to splash out millions for membership in an EU country – have taken less of a hit, and their interest in these programs have indeed risen since late 2020, particularly from the USA.