Why Trump's 'gold card' visa program could make the pricey U.S. housing market even more expensive

Dow Jones

03-01

MW Why Trump's 'gold card' visa program could make the pricey U.S. housing market even more expensive

By Aarthi Swaminathan

An influx of immigrants who pay $5 million for a visa could increase demand in the 'ultrahigh end of the real-estate market,' says a National Association of Realtors economist

President Donald Trump's bid to lure wealthy immigrants to the U.S. with a "gold card" program could drive up home prices and worsen America's housing-affordability crisis, according to real-estate experts and people who've studied similar immigration incentives in Europe.

Trump's proposed program would provide immigrants who invest at least $5 million in the U.S. with a path toward citizenship. There are similar programs currently in place in the U.S., but they come with a smaller price tag. Trump said it's possible the program could attract 10 million "highly productive people" and generate enough revenue to pay down the national debt.

Though details on what type of investments would be required through the gold card program are still scarce, experts who have studied existing citizenship and residence-by-investment programs in more than 100 countries say that if wealthy foreign investors can invest in real estate to qualify for the visa, that could directly push up home prices in the U.S.

The White House did not respond to a request for comment about the mooted program and its potential impact on residential real estate.

When foreign investors buy up residential real estate, particularly in city centers, "that overheats the real-estate market and makes it very hard for the locals to live where they used to live," Basil Mohr-Elzeki, managing partner at Henley & Partners North America - a firm that advises wealthy individuals who want to participate in citizenship-by-investment programs - told MarketWatch. That's led some countries to modify their citizenship-by-investment programs to be less focused on real estate.

Could home prices shoot up in a similar way in the U.S. with the introduction of Trump's gold card program? Potentially, experts say. Even if Trump's program is not specifically centered around real-estate investment, home prices could go up if it is implemented - because it's theoretically ultrarich individuals who have the capacity to spend $5 million for the visa, Lawrence Yun, chief economist at the National Association of Realtors, told MarketWatch.

"I'm sure that if they can come up with $5 million, they probably have a little extra to buy real estate," he added. "So it will bring about more demand in the ultrahigh end of the real-estate market."

How 'golden visa' programs work

So-called golden visa programs exist in many parts of the globe - from the Caribbean to the Middle East, throughout Europe and in the Asia-Pacific region, including in Australia and Hong Kong.

All these programs operate under the same principle: Foreign investors invest capital into a specific fund that a nation sets up to pay for some objective, and they're rewarded with legal residency and sometimes even citizenship in that country.

The term "golden visa" is a marketing phrase that refers to visa programs that allow investors to skip the often lengthy and arduous process of attaining legal residency in another country, Mohr-Elzeki said.

But the programs differ widely in structure.

Some countries allow foreign capital investment to go toward investing in local businesses. New Zealand, for instance, has an Active Investor Plus Visa that requires a minimum investment of $2.8 million (NZD 5 million) into unlisted New Zealand businesses over the course of four years, in exchange for permanent residency.

Some programs allow foreign capital investment in real estate in exchange for residency; this has been an attractive option for many investors. Many wealthier Americans, for instance, have used these programs to move abroad in search of a lower cost of living, lower taxes, a better quality of life and other perks. Americans typically go to Europe or the Caribbean, Mohr-Elzeki said, and are often looking for passports that offer a hedge against geopolitical risk.

For example, investors can buy real estate in Greece in exchange for residency in that country and visa-free travel across the 29 countries that make up the Schengen Area in Europe. They can also rent out the investment property to generate extra income.

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'Golden visa' programs have helped drive up home prices in some countries

These citizenship-by-investment programs have created ripple effects in some countries' housing markets - sometimes with negative consequences for local residents.

In Portugal, the nation's search for foreign capital in the aftermath of the global financial crisis inadvertently made real-estate more expensive for locals. Joao Pereira dos Santos, an academic at the University of Lisbon who co-authored the paper "All That Glitters? Golden Visas and Real Estate," told MarketWatch that the golden visa program was one factor that drove up high-end property prices in Portugal, according to his analysis of transaction data.

When Portugal's program was put in place in 2012, the nation offered residency in exchange for investment, primarily in real estate, for a minimum amount of 500,000 euros.

The local real-estate market was depressed, but "for people who bought a house in 2012, 2013, 2014, this was a very good deal," dos Santos said. "In less than 10 years, house prices doubled in Portugal, especially in more [tourist-friendly] areas and urban centers like Lisbon."

Tens of thousands of applications later, the co-authors found that there was a significant increase in properties sold at that price, suggesting that home sellers were strategically pricing their properties at that figure to satisfy the golden visa's requirements for investors. That led to a "distortion" in the real-estate market, the authors said.

"While the golden visa scheme has been successful in attracting foreign investment, it has also led to unintended consequences in the real-estate market, including price distortions and public disapproval, particularly in urban areas like Lisbon," they added.

The argument is not that the golden visa program itself directly drove up home prices, dos Santos said, but rather that it was part of a broader set of programs that attracted money and created demand for homes from high-net-worth individuals - and with supply not keeping up, prices rose.

The same dynamic of foreign money driving up home prices played out in Spain, which has more than four times the population of Portugal. A sharp increase in property prices for Spanish citizens led the nation to stop issuing golden visas to foreigners buying homes last year.

"Today, 94 out of every 100 such visas are linked to real-estate investment ... in major cities that are facing a highly stressed market and where it's almost impossible to find decent housing for those who already live, work and pay their taxes there," Prime Minister Pedro Sanchez said at the time, Reuters reported.

In Greece, rent prices and real-estate sales shot up after the country started its golden visa program, Euronews reported. Prices have gone up so much that permanent residents haven't been able to buy houses, Themistoklis Bakas, chief executive of E-Real Estates Network, a property portal, told Euronews.

Trump's gold card proposal comes as the U.S. housing market is already facing a crisis of unaffordability. Many would-be home buyers are shut out of the housing market as home prices have soared to record highs and mortgage rates hover around 7%. The average worker in the U.S. does not make sufficient income to afford a median-priced home, as seen by the big gap in affordability in this chart from the Federal Reserve Bank of Atlanta.

Reforming immigration has been a key focus for the Trump administration, and on the campaign trail, President Trump and Vice President J.D. Vance pointed to illegal immigration as one of the drivers of high housing costs.

In September, Trump said he would ease housing affordability by banning mortgages for undocumented immigrants, though such mortgages are rarely issued. In the vice-presidential debate in October, Vance said that housing has become "totally unaffordable because we brought in millions of illegal immigrants to compete with Americans for scarce homes."

Some 'golden visa' programs don't allow real-estate investment

Some countries with golden visa programs have made it clear that their real estate is not up for sale - though they still want to attract foreign money.

Canada offers residency for investors with startup ideas under its "Start-up Visa Program." But the nation, which is also dealing with a dire housing-affordability crisis, banned foreigners from buying homes last year.

Similarly, in New Zealand, foreigners haven't been allowed to buy homes unless they're approved by the government since 2018 - though that rule could be relaxed, according to local media reports.

"It's very hard for a foreigner to buy property in New Zealand," Dominic Jones, head of Greener Pastures New Zealand, which advises on investment residency in the nation, told MarketWatch. Instead, one can obtain permanent residency in New Zealand with an investment into other asset categories such as bonds or stocks, he noted.

Another way the 'gold card' program could affect housing prices

The Trump administration has signaled that its gold card program could replace another existing path for foreign investors to get residency in the U.S.: the EB-5 program. Created by Congress in 1990 to stimulate the U.S. economy, it offers visas in exchange for an investment of at least $800,000. It has a cap of about 10,000 participants each fiscal year.