The first official Citizenship by Investment programme was launched in 1984 by St Kitts and Nevis. Since then, the idea has been adopted by over half the countries in the world today. Each of those countries is, effectively, competing for investment funds - and COVID-19 has significantly changed the rules of engagement.
To explain further, Jude Fletcher, Director of Fletcher Day, takes a look at the impact COVID-19 has had on Citizenship of Investment.
What investors want for their money
Realistically, Citizenship by Investment programmes are not about investment in the traditional sense. They are effectively a means by which high-net-worth individuals can buy the right to reside in a country and potentially obtain citizenship at a later date. Any investment returns are often just a pleasant bonus.
This means that countries are generally competing on their attractiveness as a place to live and do business. In the early years of the Citizenship by Investment scheme, commercial opportunities were often high on the agenda for HNW individuals. Now, however, the combination of the internet and air transport means that this is generally much less of an issue for them.
Quality of life, therefore, becomes the only real consideration. While this means different things to different people, the simple fact is that even HNW individuals have to think about practicalities. As a minimum, they need to feel confident that they are safe and can expect to stay that way.
The impact of COVID-19
Up until the pandemic, the issue of safety was essentially a physical one. HNW individuals and their families are both kidnap targets and burglary targets. This means that they generally have a strong preference for countries with an effective police force. Even then they may supplement this with private security.
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Of course, even the best police force (and military) in the world would probably struggle to cope with mass civil unrest and/or a major environmental catastrophe. As a result, HNW individuals have long shown a preference for places which were politically and environmentally stable. Now, however, there is another major issue for them to consider - biohazards.
Your location may not be able to protect you from COVID-19 or any future pandemics. It can, however, make a great difference to your chances of survival. For all the criticisms of the UK’s response to the pandemic, the NHS has remained functional and the country has remained stable. This is a serious achievement which HNW individuals have clearly noted.
The future of Citizenship by Investment in the UK
Neither COVID-19 nor the prospect of Brexit seems to have dimmed the enthusiasm of HNW individuals for the UK’s Citizenship by Investment programme. In fact, Brexit may even be helping since it is at least one of the factors keeping the currency relatively weak and hence sterling-denominated prices more affordable to international investors.
As a bonus, the UK currently has a stamp duty holiday. International investors have particular reason to make the most of this as the government is due to impose a 2% surcharge on property purchases made by overseas buyers (on 1 April 2021).
Short-term incentives do not necessarily lead to long-term gains. In this case, however, the outlook is still good. Even with Brexit, the UK will retain many of the attractions which appeal to HNW individuals. These include safety, internationally-renowned schools and universities and excellent healthcare.
