The Hungarian government announced recently, that the residency bond program will be indefinitely suspended effective from April 2017. The Hungarian Debt Management Agency (AKK) announced they and will stop issuing new residency bonds from March 31, 2017.
Since the announcement, many anticipate there will be rush of people from China, Russia and other countries to apply for the bond program before it closes on 31 March 2017 (Source: Magyar Nemzet).
The hungarian residency bond program started in 2013, grants permanent residency in Hungary to foreigners in Hungary who buy EUR 300,000 worth of government bonds, which will be entirely given back after 5 years with no interest. Investors are free to move around schengen countries, once the residency is granted.
The reasons that lead to closing of the hungarian bond program..
- Hungary credit rating upgraded by Moody’s and Hungary has no economic need for the program and further the bond yields are less than the market rates.
- The residency bond program attracted very less interest – only 58 residency bonds issued during Sep and Oct 2016 seeing overall 23% drop in 2016. 4033 residency bond applications were processed by agents as of Nov 2016. (Source: HungaryToday).
- Program caused outbreak of political controversy and corruption scandals involved in the program (Russian national convicted of tax fraud, secured residency in hungary through bond program).
- Other reason contributed to the drop in interest is Governments decision in 2015 to increase the bond investment from €250,000 to €300,000 euros.
In the report Shadows over the Hungarian bond program by Boldizsar Nagy mentions, the economic impact of the settlement bond in managing Hungarian state debt or creating jobs is insignificant. ‘Investors’ neither invest nor actually move to Hungary. The Hungarian immigration investment programmes rather functions as a loosely controlled backdoor into the Schengen area, and a way to generate income for five private companies”. The report concludes the bond program does not entail any investment into the Hungarian economy and the immigrants do not directly contact the settlement bond circulating agency. They actually buy dubious securities from intermediary companies which in turn purchase five-year zero bonds issued on behalf of the Hungarian State at a discount.
According to these statistics from BAH (Office of Immigration and Nationality), as of Dec 2016, Hungary issued over 7000 settlement permits by the end of 2016. It is not entirely clear how many permits were issued under economic interest through bonds.
Refugee affairs office statistics also show about 28,803 non european asylum seekers registered in Hungary in 2016, compared to 176,903 asylum seekers in 2015.
The golden visa programs (property investment schemes) in Portugal (€500,000), Greece (€250,000) and Latvia (€250,000), United Kingdom (£200,000) are worth looking at, as good alternatives for Hungary.
We recommend this agent, if you are interested in applying before March 31.
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