The Changing Face of the EB-5: How Emerging Markets Are the New Driving Force

The USA’s EB-5 Immigrant Investor Visa remains strong and continues to be the largest residence-by-investment program in the world. However, after years of Chinese EB-5 investors leading the USA investment immigration sector and injecting more than USD 7.7 billion into USA property and business investments, market forces have shifted the industry to other emerging markets. The change is opening the door to new waves of investors from Africa, India, South America, and Vietnam.

Although Chinese investors still dominate the number of EB-5 approvals, times are changing. In 2018, for the first time since 2010, fewer mainland China-born EB-5 investors and their dependents received EB-5 visas compared to investors from the rest of the world combined. But the gap is small: Chinese investors received 4,642 visas in fiscal year 2018 (48% of the total) compared to 4,960 investors from everywhere else, according to data from the USA’s Department of State. Still, the change reflects an extraordinary shift. Just five years earlier, 9,128 visas, or 85% of the total EB-5 visas issued, went to mainland-China born investors, with just 1,564 going to investors from other countries.

Emerging Markets Are Expanding
The Chinese EB-5 wave is breaking, primarily because of a rule by US Citizenship and Immigration Services that assigns only 700 visas a year, or 7% of the 10,000 annual total, to applicants from a single country. Surplus visas are then assigned based on investors’ application dates but, given the large number of EB-5 applications from mainland China, those applicants can face an average wait of 10 to 15 years before finally receiving their conditional green cards.

The prospect of these delays has triggered a change in focus for EB-5 professionals and investors. EB-5 professionals are now promoting and holding educational seminars about the program in markets other than China. Both India and Vietnam saw double- or triple-digit annual growth in EB-5 applications, or I-526 filings, in 2015, 2016, and 2017. In total, Chinese investors accounted for 77% of I-526 filings in 2017, down from more than 85% in 2015, with the total number of I-526 filings by Chinese investors falling by almost 20% in both 2016 and 2017.

The shift also comes as wealthy Chinese families reconsider plans to move away from their home country. According to a 2018 report published by the Hurun Research Institute, noticeably fewer ultra-wealthy Chinese people now plan to move to the West. Just 37% say they are considering relocating, down 10 points from 2017.

Domestic economic and political trends seem to be exacerbating that situation. Chinese investors’ foreign real estate holdings grew by just 6.2% between 2016 and 2017, down from 40–50% annual growth between 2013 and 2015, according to a report from Juwai.com. The value of Chinese investments in American real estate fell by 32% in 2017, while Chinese investments in Europe soared by almost 228%.

Investors Exploring Other Options
Because of the country quota limits of the EB-5 program, many of China’s high-net-worth individuals (HNWIs) are instead exploring European residence permit opportunities. While Portugal’s investment visa, used by more than 4,200 Chinese investors since 2012, saw total investments slip by 31% year on year in March 2019, the programs of other European countries are thriving. Since Greece launched its program in 2013, the Mediterranean country has issued residence permits to more than 6,800 Chinese investors and family members, which accounts for almost 60% of all visas issued under the fledgling program. Russia, the second most common nation of origin for Greek immigrant investors, accounted for significantly fewer permits than the Chinese, at 1,072.

The UK has also seen a continuing influx of Chinese capital, with the number of Tier 1 investor visa applications from China doubling since UK citizens voted to leave the EU in 2016. Last year, 63% of 228 total Tier 1 applications came from China, up from around half in 2017. Ireland, with its low corporate taxes and EU membership, is also increasingly popular with Chinese investors.

EB-5’s Popularity Is Increasing in Emerging Markets
In the USA, developers and EB-5 regional centers are now contacting investors from nations where the program hasn’t traditionally had a strong foothold — and where, consequently, investors can obtain green cards without facing lengthy waiting periods. Vietnam, India, and, to a lesser extent, South Korea are the current markets for EB-5 professionals and migration agents. These three countries accounted for almost 12% of I-526 filings in 2017, up from around 4% in 2015. A total of 587 I-526 petitions were filed by Indian investors in fiscal year 2017, a six-fold increase from 2014. Vietnam has seen a similarly sharp increase in EB-5 activity.

Several other countries are also seeing strong EB-5 growth, albeit from low baselines. The number of EB-5 applications from South Africa has surged by 600% from levels seen three years previously, while Turkish I-526 filings increased by 152% between 2016 and 2017. Over the same period, Japan, Taiwan, and Hong Kong also saw double-digit growth in I-526 filings.
A key question is whether the new EB-5 markets will overheat too quickly, causing a flood of new investors from a small number of countries, which will trigger longer waiting times for green cards. Vietnamese investors now face a roughly seven-year wait for green cards, and Indian investors might soon become subject to a visa backlog.

For now, though, developers are increasingly recruiting in non-Chinese markets, with the mission of increased diversity as the key to the future of the EB-5 program. The Chinese investment boom may be fading, but the EB-5 program is well placed to continue to attract foreign capital — and foreign investors — to the USA for years to come.

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