https://doi.org/10.52903/wp2026359
THRESHOLD-BASED POLICIES AND DISTORTIONS IN HOUSING MARKETS
Dimitris Karamanis
Bank of Greece and University of Piraeus
Christos Kotsogiannis
University of Exeter Business School, TARC and CESIfo
Evangelia Papapetrou
Bank of Greece and National and Kapodistrian University of Athens
ABSTRACT
This paper examines how investment thresholds embedded in residence-by-investment programmes shape housing market outcomes. The analysis exploits a reform of Greece’s golden visa scheme that selectively doubled the minimum real estate investment requirement - from €250,000 to €500,000 - across municipalities. Using comprehensive administrative data on property transactions from 2017-2024, the study combines a bunching framework with a difference-in-differences design to identify behavioural responses to eligibility thresholds and their spatial equilibrium effects. Under the initial regime, pronounced bunching in transaction prices is observed around the €250,000 cutoff, indicating that the threshold was a salient determinant of pricing behaviour. Following the reform, this bunching disappears in municipalities subject to the higher threshold, while persisting in unaffected areas. Consistent with this pattern, treated municipalities experience a relative deceleration in price growth, alongside increased transaction activity in nearby markets that remain eligible under the lower threshold. The results demonstrate that residency-investment thresholds may operate as active policy instruments that distort housing price distributions and reallocate demand across space, highlighting the importance of threshold design for housing-market outcomes.
Keywords: Golden Visa programmes; Housing Markets; Foreign Investor Demand; Price Thresholds; Bunching; Spatial Reallocation
JEL-classifications: H24; R31; R38; F22
Disclaimer: This research was conducted in the context of the Bank’s programme of cooperation with universities. We thank the Ministry of Migration and Asylum of the Hellenic Republic for providing part of the data, and George Hondroyiannis, Hiona Balfoussia, Sofia Anyfantaki, Sofronis Clerides, Maria Konstantinopoulou, Luca Salvadori, and Mazhar Waseem for helpful comments and advice on an earlier draft of this paper. The views expressed are those of the authors and do not necessarily reflect those of their respective institutions. The usual caveat applies.
Correspondence:
Evangelia Papapetrou
Bank of Greece
El.Venizelos 21, 10250 Athens, Greece
Tel.: +30-210 320 2377
email: epapapetrou@bankofgreece.gr