Spain is to offer foreigners residency permits if they buy houses worth more than 160,000 euros (£128,000) as part of an attempt to reduce the country's huge number of unsold homes.
Trade Ministry secretary Jaime Garcia-Legaz said the plan, expected to be approved in the coming weeks, would be aimed principally at Chinese and Russians as the domestic demand was stagnant and showed no sign of improving. Spain has more than 700,000 unsold houses following the collapse of its property market in 2008.
The country's economy is struggling and is currently in recession with 25% unemployment. Thousands of houses have been repossessed by banks and their owners evicted because they cannot pay their mortgages. The government last week approved a decree under which evictions would be suspended for two years in specific cases of extreme need.
The country's offer beats others in bailed-out countries such as Ireland and Portugal, where residency papers are offered to foreigners buying houses worth more 400,000 and 500,000 euros, respectively. It was not clear if the residency would only refer to Spain, and not the European Union.
The stricken state of the country's real estate market was highlighted by figures from the Bank of Spain which showed that the level of bad debt in the country's banks had risen to a record 10.7% of their loan total in September.
The 16 other countries that use the euro have agreed to lend Spain up to 100 billion euros to help support the country's banks weighed down by these bad loans and investments. On top of the bank loan, Spain has been under pressure to apply for more outside financial aid to help it manage its debt and deficit. The European Central Bank has insisted on the move before it will make good on its pledge to buy the bonds of certain troubled countries to help lower their borrowing costs.
Spain says it is waiting to know all the conditions that might come attached to the rescue package before making a decision.