Threshold-based policies and distortions in housing markets

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.