Portugal’s Real Estate market included was booming until recent years, but it has not always been like that. In one of our recent articles, Portuguese Real Estate Market: Analysis and outlook, it was explained how the Portuguese Real Estate market evolved since the beginning of the millennium. After the 2008 financial crisis hit Portugal, it was clear how the Portuguese economy, the real estate market included, was affected. After this period, the Portuguese Government opted, as a tool to propel the economy, to introduce the possibility for non-European citizens to invest in Portugal in exchange for Golden Visas. Eight years after its emission, the legislation and focus of this program are changing.
What is a Golden Visa?
The Golden Visa or the Golden Resident Permit Programme (GRPP) was launched in 2012 and allowed non-European citizens to live in Portugal and travel through the Schengen area for up to 90 days.
The visa lasts five years, and the holders may apply for full Portuguese citizenship after it expires. Other European countries also had programs to spur Foreign Direct Investment, but the Portuguese program distinguished itself from being the most affordable while also giving tax incentives to its users.
To own a Golden Visa, multiple investments can be conducted – culture, investment funds, companies, science, arts, and real estate. In the last situation, a value of at least 500.000€ has to be invested in a property, or, if it is urban renewal, only 350.000€, to access a Golden Visa.
How they affected the market?
Investments in Real Estate represented the largest share of golden visas issued, 94% of the total, representing around 7.500 golden visas issued for Real Estate from 2012 until 2020. In the first year, only 464 visas were issued for Real Estate, which still amounted to 270 million euros in just one year. Until 2020, around 4,5 billion euros were invested in the Real Estate market due to this program. The majority of investments, around 90%, were conducted in urban centers, which did not promote the development of the countryside or suburban areas. The leader investors were the Chinese, who, since the beginning of this program, represented 54,4% of the issued visas; Brazilians are Portugal’s second most significant “client” since they represented 10,5%.
It is possible to see how this program attracted foreign investments and spur the real estate market; in fact, from the 25 billion euros traded in this market only in 2019, 2,5% were from visas. Experts believe that the impact from Golden Visas was even higher for the Portuguese economy than what can be interpreted from these numbers.
Housing price has been shown to heavily increase over the last 8 years (just over the last 3 years, prices grew 55,5%, and since 2012, some studies show how they have doubled). However, while some argue that foreign investments highly impacted this, there is no consensus on that matter since visas still represent a low percentage in the whole Real Estate Market.
What has changed?
Since the majority of investments only tackled specific areas, the Portuguese Government decided to change the conditions needed to attribute a Golden Visa to foreign investors. These alterations were approved in December of 2020; however, they will only enter into force after the 1st of January of 2021. There will be a transitory period until 2022 to implement the restrictions approved progressively.
Therefore, it is essential to understand what were the changes implemented and their consequences.
The most important measure is the restriction of places that real estate investors can choose in order to be considered to receive a Golden Visa. Most of the investments were made in Lisbon, Porto, and across the coastline. However, this will undoubtedly change because those regions are no longer framed in the legislation that allows investors to apply for a Golden Visa. From now on, only investments in “Territórios do Interior” (interior regions of Portugal), and in the Autonomous Regions of Açores and Madeira, the regions that are previewed in the legislation are:
Alto Tâmega
Terras de Trás-os-Montes
Douro
Viseu - Dão e Lafões
Beiras e Serra da Estrela
Beira Baixa
Médio Tejo
Lezírias do Tejo
Alto Alentejo
Alentejo Central
Alentejo Litoral
Baixo Alentejo
Algarve
Regiões Autónomas dos Açores e da Madeira
The necessary amounts to invest in habitational properties or developing properties are the same as we said before, unlike most of the other categories that can allow foreign investors to apply for a Golden Visa, which increased the minimum capital necessary to be granted one.
What will be the consequences?
It is impossible to know the future, so we can only forecast what these changes can possibly origin. It is clear that the Portuguese Government aims to direct foreign investment to underdeveloped regions of the country with a particular focus on the hinterland.
While this may also impact the number of emitted visas since urban and coastal areas are known to attract further investment than interior areas, these may still result in an increase of prices on the real estate market of those places and, therefore, development in the infrastructures, revitalization, and a boost in those areas. Whilst regions such as Lisbon and Porto may have a relief in the inflated house market because the foreign investors willing to invest there will probably decrease since the incentives are being diverted. Of course, foreign investors may still consider Lisbon and Porto very attractive investments even without the Golden Visas, therefore keeping on investing in those regions and disregarding the hinterland.
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