Buffeted by a global recession and witnessing a plunge in foreign investment, Portugal introduced its golden visa program in 2012 to attract foreign capital through investment immigration.
The program allowed non-EU nationals to become permanent residents of Portugal by purchasing a property worth at least €500,000.
Today, applicants have numerous other investment options. including
- €1 million capital transfer into the country;
- €350,000 investment in
- A 30-year old property or one located in an urban regeneration area.
- A public or private scientific research institution, or
- A commercial society in Portugal combined with creation of five jobs, or
- A venture capital fund investing at least 60% of its funds in Portuguese companies, or
- €250,000 investment in support of art or reconstruction of the national heritage
Real estate continues to remain the preferred investment option for wealthy investors seeking permanent residence in the country.
This foreign demand has contributed significantly to the impressive recovery of the country’s real estate and tourism sector over the past six years.
Rapidly Expanding Real Estate Market
While the earliest applicants preferred to focus on the Lisbon and Algarve markets, more and more investment immigrants are now looking to invest in other parts of the country.
The breadth of the real estate market has grown primarily due to the rapid rise in property prices in the capital city. As of 2018, real estate in Lisbon is 24 per cent up on the 2012 lows.
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In 2017, property prices in Algarve, another popular destination for golden visa applicants, registered a 7.5 per cent increase as compared to the previous year.
With more than 6,300 golden visa applicants from China, Russia, South Africa and other countries owning property in prime markets, there is a natural and inevitable expansion of demand to other regions.
Aiding Property and Rent Reform
The golden visa program has also helped the government push through much-needed rent reforms in the country.
Until 2012, the imbalance between tenant-landlord rights and responsibilities deterred foreign investors from buying into the sector.
The golden visa facilitated rent reforms that revived interest among developers and investors alike. Further, the program has changed Portugal’s real estate market at a fundamental level.
Prior to the program, the majority of foreign investment into the property market would come from buyers in the UK and Ireland. Post the program’s introduction, buyers from Scandinavian countries, Germany, and France have become more active.
Collateral Gains: Tourism Sector
Tourism has long been considered a reliable indicator of strength of international demand in a country’s real estate.
Not surprisingly, tourist inflow into Portugal jumped 12 per cent in 2017 with close to 60 per cent of all visitors arriving from developed countries like the UK, Germany, France, Spain, and emerging markets like Brazil.
Short-term visitors apart, the program has contributed to a 100 per cent rise in the population of foreign-born residents in the country, from 207,000 in 2000 to 416,000 as per the latest data.
The program’s popularity seems assured in the near future with the government resisting the temptation to tinker with rules related to property taxes or foreign ownership.
Further, the zero tax on inheritance also makes Portugal attractive for the next generation of golden visa settlers.