After being battered by the economic recession over the past seven years, a combination of flexible investment immigration policies and other developments is causing a significant increase in foreign investment in the property market of Portugal’s capital city. There is a growing perception amongst investors that buying property in Lisbon represents an opportunity to acquire a low-cost stake in a market that may begin its rise shortly in the future.
Recent data released by the Portuguese government shows that property prices rise by close to 6% in the second quarter of 2014. A market report released in early 2014 indicated that international investment and speculation in the Portuguese real estate market constituted 70% of the market in 2013, up from just 45% in 2012.
US-based Eastbanc, a property developer, has acquired assets in Lisbon’s suburban areas that are situated close to the most popular shopping districts in the city. The Principe Real district, which has premium antique stores and boutiques, has witnessed investment of around €50 million towards construction and purchase of 20 buildings.
The developer has also invested in residential properties, with the first residential unit consisting of six apartments with areas ranging from 250 sq. meters to 400 sq. meters. On an average, the apartments cost around €1.5 million and more.
With 270 days of sunshine and average temperature at a comfortable 17°C, Lisbon is a preferred destination for European and global investors alike. Central Lisbon commands the highest premium as compared to other real estate markets in the country with prices said to have risen by 10% in the past twelve months.
Property options range from a two-bedroom apartment with a shared garden for $500,000 while a 12-bedroom converted palácio with a garden and pool costing around $5 million.
The low cost of property in Lisbon is the most attractive aspect for domestic and international property developers at a time when prime real estate in other capital cities in Europe has witnessed significant appreciation. Apart from traditionally expensive cities like London, where residential properties in prime locations cost around €33,000 per sq. meter, even smaller cities like Vienna are significantly expensive as compared to Lisbon. A well-developed property in Vienna would cost around €25,000 per sq. meter while Lisbon allows property developers to buy similar units at a much lower rate of just €6,000 per sq. meter.
Firms that focused in Spain’s property market are now seeking opportunities in Portugal as well. The general consensus is that buyers ready to pay €5,000 per sq. meter can find very good options while those operating at a lower budget of around €3,000 per sq. meter may have to spend more on renovation and maintenance to make the unit attractive for potential buyers.
A quick comparison of options shows that a 600 sq. meter home with eight bedrooms is available at a price of €1.1 million while a 1500 sq. meter property in Portugal is available at a relatively affordable price of €4.9 million
Apart from institutional investors seeking to benefit from the revival in Portugal’s property market, a large number of French and Scandinavian individuals are also investing money in real estate in various localities in Lisbon. The tax benefit offered by the government is the primary reason why foreign and immigrant investors are pumping money into the real estate market.
Investment immigration and residence experts opine that the twin benefits of an attractive Golden visa program and a liberal tax environment makes Portugal an ideal investment destination for wealthy immigrant investors.
Portugal has two different programs that make real estate an attractive proposition for investors. Firstly, the scheme for Non-Habitual Residents is designed to attract investments from European citizens while the Golden Residence Permit in Portugal is popular amongst investors from China, Angola, and Brazil.
Under the NHR program, first-time movers to Portugal will be subject to a reduced or zero tax rate on certain incomes for the first ten years of residence. The tax exemption on income from creative industries and professionals has resulted in some high-profile artists moving to Portugal.
The Golden visa scheme offering long-term residence in exchange of investments has had a very significant impact on the country’s property market. Foreign investors who invest a minimum sum of €500,000 towards purchase of property gain the right to reside in Portugal and travel through the EU without onerous visa restrictions. Further, such investors have the option of applying for citizenship after a period of six years of residence in the country.
This scheme is particularly useful amongst Chinese investors who have cornered 1159 visas of a total of 1141 golden visas issued by the country. Russians come next with 46 successful applications.
Market surveys indicate that the preference of foreign investors for centrally-located properties in Lisbon is beginning to push up prices due to dwindling supply. Lack of new developments in the property market combined with preference for areas with historical or cultural relevance has resulted in drying up of properties priced less than €500,000.