Portugal’s golden visa is setting itself up for a big crash in demand in 2021 if a controversial proposal enacted in 2020 and deferred until 2021 is brought into force.
About Portugal’s Golden Visa Program
One of the most popular golden visa programs in the world, Portugal offers wealthy investors the choice of multiple investment options to qualify for fast-track permanent residence. The simplest, and by far the most popular, investment option is the €500,000 property investment.
While other investment options include equity investments in Portuguese companies and even a cheaper option of €350,000 investments in a rehabilitated property, most foreign investors prefer to:
- buy a home in Porto or Lisbon,
- convert the same into a vacation home or homestay,
- enjoy steady rental income and capital appreciation, and
- qualify for the golden visa.
The Controversial Change
Portugal’s golden visa has been a bit too successful for its own good. Surging foreign demand led to a huge spike in property prices, especially in the urban centres of Porto and Lisbon.
This led to a situation where native Portuguese found it impossible to buy or even rent properties in some areas of the capital city.
The situation prompted the Portuguese government to declare that property purchases in Lisbon and Porto will no longer be eligible for the golden visa.
Impact of the No Porto and Lisbon Change
The pandemic forced the government to defer the change to 2021, which led to a spike in Chinese demand for properties in the two areas. Investors from mainland China pumped in €37 million into these two cities in the second quarter of 2020. To put this in context, this figure is twice the total golden visa investments by Chinese investors in the whole of 2019.
In the nine months between January and September 2020, golden visa inquiries by Chinese investors surged more than 175 percent despite this being the worst period of the pandemic.
Investment immigrants value policy stability over everything else, which means there’s always a surge in demand before any rule change comes into force.
With Portugal becoming the only country to specifically exclude cities from its golden visa program, investors have rushed in to invest before the opportunity ends.
Of course, that China has tamed the virus and regained economic momentum is also a factor contributing to rising foreign investments.
The Threat: No More Golden Visa Programs
With irregularities forcing Cyprus to suspend its citizenship by investment program and Malta increasing minimum physical residence period from 12 to 36 months, the strident criticism of golden visa programs by the European Parliament in Brussels seems to be having an effect.
With the European Parliament calling for outright termination of all golden visa programs, it remains to be seen whether Portugal’s program will be affected. Any further adverse rule changes in 2021 will only serve to push investors away to more-expensive but less-complicated investment immigration options.