Portugal’s golden visa program may shift future investors from passive and low-risk asset classes to active investments in riskier assets, having attracted foreign investments of around €5 billion since 2012.
Further, the recent review announced by the government is likely to push for greater job creation in the country through golden visa investments.
A Good Run Since 2012
Golden visa programs have always been controversial. From indignation over ‘sale’ of citizenship and national security concerns to worries about tax evasion – critics have long sought a blanket ban on golden visa and other investment immigration programs.
Yet, the golden visa program was good news for Portugal’s crisis-hit economy. It contributed significantly to revival in the country’s real estate and tourism sector in the aftermath of the 2008 economic crisis.
Preference for Real Estate: A Growing Worry
There always has been a deep connection between real estate and Portugal’s golden visa program. To put that in perspective, just 472 out of the 8,207 golden visas issued between 2012 and 2019 have been for non-real estate investments.
The numbers for the job-creation category is even worse. Out of the 472 visas issued for non-real estate investments, just 17 golden visas have been issued to investor creating ten jobs or more in the country.
For policymakers, lack of diversity in deployment of foreign capital is an obvious concern. The government has been called upon to introduce measures to shift investments beyond two or three preferred urban destinations.
Further, even within the real estate sector, there is very little money flowing into regeneration of old properties or properties outside the cities of Lisbon and Porto.
Read More
Citizens of Hong Kong and South Africa Drive Surge In Interest In Greece, Portugal Golden Visas
Portugal Golden Visa Demand Revives in June and July after Lackluster Start to 2019
Portugal Expands Golden Visa Program To Offer Green Visas
For Portuguese citizens and residents, the torrent of foreign money flowing into the real estate sector has resulted in significant economic and cultural disruption.
Golden visa investors prefer to convert properties into homestays for tourists, which has led to a shortage of residential rental accommodation for ordinary Portuguese. Lack of supply has led to spiralling rental costs beyond what ordinary residents can afford.
The situation is equally bad for homebuyers, who find themselves being priced out of a market enjoying high demand from wealthy foreign investors.
Unaffordability of rental properties is impacting businesses as well, which are struggling to retain employees who cannot find an affordable home close to their workplace.
Government to Review the Program
In October 2019, the Portuguese government announced a review of the program aimed at finding ways to push investments beyond Lisbon and Porto, and into rural destinations.
Further, there’s likely to be a fundamental change in the program’s structure from attracting real estate investments to accelerated job creation in the country.
It remains to be seen whether such lofty intentions will meet the approval of golden visa applicants. Australia’s Significant Investor Visa program saw a sharp fall in demand after it bared direct investments into residential real estate and made investment fund and venture capital fund investments mandatory for golden visa investors.
With strong competition from programs offered by EU countries like Greece, Malta, Cyprus and Spain, the possibility of significant changes to the program remain a challenge for the Portuguese government.