The program has fallen victim to its own success with the government forced to shut it down to combat speculation in real estate.
Although the program offered different options, more than 90 percent of investors preferred the €500,000 real estate route to obtain permanent residence in Portugal.
This led to a rapid increase in property prices in big cities and made it virtually impossible for ordinary citizens to buy or even lease homes at affordable prices.
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No Stopping Investor Appetite for Real Estate
Seeking to curb the influx of foreign money into its real estate sector, Portugal amended its program in 2020 and barred those from buying homes in Lisbon, Porto and other in-demand coastal areas.
Despite strong backlash from investors, the government refused to roll back its decision and only chose to only defer the change.
The amendment became effective from January 2023 but has failed to discourage investor demand in the real estate sector. This led to the drastic decision to shut down the program.
Government Mulled Termination Before
This is not the first time the government considered shutting down the program. In October 2022, the prime minister said that the program had fulfilled its objective.
However, the proposal was not approved in the legislature and the program continued. Now the government has formally decided to shut down the program. Although legislative approval is pending, it seems unlikely that the government’s decision will be overturned.
Golden Visa: Victim of Its Own Success
This is probably for the first time since Canada suspended its Federal Immigrant Investor Program in 2014 that an investment program has been shut down at the peak of its popularity.
Canada also terminated its program to deter speculation in its real estate sector and to make homes affordable for its citizens.
Considered an improvement over passive investments like government bonds, requiring investors to buy homes in the country was considered a more productive way to boost economic development.
However, the sheer volume and concentration of investments in the big cities of Portugal made it an unsustainable proposition and led to rentals in Lisbon jumping by close to 40 percent in 2022.
Further, golden visa investors preferred to lease out their homes to tourists and vacationers on short-term rentals, which meant there were fewer homes for ordinary residents of Lisbon, Porto, Algarve, and other cities.
The program has attracted close to €7 billion in investments since its launch in 2012 and the decision is likely to cost the government around €900 million per year.
Portugal’s decision follows Ireland’s move to shut down its investment program, as Spain considers proposals to bar real estate investment in its program.General Information: Contact us to receive more information about this article.
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