Ever since the introduction of the Golden Visa scheme in 2012, Portuguese property prices, driven by foreign investment, have increased year on year. Several European countries launched Golden Visa schemes in order to attract foreign investment, but Portugal’s was by far the most generous and up to this point it has been the most successful. The scheme allowed foreign buyers, who purchased property valued in excess of 350,000 euros, to obtain residency rights for themselves and their families and in addition it entitled them to apply full a Portuguese passport after only five years. In order to qualify for the residency, the purchaser need only spend a minimum of seven days in the country. The scheme has generated 5.6 billion euros for the country’s economy and allowed around 10,000 foreign purchasers from forty-nine countries to gain residency rights.
The Portuguese economy was hit hard by the pandemic. The International Monetary Fund estimates that Portugal’s economy contracted by nearly 8% in 2020. 20% of the country’s GDP is based in tourism and when the planes stopped, unemployment rose, and rental prices slumped. What is perhaps surprising is that demand for property purchase remained strong, in fact there was a 96.8% increase in demand between March 2020 and March 2021 and in the first three months of 2020, foreign investors bought property totalling 238.8 million euros. According to Imovirtual’s property barometer, average property prices across the country, for September 2021, are up 1.4% compared with the previous month.
Up to now, foreign investment has focussed on Lisbon, Porto and the Algarve. Foreign money has transformed what was once a decaying capital into one of the most happening cities in Europe. Property prices in the city have soared and continue to do so. Average Lisbon property prices are up 11% since September 2020 to 592,960 euros, making Lisbon unquestionably the most expensive area in Portugal. The most affordable district in the country is Guarda, with a very modest average property price of 112,108 euros. One might expect that such cheap property is an indication that the area in question is deprived and undesirable, but Guarda is a fine granite city with an historic medieval centre and is situated just three hours by road from Lisbon.
The most significant development which will impact the Portuguese real estate market is the change to the Golden Visa scheme which will take place in January 2022. From this date, foreign investors will no longer be able to benefit from the scheme when making property purchases in Porto, Lisbon or the Algarve and the minimum investment level will be increased from 350,000 euros to 500,000 euros. The prospect of this change has driven sales in recent months but its implementation in 2022 is likely to result in a slow down in the property market. The effect of the pandemic on the global property market has been to create a shift in sales from high density population urban areas to less populated rural areas. The Portuguese government will have to wait and see whether foreign property investment in Portugal follows this trend.
