Foreign investment
Since its introduction ten years ago, Portugal’s Golden Visa scheme has attracted in excess of 5 billion euros of foreign investment, resulting in year-on-year price rises in Lisbon, Porto and the Algarve. In January 2022 the government changed the rules of this highly successful scheme, raising the threshold to 500,00 euros and restricting eligible real estate to the centre of the country. Many of the foreign buyers of Portuguese property are already European citizens, for example, 21% are French buyers, whose buying intentions will be unaffected by the new rules, however, for those purchasers for whom European residency is an important goal, buyers from Brazil and the U.K. each account for 18% of the market, the changes may act as a deterrent or we may see a shift of purchasing interest to the interior of the country, which is clearly the government’s intention. A further legislative change which may impact on foreign investment is the increase of the Non-Habitual Tax rate from zero to 10%, but from a foreign perspective, Portugal still has some of the cheapest inner-city real estate in Europe and the average 5.5% return on rental properties is one of best on the continent.
The impact of Covid
Around 20% of Portuguese GDP is generated by tourism and consequently the pandemic dealt a severe blow to the economy, from which it is only just starting to recover. The pandemic also created a shift in perspective around the globe. There was a drift from densely populated urban areas to the country and a re-evaluation of lifestyle which saw large numbers of people seeking the sort of quality-of-life which Portugal offers. According to data collected by Imovirtual, average property prices rose by 6.8% from December 2020. Lisbon real estate prices saw an increase of 5.7%, and the island of Madeira an increase of 17.5%. Guarda, currently the most affordable location in the country, was one of the few areas to see a slight decrease in property values. Ricardo Sousa, CEO of Century 21 Portugal, expects the new covid variant to have little impact on real estate prices in 2022. He observes that the residential market is experiencing high levels of demand, driven by new mortgage loan opportunities and research suggesting that 45% of Portuguese people wish to move house as a result of the pandemic. The residential property market is the main investment option for household savings which have accrued during the pandemic.
Building construction in 2022
The Bank of Portugal forecasts growth of between 4-7% in the construction industry over the coming year, but progress is being hindered by shortages of manpower, lack of raw materials, long licencing and construction cycles and ambitious environmental sustainability goals, which the industry has put in place. The cost of building new houses has seen an 8.5% increase, year on year, as a result of global increases in the costs of raw materials and rising labour costs.
