Portugal is seeing a tentative economic recovery. GDP growth stood at just 0.92% in 2014, but it still represents a steady improvement over previous years’ performance. Unemployment is falling, and at 13.2% it is significantly lower than that of neighbouring Spain, at 22.4%. Without the same levels of overdevelopment, its residential markets fared better too.
Portugal’s residential market saw price falls of 10.3% between 2010 and 2014, according to data from Instituto Nacional de Estatistica (adding to falls already seen since 2008). Since then, transactions have been on a modest upward trajectory and 2014 was characterised by stability in prices, posting a modest 2.2% year-on-year increase.
Portugal is friendly to foreign investment. There are no restrictions on property ownership, while transaction costs are low. The golden visa scheme has proved successful in stimulating prime residential markets, particularly among the Chinese. For others, the government's Non-Habitual Residents (NHR) regime offers people moving to Portugal for the first time reduced tax rates or tax exemption for 10 years on certain incomes. It has proved particularly attractive to EU residents, notably those from France.
In addition, Portugal has overhauled its leasing laws. Rents in urban areas had previously been heavily controlled by law and had become detached from market reality. While they remain pro-tenant, they have made residential investment for long-term income a more appealing proposition. A slowly improving economy means stronger occupier demand too. All these factors, taken together, have contributed to the recent stabilisation of Portugal’s housing market.