Research article

Location by Location: Portugal

Portugal's golden visa scheme has proven successful in stimulating prime residential markets.

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.

Figure 23

FIGURE 23Portugal market performance (2006 – 2015)

Source: Instituto Nacional de Estatistica

Golden Visa Buyers

Portugal launched one of the world’s most successful golden visa schemes in 2012. A minimum investment in real estate of €500,000 grants the non-EU buyer a visa and longer term, a route to an EU passport. Foreigners need only be resident in Portugal for seven days in the first year of residency.

By June 2015, the scheme has brought Portugal €1.46 billion investment. More than 1,500 visas were issued in 2014 alone. The Chinese accounted for an overwhelming majority, more than 80%, and have favoured apartments in Lisbon, at the minimum investment mark. Such was its popularity with the Chinese it has spawned an industry specialising in the sale and investment of Portuguese property to Chinese clients. The scheme was paused in July 2015 amid allegations of corruption, but reinitiated soon after.

The Portuguese scheme faces competition, particularly as the minimum investment threshold is pushed downwards in other jurisdictions. Cyprus, Greece, Malta and Spain all offer programmes. Montenegro and Hungary are to follow. The Caribbean market is particularly competitive. Grenada and Dominica offer citizenship by investment programmes in real estate for as little as $200,000.

There are around 20,000 applicants for golden visas annually across the globe, a market that is growing rapidly. While there are no shortage of applicants, the challenge is attracting inward investment into a country’s real estate market without distorting it. Purchasers of real estate via such schemes are required to spend relatively little time in the host country, and many use it as a cheaper route into major European cities such as London.

Questions have also been raised over setting ‘false floors’ in the market at the entry price point, whereby properties worth less are artificially priced to the investment minimum. This could have ramifications upon resale, distorting the domestic market.

Figure 24

FIGURE 24Golden visa buyers: nationalities Oct 2012 – Jan 2015

Source: Ministry of Foreign Affairs


Lisbon is enjoying a new wave of investment into its residential markets. While new development is limited, existing building renovations are increasingly common. Dilapidated townhouses are being redeveloped into high end retail, offices and apartments.

US developer EastBanc has been active in Lisbon’s Principe Real, a prime district within reach of key shopping districts. It is redeveloping buildings here into high-end apartments. In other real estate sectors, investment fund Blackstone has been particularly active in Portugal, obtaining retail and logistics assets.

Buying activity generated from the golden visa scheme has seen demand concentrated in central parts of Lisbon, such as Principe Real, Portugal’s historic heart. The Chinese, the major recipients of the country’s golden visa programme, have mainly bought in Lisbon, reflecting their preference for city property. Other active international buyers include South Africans, Brazilians and, to a lesser extent, Russians.

Lisbon’s prime real estate looks good value by European standards – roughly half the price of that in Madrid, and less than a tenth of London prime prices.

Lisbon is witnessing investment from China

The Algarve

The Algarve is the southernmost region of mainland Portugal. A popular tourist destination, it is a well established second home location for northern Europeans, notably the British and Irish. The French are a growing force in the region, attracted by the tax breaks on offer under the government’s Non-Habitual Resident regime.

In common with other Eurozone markets, dollar and sterling buyers have the upper hand, and this has helped to revive demand from the UK market in particular.

One of the most established enclaves for prime property in the region is Quinta do Lago, a high-end golf and residential community, comprising of more than 1,200 villas. The resort saw the beginning of a sustained recovery in 2014, with sales increasing by 34%. A testament to the strength of the market is that offers being made on properties there are now at, or close to, asking price. ‘Turnkey’ properties remain popular, but investors are also active. Older villas are typically redeveloped for today’s market, complete with the latest technological innovations.

Quinta do Lago represents the kind of prime, well managed developments with strong amenity offer that are leading the recovery in depressed national markets. In addition to new French buyers, British, Irish, Belgian and other Europeans are returning to the region in greater numbers.

Outside the prime resorts, the Algarve market remains challenging, but a rapidly improving tourist market bodes well longer term. Tourist arrivals were markedly higher in 2014 than the prior season. prior season.

The Algarve is a well-established second home location

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