The Portuguese Prime Minister António Costa announced on Thursday that Portugal’s highly popular Golden Visa programme, as it was, will be ending. The programme, which has been in effect since 2012, has attracted €6.797 billion in investment, 88% of which has been in real estate. Confirmation of whether the closure is immediate or within a certain time period is yet to be given.
On the 16th March, a public discussion to shape and amend the proposals will take place where today’s proposals will be discussed, and then approved by the Assembly of the Republic. Therefore, whilst nothing is confirmed, the likelihood is that at least the real estate routes for the Golden Visa will be ending at some point in the future.
“It remains to be seen whether there will be a grace period for those investors who have started the process recently as well as the businesses that work within this market,” comments David Moura-George, Portugal Director at Athena Advisers. “Such a period was given when the programme was altered in 2022, so logic would suggest such a period would be given this time too, perhaps until the end of this year. It’s also possible that some of the non-real estate routes to the Golden Visa will remain, such as capital transfer, fund investment or investment in culture, as they exist in other European countries.”
“Many will argue that the closing of Golden Visa is a populist idea to try and appease domestic real estate buyers who have been priced out of the regenerated and gentrified city-centre property markets,” adds Moura-George” You can’t argue that Golden Visa investment had a small part to play in this, but it is by far the main reason, which in my view was the government’s decision in late 2012 to allow landlords to more easily vacate their properties. This is what led to the wave of regeneration across Lisbon over the last decade and the Golden Visa was an incentive that supplemented international demand.”
“It will be unfortunate for some interior regions of Portugal along with the islands of Maderia and the Azores. After the changes in 2022, these places were hoping to see an influx of investment, now that cities like Lisbon and Porto no longer qualified and I believe that the changes programme as it exists today is a well-refined model that no longer negatively exposes urban or coastal markets to increased development, so it is a shame to see it go.”
The changes that came into effect in 2022 made it so that property investments in Lisbon & Porto will no longer qualify for Golden Visa applications, instead only investments in interior regions and the island destinations of the Azores and Madeira qualified. Some minimum investment amounts for other categories also changed.
How the programme changed in 2022
“For The Azores and Madeira, development has always been highly restricted so there is generally very little new property stock and these destinations have a pull that’s beyond the Golden Visa - think beach, sun, rugged outdoors - so demand for these markets will remain strong as and when the infrequent projects are released.”
Market movements - how will the closure affect property markets like Lisbon?
“If this happened five years ago, I’d be a little worried about Lisbon market, but not today,” adds Moura-George. “The Lisbon market has matured and the changes that took place in 2022 acted as a buffer to any market movements. But the biggest thing is that the Golden Visa real estate market has been one with little or no leverage. Very little of the Xbn in real estate investment via the programme used finance, it’s been a market of cash purchases almost exclusively, so from that front it has been an insulated market.”
“If real estate is no longer an option, developers will try to accelerate the programme of launches for any projects which apply, so there may be a small flurry of releases as demand bottles-necks in the run-up to the closure. In reality, these projects are at the mercy of government approval anyway, so it will be hard to push them far forward.”
A big hit for Golden Visa eligible funds?
Since 2019 investment via eligible funds has been increasing fast. In 2019, 0.56% of the year’s total investment was via the fund and only three years later, by the end of 2022, this share had grown to almost a fifth (18.36%). This resulted in a thirty-fold increase in three years, from €4.16m total investment in 2019 to €120.07m in 2022.
“Investing in a regulated fund obviously means you don’t own the title deeds to a property as you would with a real estate Golden Visa investment,” continues Moura-George. “But then for a minimum investment of €500,000 there hasn’t been any central Lisbon real estate stock available at that level for almost 5 years. This is why the funds, at least those aligned with property, have become so popular with non-eu investors, as they gave the ability for people to invest in prime Lisbon real estate at a lower level, whilst also combing it with the incentive of a Golden Visa application.
“A closure for this route to the Golden Visa will quickly identify those funds which have not been put together correctly. The funds that have been structured well, investing in diversified real estate in key locations around Portugal will retain demand whether they can be used for a Golden Visa application or not.”
It took less than two years for Portugal’s Golden Visa programme to generate €1bn in investment, attracting Chinese, Brazilians, South Africans and as of this year, British too. It’s since become one of the most popular investment-for-residency programmes of its kind in the world, attracting almost €7bn in investment.
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The Golden Window Closes
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