The Golden Visa program has come to an end. And if, on the one hand, this allows us to fight the consequences of gentrification, on the other hand it restricts the necessary investment in Portugal. But how are these two factors related and what are the challenges they bring to the real estate market and to our country?

Find out the opinion of Francisco Quintela and Carlos Penalva, partners at Quintela e Penalva | Knight Frank.

These two themes are on the agenda, given the new program "More Housing" that the Government intends to carry forward and that will certainly shape the real estate industry in the coming years. Although they are different concepts, they can interconnect, particularly in the context of real estate. It remains to be seen whether the combination of these ingredients will be detrimental to the market or whether it will just operate a transformation in the transaction of properties.

Portugal has been pointed out in recent years as an exceptional destination, whether for tourism, for living or for investing. The popularity of cities like Lisbon or Porto has transformed the urban landscape significantly. This transformation is evident in the rehabilitation of buildings and the return of quality public spaces to citizens. Cities were resized to receive a mobile population, composed of short-term tourists, who gradually fell in love with the Portuguese "way of life".

The gastronomy, the good weather, the nautical sports and a good dose of authenticity have also contributed for many of this mobile population to become new residents. Because of all this, Portugal has been placed in the investors' route and in the collective imagination of many countries in the western world. The great challenge became to have the capacity to welcome these "new Portuguese", guaranteeing levels of quality in line with the international standards of the most developed countries.

It was no longer enough to provide good restaurants and a considerable number of hotel beds. The world expected much more from Portugal, which led to the notorious development of real estate, not only in quantitative terms, but, above all, in qualitative terms.

This is what happened. The demand for real estate in the tourist centers of Porto and Lisbon grew rapidly, motivated not only by the attractiveness of the locations, but also by the low prices compared to other European cities. The incentive to urban rehabilitation worked, and dozens of new high-quality urban projects quickly flooded the market.

The creation of the Golden Visa program and the announcement of tax exemption through the NHR (Non-Habitual Resident) program set off alarm bells all over the world, bringing in citizens eager to benefit from Portugal's unique conditions. In addition to this, Portugal belonged to the European Union, had high-security levels, and a consumer society that was beginning to stop being young and enter maturity.

The combination of these factors was so effective that, suddenly, people started talking about gentrification in Lisbon and Porto. Gentrification is associated with the transformation of city areas through the influx of a new population with strong economic power, transforming the existing supply of consumption and infrastructure.

Although presented as a social problem, forcing the movement of resident populations, destroying communities and giving rise to new social dynamics, gentrification only happens because a particular region is attractive, inviting investment and urban renewal. Gentrification, while raising the prices of consumer goods, enhances the value of real estate and opens new horizons in the economic field. It works almost as a guarantee that a given society is functioning well and can attract a variety of audiences, whether they are tourists, investors, merchants, or even citizens covered by the Golden Visa or NHR programs.

It also makes it possible to collect more taxes, both for municipalities and for the State. But these cities with gentrified areas, a little bit all over Europe, are struggling with the problem of the loss of cultural identity, which in a first phase worked as an attraction and is slowly fading away among the melting pot of cultures and the socioeconomic turn that is taking place.

Although Portugal proudly has an above-average capacity to maintain its cultural identity, perhaps because for many years it has been a peripheral country in Europe, great challenges are posed in this new phase of our cities. And with the end of the Golden Visa in sight, this challenge becomes even greater.

At Quintela + Penalva Knight Frank we face this new phase with optimism. We believe that the phase of uncertainty regarding the ability to attract people and companies from all over the world is over. Portugal is on the map and will continue to be. If the end of the Golden Visa system had been decreed a few years ago, the impact would have been greater. Our cities have molded themselves and knew how to respond to this "globalization" of Portugal. We have all the conditions to continue to be an attractive destination for tourism, residence and investment, and although as residents of the cities of Lisbon and Porto we watch with perplexity the transformation of certain areas, we cannot ignore that this has beneficial consequences for the economy and in particular for the real estate sector. It is not desirable to deliberately provoke a gentrification process. However, this process is intrinsically associated with a moment of great prosperity and the appreciation of heritage that goes far beyond buildings and urban infrastructure.