The final wording of the bill recently revealed for parliamentary discussion does not appear to be as extreme as initially feared. Golden Visas that investors have already applied for or wish to renew are planned to be converted into a special regime of D2 (Entrepreneur) visa, retaining the seven-days-a-year residency requirement for its holders. No retroactive measures, which had drawn heavy criticism, will be applied. The government is also proposing to allow investment-based residence permits for those who invest in support of "artistic production and the recovery or maintenance of cultural heritage." However, the option to invest in real estate will be eliminated.

Will the decision to close the most popular investment route in Portugal truly help solve the housing problem? The Golden Visa program has been the subject of much controversy for several years already, with some people blaming it for the country's housing crisis. However, the reality is far more complex than that, and the program's impact on the real estate market is often exaggerated. Let’s see if the Golden Visa really worsens the situation and explore how foreign investments could be used to address this issue.

The housing crisis in Portugal

How bad is the problem?

The housing crisis in Portugal is a complex issue that is affecting a growing number of citizens. The median house price of dwelling sales in Portugal in the 3rd quarter of 2022 was 1,492 €/m2, representing a year-on-year growth rate of +13.5%, a significant increase from the previous year. This growth was observed in all sub-regions, except for the Viseu Dão Lafões. The three sub-regions with the highest median house prices were the Algarve, and metropolitan areas of Lisbon and Porto, which also had the highest values in both categories of the purchaser's tax residence.

The housing crisis in Portugal is particularly challenging for low-income families, as just over half of Portuguese workers earned less than 1,000 euros a month last year, according to Labor Ministry statistics. In the case of people younger than 30 years, the numbers are even more disturbing - about 65% of this age group's representatives earn less than 1,000 euros. This means that housing is becoming increasingly unaffordable for a significant portion of the population. Between 2020 and 2021, house prices in Portugal surged by 157%, while rents jumped by 112% from 2015 to 2021, according to the European Union's statistics agency Eurostat. In the past twelve years, housing prices in Portugal have surged by over 80% in the past twelve years, surpassing the European Union's average.

According to data collected by Confidencial Imobiliario, rents in Lisbon, a popular tourist destination, have risen by 65% since 2015 and sale prices have skyrocketed by 137% in the same period. Last year, rents increased by 37%, which is more than in Barcelona or Paris, according to Casafari, another real estate data company.

Imovirtual, a housing portal, conducted a study that found the average rent for a one-bedroom flat in Lisbon to be around 1,350 euros, while the monthly minimum wage is only 760 euros.

As a result of low wages and high rents, Lisbon is ranked as the world's third-least viable city to live in, according to a study by insurance brokers CIA Landlords. The current inflation rate of 8.2% in Portugal has only exacerbated the issue.

The housing crisis in Portugal is also leading to overcrowded conditions, as more than 10% of the population now live in such conditions, according to a survey released in August by the National Statistics Institute (INE). The Algarve region, which has the highest average house price in the country, reports the worst rate of congestion at 13.7%, followed closely by the metropolitan areas of Lisbon (13%) and Porto (11.3%).

What does government suggest?

In addition to ending the Golden Visa program, the Portuguese government is planning to take several other measures aimed at tackling the housing crisis. These measures include forcing owners of unoccupied properties to rent them out, with priority given to younger renters, single-parent families, and families who have experienced a significant drop in income. The government has also put a cap on rent increases in new rental contracts, limiting them to no more than 2% above the previous contract.

Another significant measure introduced is the suspension of new licenses for short-term vacation rentals through tourist accommodation platforms, except in rural areas. This move is intended to ease the pressure on the housing market by reducing the number of properties available for short-term rentals and making them available for long-term rent instead.

The government is also taking steps to convert commercial properties into residential housing, with the goal of increasing the supply of available homes. This measure is particularly aimed at urban areas where commercial properties may be vacant or underused, while the demand for housing continues to grow.

Are Golden Visas holders responsible for the housing situation?

Some important statistics

The Golden Visa program was launched in 2012. As of February 2023, a total of 11,758 Golden Visas have been granted, along with 19,171 residence permits for family members. The program has been particularly successful in attracting real estate investment, with 10,755 Golden Visas granted via real estate purchase, and a total of €6,118 billion invested in real estate out of a total investment of €6,852 billion.

Prime Minister Antonio Costa has been a vocal critic of the high amount of investment going into real estate and the low number of jobs created. Despite the program's popularity in attracting foreign investment, Costa has highlighted that only 22 working places have been created through the program, which he sees as a major weakness. In his view, the focus on real estate investment has led to potential inflation of real estate prices and a missed opportunity to attract investment in other sectors that could create more jobs and contribute to long-term economic growth.

The National Statistics Institute (INE) issued its latest construction and housing statistics report in 2022, covering the years 2015 to 2021. The report indicates that 165,682 dwellings were traded during this period, a new maximum representing a 20.5% growth compared to 2020.

While the infographic provided by INE does not allow for an exact number of traded dwellings, it is possible to approximate that 934,000 living units were traded between 2015 and 2021 based on the following graphic. The construction and housing report from 2015 shows that approximately 240,000 units were traded between 2012 and 2014, resulting in a total of 1,174,000 units traded from 2012 when the Golden Visa program was launched until 2021, which reflects the most recent available statistics.

Credits: Supplied Image; Author: Client;

Credits: Supplied Image; Author: Client;

Further calculations using SEF statistics reveal that by the end of 2021, 8,911 Golden Visas were obtained through the real estate investment route. This means that the 8,911 real estate purchases by Golden Visa investors represent approximately 0.76% of the 1,174,000 units traded since the visa launch in 2012.

“For the last 10 years the total amount of family applications reached 19,000. Does anybody seriously think that a yearly purchase of 1,900 flats drove property prices high? Ridiculous”, supports the Managing Director at Discus Holdings Ltd, a group of companies that provides investment migration, Laszlo Kiss, who has 32 years of experience in the industry.

By dividing the total investments made in real estate by Golden Visa holders by the number of Golden Visas issued via the property purchase route, we can see that the average cost of a single real estate purchase by program participants is €568,863. Obviously, properties in this price range are not the ones currently lacking in the Portuguese real estate market and if we are considering purchasing multiple units for rental purposes, these units are already in the rental market. Additionally, a portion of the real estate investments made through the Golden Visa program includes commercial properties, particularly in the hotel industry.

If we are discussing foreign investors who purchase property in Portugal but do not obtain the Golden Visa, their contribution to the real estate market is also negligible. For instance, in the first half of 2022, international investors accounted for only 3% of all real estate transactions. To emphasize the small percentage of purchases made by Golden Visa applicants, they contributed to just 0.6% of all transactions during the same period.

If Golden Visas aren’t causing the problem, then what does?

“The main reason for the increase of property prices in Spain and in Portugal (among many other countries) is the policy of their Central Banks of keeping EUR interest rates at nearly zero. Who doesn’t want to get a 20-year mortgage for an interest rate of 1,5% with low monthly repayments?”, believes Laszlo Kiss. However, there are different factors that add to this crisis.

Experts attribute the situation to the fact that only one house has been constructed for every ten sold since 2018, which has created a shortage of affordable housing options. There is a growing insufficient supply of properties to meet the high demand. "We need to find more supply to the existing demand so that prices can stabilize", says Ricardo Reis, Century 21 Newlife agency manager, in his recent interview with Euronews. There are several issues that contributed to this shortage.


One of these issues is the constantly growing tourist flow. Portugal attracted a record more than 26 million foreign tourists in 2019 and €15.3 million last year showing a 158% rise after the previous year of pandemic restrictions. In 2023, a 33% rise is expected. A lack of available housing options has led to rising signatures from locals to hold a referendum to stop short-term vacation rentals in Lisbon.

A study conducted by the School of Economics and Management at the University of Porto in 2021 investigated the impact of transferring residential housing into tourist accommodation on the real estate market in Lisbon and Porto metropolitan areas. The results revealed that the liberalization of short-term rentals (STR) had a significant effect on housing prices in municipalities with a higher percentage of housing converted to tourism. The study estimated that a 1% increase in STR led to an average increase of 14% and 21.3% in housing prices in Lisbon and Porto respectively. This serves as a proxy for the mean impact on housing prices of an aggregate decrease in housing supply, although not controlling for other factors, which would render the coefficient smaller.

The study also provided empirical evidence of this impact, stating that from January 2011 to December 2019, the accumulated share of housing transferred to STR in Lisbon and Porto municipalities was 5.787% and 5.475% respectively. In the same period, housing prices increased by 76.9% in Lisbon and 79% in Porto. These findings suggest that the transfer of residential housing to tourist housing through STR had a significant effect on housing prices, resulting in substantial increases in both Lisbon and Porto metropolitan areas.

The research also identified that municipalities with a higher share of STR had low housing elasticities, indicating that adjustments to the conversion of real estate from housing to tourism were primarily made by increasing house prices rather than increasing supply quantities. This unexpected consequence of allowing property owners to transfer real estate from housing to tourism was extreme housing price increases due to an inelastic housing supply.

High immigration flow

Portugal has seen an increase in its immigrant population for the seventh consecutive year, reaching a total of 752,252 in 2022, according to data from SEF. This marks a rise of 58,365 immigrants compared to the previous year, representing an 8.3% increase. Meanwhile, the number of Golden Visas received by foreign investors and their family members was 1,281 and 1,588, respectively, accounting for only 0.38% of the total immigration flow in 2022.

The largest growing immigrant populations in Portugal over the past year have been from Brazil and India. The Brazilian community remains the largest immigrant group in Portugal, with over 230,000 individuals, reflecting a 13% increase since 2021. Similarly, the Indian community has also grown by 13% to around 34,000 residents, making it the fourth-largest immigrant population in Portugal.

Unlike investors who use the Golden Visa program, immigrants coming to Portugal through different types of national D visas, such as individual entrepreneurs, passive income, or digital nomads, often seek more affordable housing options, which can lead to increased competition with the local population in the real estate market, particularly in the rental sector.

However, immigrants account for only 7.3% of the total Portuguese population of 10,270,865. This implies that if the construction pace and volume were sufficient, it could potentially meet the demand.

Lack of the social housing

The shortage of social housing is a critical aspect of the overall housing crisis, as it directly impacts vulnerable populations. According to Pedro Nuno Santos, the Minister of Infrastructure and Housing, social housing constitutes only 2% of all public housing in Portugal, in contrast to Vienna where it accounts for 60% of the housing stock.

Lisbon Town Hall is recognized as the largest real estate owner in Portugal, with ownership of 25,000 social housing units, but not all of these units are currently allocated. As of July 2022, 1690 social housing units were unallocated due to the need for renovation, as reported by Filipa Roseta, Lisbon's Assistant Mayor for Housing. Despite receiving 6000 applications from families in need, only 36 vacant social houses were available at that time.

However, the requirement for approval of the reconstruction project by the municipality of Lisbon before renovating the house presents another challenge. This contributes to the inadequate speed of project approval and, as a result, low construction rates.

Construction rates

As mentioned earlier, the ratio of one house constructed for every ten sold since 2018 is a cause for concern. Our experience with partners and real estate investment funds shows that the approval process for new development or construction projects in the municipality of Lisbon can take up to two years due to bureaucratic procedures.

According to the latest construction and housing statistics report, in 2021, a total of 15,065 buildings were licensed for new construction for family housing in Portugal, with an additional 4,900 buildings licensed for renovation. However, these numbers are insufficient to meet the needs of the 1.027 million people living in overcrowded conditions, let alone other groups impacted by the housing crisis.

Although there has been a slight increase in approval rates for renovation and construction projects in 2021, with a 12.6% increase compared to 2020 and a 14.1% increase compared to 2019 for new buildings, and a 1.5% increase for renovation projects, the numbers still fall short. In 2021, approximately 22,384 dwellings were completed in the country, representing a 10.2% increase from the previous year.

While there has been some improvement in approval and construction rates in the past two years, they are still insufficient to meet the population's needs. Instead of closing programs for foreign investment in real estate, it may be wiser to utilize these investments to stimulate construction rates and address the housing crisis more effectively.

How can foreign investment be used to combat the housing crisis?

Portugal is not alone in facing a housing crisis. Other European capitals such as Berlin, Madrid, and Paris are also grappling with similar issues, albeit to varying degrees. According to the World Economic Forum, the COVID-19 pandemic accelerated a worldwide housing shortage. Lockdowns and construction bans have caused land prices to soar worldwide, leading to significant delays for developers. Moreover, supply chain disruptions, materials shortages, and labor challenges have further hampered the new housing supply. The widespread inflation has also resulted in project economics being viable only at higher sale and rental levels than originally anticipated.

How can cities use foreign investment in real estate to address the housing crisis?

  1. Donations to the national fund.

    Countries suffering from the housing crisis could adopt the Sustainable Growth Fund investment option, which the Caribbean Five - Antigua and Barbuda, Dominica, Grenada, Saint Lucia, and Saint Kitts and Nevis - offer (note: the exact name of the fund may differ between countries). This allows investors to contribute a certain amount of money to a national development fund in exchange for citizenship. Portugal and other European countries could introduce a similar program, offering investors a residency permit for a significant donation to a similar fund using this money to increase construction rates.

    Malta's Individual Investor Program of the Republic, which was renamed Malta's Exceptional Investor naturalization policy in 2021, requires €750,000 for a 12-month residency period and grants investor citizenship after this period. At its peak of popularity in 2016, the program attracted €279.9 million in donations, and €121.8 million in the post-pandemic year of 2020, the last year for which statistics were shared. Caribbean countries are not eager to share information about their citizenship programs, but we can estimate that in 2022 Grenada earned approximately $96.93 million in donations from investors, as 27% chose this option to apply. In Antigua and Barbuda, the donation option is far more popular, with 89.5% of investors choosing the state fund option in 2020-2022. Even though we don't know the exact numbers of earnings, we can see that donations stimulate development in these islands. Antigua and Barbuda uses the money contributed to the state fund to develop the country's tourism, agriculture, service, and precious metal sectors. For example, it used $45 million to expand the airport.

    Now, let's do some calculations: if half of the last year's Portuguese Golden Visa applicants choose the donation option, with donations being set at a reasonable level of €100,000 (as it is not a citizenship-by-investment program after all), that would mean the country's budget would receive €64 million. With an average construction price of €492 per square meter (as per the latest INE report), it would be able to build approximately 129,900 square meters of housing for social or affordable rent purposes.

    Laszlo Kiss, the managing director at Discus Holdings Ltd, believes that donations are the great win-win option both for countries and investors. “It is a clear winner for the government budget, as it is money to be spent on noble social causes”, he says.

  2. Repairing the abandoned dwellings.

    In Lisbon, 25,999 buildings are unoccupied, representing about 15% of all city dwellings. These buildings are often abandoned for long periods of time and require renovation. Investors could be presented with an opportunity to buy and repair some share of these buildings with an obligation to later convert them into hotels to alleviate the strain of tourist housing on local accommodations. Another share of these buildings could be turned into social housing using donations to the national fund as suggested earlier. Alternatively, investors could be given the option to buy and renovate houses and later rent them out with the maximal renting price limited by the authorities in exchange for the residence permit and tax incentives on the rental income.

  3. Construction of the new buildings for rent.

    Pedro Vicente from the Portuguese Association of Real Estate Developers and Investors believes that creating an option to directly invest in building houses for rent “would be the most relevant factor that would give Golden Visa a true meaning, helping to solve this housing crisis we live in Portugal”. “Together with tax benefits (6% VAT for this kind of construction), Golden Visa would be used to constitute a true build-to-rent industry that, in the hands of companies, would give results in a short period of time”, he states.

  4. Commercial property investment.

    Limits on foreign investors can be limited to commercial property purchases for the Golden Visa program. This doesn't take away their right to buy residential property to live in, but makes it obligatory for them to invest in commercial property in order to obtain a residence permit. This would attract money to the economy and create job opportunities. In case the commercial property is a hotel, it will also alleviate the strain on the tourist housing market and help meet high demand without using more of the local housing.

The government bond option that some countries, for example Hungary, use may not be the best approach for Portugal, according to experts. “Spain and Portugal can finance themselves, especially at low rates from the financial markets, so a bond investment does not generate serious financial advantages for the country. This was one of the main reasons why Bulgaria stopped its citizenship program”, says Laszlo Kiss, who is the government-approved agent for the Hungarian program.

To address concerns about potential money laundering issues associated with the Golden Visa program, there are two possible routes to alleviate those fears. Firstly, restrictions could be placed on passport holders from certain countries that are deemed unsafe, limiting their eligibility to apply. Secondly, a more rigorous compliance process could be implemented, taking inspiration from Malta's diligent procedures which resemble those of a bank. This would allow for a careful selection process to minimize the risk of granting residence permits to participants in the investment program.

In short, the ideal modified Golden Visa program would offer various real estate investment options with the goal of increasing the supply in the housing market, while also ensuring security from the state's perspective and maintaining profitability for investors. There are plenty of successful examples in other countries that Portuguese authorities could use as a reference.

After losing the opportunity to obtain a residence permit via the real estate investment route, foreign investors may start looking for more stable and transparent investment opportunities in other countries. Overall, Portugal's international image will be damaged, making the country less commercially attractive while the housing crisis will remain unsolved. Instead, foreign investment can be utilized as one of the measures to address the problem, by stimulating investment in renovation and the hotel business, or by creating different donation programs.

Pedro Vicente from the Portuguese Association of Real Estate Developers and Investors does not believe that the government will back off and maintain the program in some modified form. However, we remain hopeful that authorities will consider creating a solution that would be beneficial for investors and the economy, while also potentially aiding in the fight against the crisis.