Before the subprime event, a lot of British and Irish citizens were choosing Portugal to buy property.
The economic health of those countries, combined with the favourable Portuguese banking conditions, were a natural incentive to promote the Portuguese real estate market, especially in the Algarve and Cascais.
The subprime crisis (2007/2008), triggered by the fall of the financial monsters Bear Stearns and Lehman Brothers, had a domino effect on the Euro Zone, killing business, increasing sovereign debt and exposing vulnerable EU countries to a bankruptcy scenario.
After that the Euro system was never the same and the following years were quite harsh to countries like Portugal. The retraction of the world economy made everybody become cautious before spending money and, due to that, property sales in Portugal dropped significatively. According to the Bank of Portugal, the building permits granted in 2014 represented only 32% of the licences granted in 2009. That reality was not going back to normal without appropriate measures.
The Portuguese authorities have been working for the last 10 years to attract foreign investors into the national real estate market.
Fiscal advantages like the NHR - Non-Habitual Resident tax privilege (Regime Fiscal do Residente Não Habitual) allowed high tax reductions or even exemptions to pensioners and to other eligible candidates.
The EU/EEE/SWITZERLAND residence certificate, available for residents or investors or to be used along with the NHR system to access the existing tax privilege, eased foreign fiscal domiciles in Portugal.
The Investment Golden Visa (Autorização de Residência para Investimento) improved the settlement of investors and allowed them to live and work in Portugal, as well as to travel within the Schengen space.
The Urban Centre Rehabilitation Programme (Incentivos para a Reabilitação de Centros Urbanos), set to protect and restore ancient buildings and The Rural Areas Programme (Incentivos para as Áreas do Interior), released to fight the exodus to the cities, also played its part on getting foreigners to invest in Portugal.
This strategy made Portugal one of the most wanted in the world, being on the top of the rankings of the countries that have been chosen to live in and to retire to.
By 2016, the real estate incentives, the settlement of the banking system, the golden visas, the fiscal privileges and the growth of tourism in Portugal inverted the trend: the real estate market was reaching the levels of the old days.
By 2020, things were going quite well, being the real estate sector one of the main engines of Portugal’s economic growth.
But then COVID-19 appeared.
Did the pandemic have a negative effect on the real estate market?
One thing is certain: the disease drastically changed our daily routines, our work and our mobility. But it didn’t have a severe impact on the real estate market, like the subprime event did.
Nowadays, the focus of the foreign citizens keen to buy property in Portugal is oriented towards living in a safe environment with decent infrastructures, good food, good weather and amongst friendly people. This is one of the definitions of Portugal.
Lockdowns and quarentine challenged the daily routines and created a new normal, by “imprisoning” us in our homes or, in a different perspective, forcing people to adapt their houses into their new online office, which may become permanent.
That said, COVID-19 had no significant alteration on the real estate market and the shortage of property to sell in the most wanted locations is proof of that reality.
To proceed with the real estate sector strategy, the Portuguese law comprehends the D7 VISA, available for pensioners, retired people or foreigners with stable income out of real estate, intellectual property, financial investments etc.
This visa was created to attract people with a settled life and financial comfort. Whoever lives in Portugal under this status, will generate economic trade and due to that fact, also wealth, tax income for the government and new jobs. Obviously the main reasons for the success of the D7 Visa are the same ones that made the Golden Visa successful: safety, good weather, good food and a friendly nation.
The Portuguese real estate market is expanding as we speak, even through these harsh times. It is actually one the power engines that will make everything to go back on track.
COVID-19 may have changed the world, but it didn’t change the will of our fellow citizens to choose Portugal as their new home.
Cláudia de Sousa Antunes
AG INTERNATIONAL | Law Firm
Digital Helpdesk: www.aginternational.eu
Published on The Portugal News on 2nd July 2021