New Portugal Golden Visa 2020: what will change?
New Portugal Golden Visa 2020: what exactly will change?
Portugal must have faced a big dilemma when deciding on changing the Portugal Golden Visa rules in 2020 and reduce tax breaks on foreign investment. While the 0% tax break on foreign pensions received more and more criticism from northern European countries such as Finland and Sweden, it became clear that such schemes would no longer be sustainable in the future. At the same time, it was this tax break who put Portugal on the map of European retirees looking for a second home under the sun, which, due to these tax incentives, became suddenly very affordable to them. Together with the Portugal Golden Visa program, aiming to attract more extra-European investment, this tax scheme helped Portugal escape from the global financial crisis earlier this decade and made Portugal one of the most booming economies in Europe.
The Portugal Golden Visa: a brief history
Portugal's housing market was crumbling in the aftermath of the global financial crisis. Hundreds of old buildings in the country's capital city of Lisbon were in desperate need of refurbishment, but investors preferred to look at other countries with Europe's south seen as troubled water at the time.
In reaction to this, Portugal started offering "Golden Visas" to foreign investors, willing to spend €500.000 or more on properties (or €350.000 if the property was to be refurbished after purchase). Other countries soon followed with similar "residency by investment" schemes, but the Portugal Golden Visa remained Europe's most successful program of its kind. Until today, the program pumped 4.5 billion euro's into the property market and helped Portugal to become Europe's most promising economy.
While Lisbon, and later as well Portugal's second largest city, Porto, became the world's hotspots for international property investment, the Portugal Golden Visa soon also showed its downside, not to the investors, but the local population.
Big buildings were bought and sold on the speculative market, big residential buildings were refurbished and their apartments put on the much more lucrative holiday rental market rather than leaving them to their long-term tenants, often having lived in these apartments and buildings for generations. Tenants were unable to afford new rental contracts at today's market price. The city centres also lost a lot of life, with residential apartments now being let on the short-term holiday rental market. The remaining residents complained about the noise holiday makers would make. Their lifelong home suddenly resembled a hotel. Also, with the speculative boom in housing prices, the middle class was no longer able to afford a property of their own in Lisbon or Porto.
Portugal Golden Visa and NHR schemes: Time for change
The Portugal Golden Visa program was always designed to contribute to the recovery of the property market in areas where it's necessary. "Fortunately, it's no longer necessary in the big urban centres", says Antonio Costa, Portugal's Prime Minister. However, it still is necessary in the country's regions with a lesser population density. and a lesser economical activity. While nothing changes for current Portugal Golden Visa holders, future investments are now attracted towards the country's inland and islands. This is not necessarily bad news for foreign investors. Inland regions such as the Alentejo or the famous Douro valley offer great opportunities for property investments and tourism. Both regions are famous for their beautiful landscapes, their abundant gastronomy and of course their great wines. With hundreds of abandoned or semi-abandoned historical buildings in these regions, investments in gastronomical and green tourism come to mind.
The new Portugal Golden Visa 2020: where to invest outside Lisbon and Porto?
Apart from attracting more investment into the interior of the country, one big region in Portugal may benefit most from the changes in the Portugal Golden Visa requirements: the Algarve. While the Algarve has always been one of Portugal's investment hotspots, it never reached the popularity of Lisbon and Porto in terms of Golden Visa investment applications. This is probably due to the better connectivity Lisbon and Porto airports offer. As the aim of many Golden Visa applicants is to conduct business in Europe, Lisbon and Porto offer all facilities needed for this. The Algarve is Portugal's resort capital region, offering among the world's most beautiful beaches, all-year-round good weather and first class resort facilities. Faro airport is very well connected to the rest of Europe, but still lacks intercontinental connectivity.
Things have changed now. The Algarve Real Estate sector is preparing itself for yet another unprecedented boom. Due to its exemplary economic recovery, Portugal will remain one of Europe's most popular investment hotspots. When these investments are no longer possible in Lisbon and Porto, investors will turn to the next biggest region in terms of potential returns on their investment. Due to its thriving tourism industry, the Algarve will be able to offer almost equal returns on foreign investments as Lisbon and Porto have offered so far.
Obviously, and this the Portuguese government's aim, the changes in the Portugal Golden Visa scheme offer a lot of potential too for regions like the Alentejo or Douro Valley, where Green tourism and gastronomical or wine tourism continue to generate outstanding investment opportunities. Also the islands of Madeira and the Azores will benefit for the same reasons with especially Madeira being extremely well connected to the rest of Europe.
Feel free to contact us if you require any assistance in finding the right investment opportunities for your Portugal Golden Visa application. We offer free consultancy services without any commitment from your side.