Portugal is due to restrict the highly successful ‘Golden Visa’ incentives for overseas property investors.
In 2012, Lisbon’s housing market was crumbling, with hundreds of decrepit buildings filling the city’s downtown area and investors fleeing after the country sought an international bailout.
That year, Portugal started offering ‘golden visas’ to foreign investors willing to spend €500,000 or more on a property. The programme has pumped €4.5 billion into real estate since it began, mostly from China, and helped turn Portugal into western Europe’s second-hottest property market. Prime Minister Antonio Costa now says it’s time to restrict the incentives.
Costa’s ruling Socialist Party wants to restrict the golden visas to property purchases outside Lisbon and the northern city of Oporto and try to attract investors to regions with a lower population density, according to a budget proposal. Costa says the aim is to contain speculation in the real estate market that’s hurt the ability of the middle class to access affordable housing in Portugal’s larger cities.
The golden visas ‘should contribute to the recovery of the property market where it’s necessary or in areas of low population density,’ Costa said last week in a speech broadcast by RTP. ‘Fortunately, it’s no longer necessary in the big urban centres.’
While real estate brokers in Portugal acknowledge that rising housing prices in Lisbon and Oporto are a problem for local residents, they fear the curbs on golden visas may prompt investors to buy property elsewhere in Europe. Cyprus, Greece and Spain offer similar programmes.
Mr Costa insists that the proposed changes will not affect existing golden visa holders. He also said. ‘Those who now want to obtain a golden visa are also welcome, as long as their investment is made where it’s necessary.’ Parliament will have a final vote on the 2020 budget on Feb 6.
Property prices increased 10.3 per cent in the third quarter of 2019 from a year earlier, the second-biggest gain in western Europe after Luxembourg, according to Eurostat.
In a separate proposal, the Socialists plan to stop some foreign residents from paying no tax on their pensions, an arrangement that led Finland and Sweden to criticise Portugal for having an unfair tax system.
If approved, foreign residents who apply for the so-called non-habitual resident programme will have to pay a flat 10 per cent levy on their pensions. The programme will continue to allow some foreign workers to pay a flat 20 per cent income tax rate.