Foreign investment forecast in the Portuguese market in 2020

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Foreign investment forecast in the Portuguese market in 2020
Reading time: 8 minutes
Published: 17th March 2020, 6:40pm

Information update January 2021: Read updated information on the Portuguese Golden Visa here.

The last years of the real estate market have been a real gold mine for the Portuguese economy, being responsible for the creation of thousands of jobs, increased private foreign investments and, consequently, increased tax revenues for the Government. After a few years of crisis and difficult times, the construction sector is also experiencing a boom. Areas that were previously abandoned are now being rehabilitated, which benefits local trade and, mainly, tourism.

According to preliminary data presented by JLL and Cushman & Wakefield, in 2019 foreign investment in real estate assets in Portugal may have exceeded €34 billion.

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Although there’s been an increase in house prices, the consultancy Cushman & Wakefield states that in 2020 Portugal should maintain “popularity” as an investment destination. For this year’s predictions, Eric van Leuven, General Director of the consultancy comments:

“For this year the outlook remains optimistic, despite some international instability and low growth potential for the world economy. However, the expected maintenance of the low level of interest rates and the “popularity” of Portugal as an investment destination will foresee applications of high levels of liquidity in the various segments of the real estate market.”

For this optimistic scenario to remain, public-private partnerships between the municipalities and developers are needed in order to guarantee an increase in supply at affordable prices.

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How geopolitics reflects into the Portuguese real estate market

According to the European Commission, the Portuguese economy is in its 7th consecutive year of growth, and it is expected to continue expanding over the next year, 2021. The Gross Domestic Product (GDP) is expected to grow by 1.2% in 2020 and 2021.

Impact of the new laws in the real estate sector for foreign buyers

Portugal is adopting a series of interventionist policies that will have a direct impact on the real estate market. Banco de Portugal has disabled granting housing credit in order to prevent mistakes that arose during the 2009 crisis.

On the other hand, some projects like “O Programa renda acessível” and “Lei das bases da habitação” were brought to life with the hope of guaranteeing the right to housing to those who need it and to discipline the real estate sector.

The Portuguese Golden Visa is also going to be changed to inland cities, aiming to combat real estate speculation and rising prices in large metropolitan areas. This will also help bring investments to low-density regions, through the urban requalification of cultural heritage, productive investment and job creation.

Learn more about the recent changes to the Portugal Golden Visa program and our advice for the best steps forward.

The introduction of the new SIGI (Sociedades de Investimento e Gestão Imobiliária - Investment Societies and Real Estate Management) also promises to move the market and have a driving effect this year. This is the Portuguese version of the REIT (Real Estate Investment Trusts), and in practice, they are property investments that generate income and that distribute that income to investors. 

The emergence of new projects for investment and profitability also takes part in this scenario. The so-called CoRevolution, in which the concepts of CoLiving and CoWorking, as well as Student and Senior Housing, open new possibilities for those who are in the real estate market and for those who already use the properties, fostering creativity and remote working.

Tax benefits in 2020

Several tax adjustments are being considered, with a direct impact on the housing and real estate market, amongst them tax advantages with regard to the IRS (Personal Income Tax), IMI (Municipal Property Tax) and IMT (Municipal Property Transfer Tax). Some of the adjustments include:

  • Houses removed from AL licenses  will be exempt from capital gains;

  • Adhering to accessible rents program will give exemption from IRS and IRC;

  • Buildings for university accommodation will be exempt from payments to the State.

In recent years, the regime of Non-Habitual Residents has also boosted real estate investment in Portugal, as it has more than 27 thousand applicants. The new changes applied to this scheme involve maintaining the exemption for those who already have it but reducing it for those who request it in the future. Currently, foreign pensioners benefit from a double tax exemption, and no IRS taxes are required to them, neither in Portugal nor in their countries of origin.

Learn more about tax exemption and tax advantages when relocating to Portugal here.

Vision for the next years

The Portuguese real estate market is currently in a phase of significant growth. Experts believe that this “real estate boom” is likely to continue for the upcoming years.

Despite the changes announced by the Government in the Gold Visa Program, Luís Lima states:

Foreign investment in Portugal 

Is Portugal still an attractive country for investment?

According to the financial rating company Moody’s, the price of real estate in Portugal has risen in recent years and this trend is expected to continue with an increase of 4% in 2020

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Since Portugal is an attractive market for talent, many of them being young professionals from technological industries, the country will continue to be the election market for investors, as opting for Portugal is investing in a country that presents favourable conditions, both in terms of political stability, economic growth (above the European average), and a great quality of life, favourable in the relationship between day-to-day work, family and leisure.

Taking into account the modest Portuguese position in the economic rankings at the World Economic Forum, immigrants choose Portugal for the lifestyle they’re allowed to have here.

If you’re looking for a peaceful place to live or spend your stay in Portugal, Portugal Homes can help you find a house or property here.

Foreign investment in Portugal

20th March 2020
Information update January 2021: Read updated information on the Portuguese…
16th March 2020
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