12 reasons behind the Lisbon property boom
A host of factors contribute to Lisbon’s recent wave of popularity and the subsequent surge in real estate prices in the capital and throughout Portugal in general.
1. An exodus of inner city residents over the past half-century
Until the recent boom, central Lisbon has experienced continual degradation and decay leading to urban flight from historical neighbourhoods over the past 50 years. The surge in tourism has served in large part to fill this void, leading to urban renewal and revitalisation of the capital’s historic districts.
2. One of the lowest property tax rates in Europe
Despite the controversial advent of the Additional IMI, property rates in Portugal remain a fraction of most EU countries. In addition to attracting foreign buyers, the low levy serves to ease the common plight of many Portuguese property owners: “Land rich, cash poor”.
3. Moderate cost of living in Portugal (amongst the lowest in Western Europe)
Due to low wages and severe austerity measures, the modest cost of living in Portugal is a further attraction for investors, tourists and migrating retirees.
4. Legal, fiscal and market frameworks create conditions discouraging long-term rentals
Legislation favouring tenants over landlords and depressed rents have left many property owners reluctant to enter into long-term contracts.
5. The popularity of Portugal and the subsequent explosion of general tourism
Lisbon and Oporto are “hot” tourist spots. These fascinating cities have become preferred destinations for holidaymakers from the European Union and around the world.
6. The post-crisis revival of residential tourism
Portugal is rapidly becoming the “Florida of Europe”, attracting retirees from northern European countries. After a post-crisis lull, north-to-south migration gathers steam as property markets begin to boom.
7. Low-cost airlines create inexpensive “bridges” to the rest of Europe
Cheap flights have opened travel options for millions of holidaymakers, both young and old, making long weekends and occasional jaunts affordable options rather than relying solely on regular vacations during the high-season months of summer.
8. Portugal is one of the safest countries in the world
Low crime rates and only a minor threat of terrorism make Portugal a safe haven in an increasingly insecure world.
9. Golden Visa popularity
The ready availability of European permanent residence visas and eventual dual nationality in exchange for real estate purchases above €500,000 continues to attract thousands of wealthy migrants and billions of Euros of investment in the Golden Visa programme;
10. Non-Habitual Residence programme a success
Pensioners and freelancers are two significant groups lured by promised tax holidays under the Non-Habitual Residence (NHR) programme. While NHR does not work for everyone, those with the right conditions find inviting tax solutions over a 10-year period.
11. Real estate investment enhanced by near-zero interest rates
The historically low cost of borrowing and a revived openness by banks to lending have reopened the doors to real estate investments.
12. Absence of capital taxes
Portugal has neither a wealth tax nor gift nor inheritance tax. Freedom from these levies helps attract many high net worth individuals to Portugal.
Surprisingly, policymakers routinely fail to anticipate the favourable consequences of many of these factors or show flagrant indifference to them.
Dennis Swing Greene
Dennis Swing Greene is Chairman and International Tax Consultant for euroFINESCO s.a.