The proposed alterations to the Golden Visa programme prohibiting a purchase of real estate at €500,000 or above in Lisbon and Porto is misguided and not well thought out.
In order to understand the attraction of the Golden Visa programme, it is first necessary to understand the motives of the applicant in applying for the Golden Visa. In 99.9% of cases, the applicant is a wealthy person in his home country and loves his country. However, he feels that his country is economically, politically or religiously unstable and is, therefore, looking for a Plan B for himself and his family in the event that events go wrong in his home country.
It is a gross mistake to believe that the applicant has fallen in love with Portugal and, as a result, is applying for the Golden Visa here. This love affair with Portugal may develop later but, at the outset, the applicant is simply looking at various alternatives for the Golden Visa in terms of country and benefits.
Portugal is but one of a myriad of countries offering a Golden Visa scheme and, therefore, Portugal is in effect in competition with other countries to attract applicants. By negatively restricting the applicant’s choice, it is Portugal as a whole that loses.
By SEF’s published figures, there have been 7,700 Golden Visa applications in Portugal through the purchase of a property at €500,000 or above. This is a minimal number of transactions in relation to the global real estate market in Portugal and it would be nonsense to say that this has warped the real estate market.
It is perfectly natural that the applicant wants to buy a property in an area where he may expect some capital growth and also has the possibility of earning an income from rental of around 3% per annum. He would also be looking for a rental tenant that can offer the relevant guarantees that the rent will be paid during the duration of the tenancy agreement.
These factors are bound to attract the applicant primarily to specific areas of Lisbon and Porto, as these two cities have rental demand from mid to high ranking executives working for international companies for medium-term contracts and whereby the employer can give the required guarantees to the landlord (applicant).
This simply would not be the case in secondary cities in Portugal.
It should also be remembered that the applicant is attracted to invest in destinations that have direct flights from his country of origin. In the vast majority of cases, this means arriving in Lisbon or Porto. The applicant will not want to arrive in Lisbon or Porto and then have to take an additional flight or lengthy drive to an area where he can invest.
If the government thinks that the applicant will willingly be diverted to other areas of Portugal, it is wrong. The effect will be that the applicant will choose a different country altogether for his Golden Visa.
The government would also do well to consider that the magnificent restorations of noble buildings in historic Lisbon (Chiado, Bairro Alto, Baixa, Alfama etc) and historic Porto (Ribeira, Aliados etc) have not been driven by the domestic market, they have been driven by the Golden Visa scheme and the additional inflow of foreign buyers (non-Golden Visa). Without these drivers, these areas would still lie in ruins as opposed to the wonders that they are becoming. It is these very transformations of previously run-down areas of the two major cities that have contributed to Portugal becoming one of the hottest tourist destinations in Europe, with all the economic benefits that they bring to the country as a whole.
With considerable experience of marketing the Golden Visa scheme, we can state that the geographical demand for the Golden Visa does not even extend to the total urban areas of Lisbon and Porto. It is restricted to the historic areas of both cities and to the Central Business Districts of both cities. This is a fact of life and we have to find a just and equitable way to live with that fact.
What the government has not taken into account in its thinking, and perhaps cannot measure, is the economic spin off effect of the Golden Visa. There are any number of examples whereby the applicant was originally interested in a real estate purchase of €500,000 to satisfy his requirement for a Golden Visa to provide his family with a Plan B.
Subsequently, he has fallen in love with Portugal and invested in some cases tens of millions of Euros in starting up a business here and/or investing in the construction or renovation of real estate. All this investment has come about solely and only from the applicant’s initial €500,000 purchase and has provided thousands of jobs that did not and would not hitherto exist.
The government would do well to consider the Golden Visa programme as a benefit to the country as a whole, even though the initial purchase is almost bound to be in either Lisbon or Porto. By trying to alter this through legislation is shortsighted and demonstrates a lack of understanding of the motivating factors for the applicant and the spin off benefits to the Portuguese economy as a whole.
By trying to force the applicant away from the regional capitals, the effect may be to drive the applicant away from Portugal totally, which would be a very negative step for the whole Portuguese economy.
By Charles Roberts
Charles Roberts is a Managing Partner at Fine & Country Portugal