Portugal registers greatest increase in property investment in Southern Europe

With good news thin on the ground globally, a ray of sunshine broke over Portugal this week when Savills real estate investment consultancy reported the country registered the greatest increase in property investment in southern Europe last year.

 From 2021 to 2022, volume of business rose 67%, reaching €3.3 billion.

 Portugal’s allure beat both Italy and Spain, the other ‘leaders in the field’.

Savills described the leap in investment as a form of bounce-back from the doldrums of the pandemic. But Portugal also has storm clouds on the horizon: government proposals to fix Portugal’s housing crisis which many complain are “an attack on private property”.

The good news here is that there has been so much pushback against the ‘Mais Habitação’ blueprint, that even its time-schedule has been delayed.

Initially, the programme was to have been in public consultation for a month, with a decision by the Council of Ministers this week.

Now, after lobbying by municipal councils, public consultation has been extended to March 24 – with decisions by the government due to be made in two stages.

Real estate agents everywhere, not least the Algarve, are hoping the most controversial measures – the scrapping of golden visas; new limits on the Alojamento Local regime (short-term rentals) and the idea to coercively lease vacant properties for onward ‘accessible rental’ – are all dropped.

As many have pointed out, they are more likely to make lawyers money than help with the country’s housing crisis.

“Everyone in the industry is just hoping the government will see sense,” Jorge Pereira, sales and marketing director of Fine & Country Algarve, tells us. “Golden visas seem to be being used as a scapegoat, when the programme has brought incredible wealth to the country.”

There is huge confusion too as to what could happen to what are called in the industry ‘golden visa funds’ – venture capital investments in often sustainable businesses, like aquaculture, solar energy, agrifoods – in which shareholders benefit from golden visas (official name: ARI, standing for Authorisation of Residence through Investment).

Are they too to be stripped of their visas when these come up for renewal (as the government has intimated will happen to golden visa holders, “unless they live in their investments, or rent them out on the long-term market”)?

“You cannot live in an investment fund, or rent it out,” Pereira says the obvious. “What does the government think it will be achieving by stopping this programme?”

This leads on to all kinds of other questions. Did the government mean it wanted to stop golden visas simply for habitational purposes, or is it drawing a line under the whole regime?

A text on the official page of the Ordem dos Advogados (Bar Association) has suggested the latter, informing people that as far as it is aware, any applications for golden visas received by SEF borders and foreigners agency after February 16 will not be accepted.

Investors fearing the worst are already consulting lawyers; some are talking about mounting a Class Action against the Portuguese State; in short, the prediction that lawyers will make the most out of the ‘Mais Habitação’ policy is already taking shape.

As for the ‘plans’ to limit the Alojamento Local (short-term rentals) regime, this is more likely to ‘kill off tourism’, say those in property sales.

“What we understand is that as well as not licensing any further properties for Alojamento Local, the intention is to make the licences applicable to the owners, not their properties, so that when they eventually sell them, the house/apartment can no longer be rented on the tourist market”, says Pereira. “What this means, in the long-term, is that fewer tourists will come here! They will go to other destinations where rules like this have not eaten into supply.”

Fewer tourists coming here will also impact on businesses throughout the country.

Bizarrely, opposition to the government’s ‘Mais Habitação’ programme has barely come from political parties. National media is starting to explain why: they see it as the government playing much more a vote-catching game than seriously attempting to tackle the issue of housing in Portugal; hence opposition parties don’t want to fall into a trap that could lose them votes.

Even the plan to coercively lease vacant habitable properties from private owners, to rent them on at accessible prices (with faint tax perks to the luckless owners) rings hollow: owners will be at liberty to challenge coercive seizures through the courts, while the entity that owns the largest amount of vacant property in the country is … the Portuguese State.

Writing in Observador online on Tuesday, social scientist Manuel Villaverde Cabral suggests the government is trying to fix the housing crisis with propaganda.

Even the minister of housing is so young as to detract from a sense of confidence. At 34, Marina Gonçalves has risen through the Socialist ranks from university. She has never worked in the private sector, or the non-political world. She insists the concern of the government is to “guarantee that Portuguese people can maintain the houses in which they live, whether they are rented or on mortgages”.

Why then the necessity to ravage regimes that ultimately create jobs and wealth? Aren’t these the kind of activities that employ Portuguese people?

Says Cabral, the government’s housing programme is ‘sand in people’s eyes’ – a political ruse to set the poor against the rich.

“The PS has nothing to give but propaganda and is vote-grabbing with populist and even racist promises that have little chance of fulfilling the designs of a party of manifest crisis,” he concludes.

Thus, focus now is on the next 10 days, to try and ensure pushback translates into rewrite.

Even president Marcelo Rebelo de Sousa has likened the ‘Mais Habitação’ blueprint to a melon, suggesting no one can tell how good it is until it is opened. Certainly, cursory inspection says it smells distinctly off. Melon is an anagram of ‘lemon’, which is also slang for ‘defective, a dud’.

Support for government’s housing plans

The only group that appears to be in favour of ‘Mais Habitação’ measures are tenants’ associations in Lisbon, representing the most vulnerable in society. Their enthusiasm is focused on the clauses in which the government promises to pay outstanding rent, and help with mortgage payments, in times of dire need.

When quizzed on live television for a number of families the ‘Mais Habitação’ policy was likely to help financially, housing minister Marina Gonçalves said “around 100,000”.

In other words, the government’s plan is to put a sizable chunk of foreign investment at risk to help 10% of the population.

It could be propaganda. It could also be another way to ease António Costa out of power in time for the European elections in 2024 (it has always been said that he fancies his chances as the next President of the European Council).

One thing detractors say it definitely isn’t is a solution to the country’s housing crisis.

By Natasha Donn
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