In 2012, Portugal established a Golden Visa program that grants permanent residency to anyone who invests in certain types of properties within the country at a minimum of €500,000. As a result, real estate prices in the Algarve and Lisbon are soaring.
Along with ditching inheritance tax, the Portuguese government has instituted two other key incentives to boost the market aside from the visa program. A Non-Habitual Residence (NHR) tax rule that allows for a flat rate of 20% personal income tax on everything that occurs within the country was introduced in 2009. There is also a tax exemption on all foreign income that includes pensions. These three factors, accompanied by the Golden Visa program, are causing a major influx of foreign investment.
Until 2012, Lisbon had seen few investors in its property market. Since the program was instituted, over 6,300 foreign investors have enrolled. Lisbon is taking the bulk of these investors since its low crime, international schools, and healthcare give the city the highest quality of life in the country. It’s actually 38th out of 450 according to a recent Mercer benchmark ranking quality of life in cities across the world.
As a result of all this, the UK’s market share is declining and Portugal’s foreign-born resident population has doubled from 207,000 to 416,000 since the new millennium started. Before 2012, 60% of foreign real estate buyers in the Algarve were either British or Irish citizens. Now, most investors in Portuguese real estate are Chinese nationals with Russians and South Africans close behind. Northern Europeans are now investing more than UK nationals.
The Algarve’s “Golden Triangle” is its most exclusive second home destination. Strong sales rates for villas below €5 Million have been registered and villas under €1.2 million are in high demand as well. Overall, the Algarve has shown a 6.5% increase in 2017 and Lisbon is up 24% in the property market since 2012.