Portugal: Europe’s Hottest Property Market


Not long ago, Portugal trailed its neighbours in attracting investment, especially after the economic crisis. The historic town of Lisbon was characterized by crumbling, decrepit buildings with s faded appearance.

 

Golden Visa and Favourable Tax


Come 2012, the government cracked the whip on rental controls and introduced tax breaks and golden visas for wealthy foreign residents. At the time, over 12,000 buildings were in ruins. Now, Lisbon is not the same city it was eight years ago.

Now Lisbon’s real estate has changed, with hilltop palaces being renovated, and several buildings are being converted into rental apartments, hotels, and luxury retail outlets. Investment in the retail estate in Portugal is at an all-time high. The country is now the hottest property market in the European Union.

Thanks to the golden visa program, wealthy investors were offered a residence permit for a minimum investment of 500,000-euro ($550,000) investment. Since then, foreign investors have pumped over 4.3 billion euros into the country’s real estate sector.

The country has also become a leading tourist destination in the Eurozone. The demand for tourist accommodation has seen several properties renovated into short term rentals, courtesy of players like Airbnb.

 

Impressive Rental Yields


According to Global Property Guide research Apartments in Lisbon provide impressive rental yields, ranging from 4.5% to 6.7%. Generally, smaller apartments earn proportionately more rental yields. Nonetheless, these are good yields when you take into consideration the purchase price of these properties in a European city. Villas in the town also have similar rental yields.

In Lisbon, monthly rents range from about €12 to €16 per sq. m. while villas rent out for around €9 to €11 per sq. m. A 50 sq. m. apartment gives a 6.32% rental yield while a 250 sq. m. apartment provides a .5% rental yield. Villas have an attractive return, ranging between 5.45% and 6.05%. Like apartments, the larger the villa, the lower the rental yield.

American financial rating agency, Standard & Poor’s (S&P), forecasts that property prices will be 6% in 2020, slowing down to 5% in 2021. The forecast places Portugal in the same league as Ireland, as countries with the sharpest increase in real estate prices.

 

Effect of Brexit


Portugal is among the leading countries in Europe with high owner-occupied properties, partly due to the government subsidies and the golden visa incentive. By 2018, the percentage of owner-occupied homes stood at slightly more than 75 %.

Brexit will determine how European citizens will choose to retire. With the deal approved, we are likely to witness a pent up demand for houses in Portugal. The Golden visa scheme, coupled with the NHR scheme, is increasingly attracting investors from outside the EU, and British citizens will also be eligible to benefit from these incentives, whatever the outcome.

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