Were you thinking about moving to Portugal on a golden visa? Take your chance now before it’s gone! Portugal originally introduced golden visas to bring capital to the country and the measure has been successful. However, the nation is struggling with a housing crisis and has decided to end the golden visa program to prevent it from contributing to the shortage. In order to get a golden visa, one of the potential ways is through investing in property. Depending on where you invest, the value of the property purchased must be between 280,000-500,000 euros. After five years of residency in Portugal, golden visa holders are eligible to apply for Portuguese citizenship. Besides the program being scrapped for new applicants, those who bought an investment property in order to receive the golden visa must live there full-time or rent it out to others. This ensures that houses are not sitting vacant while the Portuguese struggle to afford housing.
While each additional foreigner buying a house means one less house for Portuguese citizens to buy, the problem is that emotions are driving the arguments rather than logic. As of February 2023, 11,758 investors and 19,171 family members participated in the golden visa program. While this can still impact the housing prices in Lisbon, around 30,000 people should not overwhelm a city of over half a million residents, particularly when its population is significantly below its historic population. The city’s population peaked in 1981 at 807,000 people and has now fallen by over 300,000 people. Part of the issue is that the number of people per household in Portugal has fallen, so even as the population decreases, demand for housing remains high. As purchasing houses is not the only way to obtain a golden visa, the Portuguese government could have modified the program and only allow people to continue to receive golden visas if they create jobs in the nation or transfer capital to the nation. The program has also been useful, as 6.8 billion euros has been moved into the country since October 2012.
In-Depth Look At Portugal’s Housing Crisis
While housing prices have in general been increasing across the European Union, part of Portugal’s problem is the steep increase in rent as well. Within the municipality of Lisbon, the average monthly household income is 1,973 euros, yet the average monthly rent for an apartment of 90 square meters is 1,161 euros. The monthly mortgage for an apartment of 90 square meters is 1,322 euros, 67 percent of the monthly average income. In the past year alone, rental prices have increased 36 percent in the capital. Simultaneously, wages have grown slowly, and the minimum wage is currently 760 euros a month. This can help explain why Portuguese citizens can feel threatened by foreigners, particularly those coming from wealthier nations. In 2018, the median gross hourly wage was 14.61 euros in the Eurozone, yet only 5.37 euros in Portugal.
Besides recipients of the golden visa, Foreigners, in general, have also been blamed for housing shortages. In Portugal, the foreign-born population grew 40 percent in the past 10 years alone. In reality, Portugal’s population has been slowly shrinking despite immigration. Portugal lost over 200,000 residents between the 2011 and 2021 censuses. Migration to Portugal is partially fueled by citizens of former Portuguese colonies looking for a better life. Of the 542,000 foreigners recorded in the 2021 census, 200,000 are from Brazil, 31,500 are from Angola, and 4,000 are from Mozambique.
Known for causing housing shortages elsewhere, Airbnb and other short-term rental services have also harmed the housing market in Portugal, arguably more than golden visas. In the neighborhood of Santa Maria Maior, over 60 percent of housing is rented out through short-term rental platforms. In order to prevent popular cities from becoming too similar to Disney World, Portugal is suspending the issuance of any new licenses for Airbnb.
A Nation Of Vacant Houses
While Portugal has become well known for housing prices that keep rising, the EU member state also has a large housing stock of vacant or abandoned homes. It is estimated that over 720,000 homes are currently vacant or abandoned in Portugal. For a nation of 10 million people, 720,000 homes is a significant number to help aid in the resolution of the housing crisis, yet this is easier said than done. While there may be a lot of homes without inhabitants currently in Portugal, the problem is the location of these homes. Due to job opportunities, Portuguese and foreigners have flocked to Lisbon and Porto. This leaves vacant homes in smaller towns and rural areas of the country, yet without enough job opportunities in these areas, the properties will remain empty. Some of these houses are also classified as empty by the government because they do not have an owner or renter registered as living there, but they are used as short-term rentals. In Lisbon alone, 48,000 houses are classified as empty, yet many of these homes are rented out through platforms such as Airbnb.
On the other hand, the construction industry has not been able to keep up with the demand for new homes. Part of the issue is that in 5 out of the past 7 years, more housing permits were issued than homes built. This is in stark contrast to the past when between 1986 and 2007, an average of 80,000 homes were built a year, which can also be looked at as a new home being built every 5 minutes. An increase in interest rates is not helping housing costs either. In December 2021, the interest rate for a contract to build a new home was 0.83 percent yet soared to 3.24 percent in December of 2022. More importantly, however, bureaucracy weighs heavily on building new homes, a shortage of labor in the construction industry slows down the completion of homes, and finally, profit margins are slimmer for middle-class homes so companies prefer to build houses aimed at wealthier families.
The Portuguese government is facing criticism due to discussing potentially forcing people to rent out vacant homes. Critics of this proposal argue that it is unconstitutional to mandate what people do with their properties. Prime Minister Costa from the Socialist Party must think about the potential consequences of this proposal too. While his party won the last parliamentary election by a significant margin, the Social Democratic Party is currently polling only one percent behind the Socialist Party, which can easily turn into a lead if the public becomes upset with how Costa and the parliament handle the housing crisis. For the homes that are not just vacant but abandoned, the national government could potentially look into auctioning them off for a euro, just as villages throughout Italy have done in order to find buyers willing to invest money into the renovation process. Portugal’s government may also need to work on how it can entice companies to relocate to other parts of the country where there is more housing available. While Portugal may be able to pass restrictions on third-country nationals (citizens of non-EU nations) from buying houses in Portugal, the free movement of people in the EU makes it illegal to apply any discriminatory policies to EU member state citizens. As no clear solution is in sight, this only puts more pressure on Prime Minister Costa and the Portuguese parliament.
For More Information Please Read The Following:
Almeida, Henrique. “Runaway Property Costs Push Portugal to End Golden Era of Visas”, Bloomberg, 17 February, 2023
Araújo, Amadeau. “Propostas do Governo para a habitação só têm uma medida para jovens”, Expresso, 24 February, 2023
Demony, Catarina Vicente Rua, Patricia and Goncalves, Sergio. “Young Portuguese defer dreams as housing crisis bites“, Reuters, 21 March, 2023