Residence permits for property in Portugal in 2022: loopholes, prices, bubble


Property prices in Portugal are rising in the run-up to 2022, driven by demand from foreigners who are keen to close the deal before the golden visa rules change. But not everyone realises that the restrictions on applying for a residence permit when buying property in Portugal, imposed by the new rules, are quite legally circumvented.


Property prices in Portugal are rising on the eve of 2022, stimulated by changes in the rules for the issuance of golden visa and other factors

Property values in Portugal continue to rise, albeit at a slower pace than in previous years. According to Oldypak Capital LP report, the figure rose by 5.46% year-on-year in Q3 2021 and by 2.85% on Q2 2021. It is noteworthy that in April-June this year the statistics office recorded an increase of as much as 10.6% year-on-year.

Oldypak LP
Oldypak LP

Property prices in Portugal showed a significant drop at the beginning of the last decade. The recovery only began in the fourth quarter of 2014 – after a consecutive decline in house prices for a full 13 quarters. Since then, residential property values in Portugal have been rising steadily, even in spite of the pandemic and the resulting economic crisis.


And the upward trend is recorded even in some cities, where prices are high enough by the standards of the state as a whole. Thus, according to the portal Imovirtual, over the past 12 months the average value of property in Lisbon showed an impressive increase of 5.9%. In October 2020 the local market began to recover after a brief slump caused by the pandemic.


In October 2021 the average price in Lisbon has risen by almost 44 thousand € compared to a year ago, reaching 583,636 €. Lisbon is now the leader on the Portuguese market in terms of prices, 70 thousand € ahead of the second highest average price region. We are talking about Faro (504 285 €).


Construction activity is on the rise again, but demand is quickly absorbing supply

After a sharp slowdown in 2020 due to pandemic-related restrictions, activity in the residential construction sector is picking up again. According to INE, in the first three quarters of 2021 the number of approvals for individual residential properties in Portugal, including flats in high-rise buildings, villas etc., increased by 15.3% year-on-year to 21,230 units. The figure increased by just 2.6% in 2020 after rising 8.4% in 2019 and 43.5% in 2018.


Economic outlook boosts buyer activity

The Portuguese economy grew by 4.2% year-on-year in the third quarter of 2021 after record growth of 16.1% year-on-year in the second quarter of 2021, according to INE. The European country’s GDP declined for five consecutive quarters from Q1 2020 to Q1 2021 due to the negative impact of the Covid-19 pandemic. Overall, the Portuguese economy contracted by 8.4% during 2020 – the worst result since 1936.


According to Oldypak Capital LP report, the state economy will grow by 4.5% in 2021 and a further 5.3% in 2022 on the back of a recovery in exports of goods and services (including tourism services) as well as an increase in private consumption following the lifting of coronavirus-related restrictions.


Recovery of investor confidence in Portugal’s commercial property market

The commercial property market in Portugal is recovering, returning to the upward trajectory typical of the period before the arrival of the Covid-19 pandemic. The strengthening of the uptrend is largely due to the restoration of investor confidence.


Relevant information is contained in the latest country report by consultancy Savills on the Portuguese commercial property market, the authors of which expect the sector to continue to grow in 2022.


According to the consulting firm, from January to early October 2021 in commercial real estate in Portugal invested 1.1 billion €. And in the third quarter the volume of investment amounted to 534 million €. Savills estimates that the 2 billion mark could well be reached by the end of 2021.


In the first 3 quarters of 2021 the office segment was the leader in attracting capital investment with a 36% share of the total. The hotel sector comes next with a 20% market share. In contrast, the retail sector, which was hit hard by the pandemic, attracted only 8% of investment.


The consultancy’s topical report additionally underlines an important fact: deals involving foreign investment accounted for more than 80% of the total number of investment agreements signed between January and the end of September 2021. But domestic investment in Portuguese commercial real estate is also on the rise, thanks to investment management funds and private investors interested in purchasing products in office segment and showing particular interest in areas with high footfall.


Preparing to apply for a residence permit when buying property in Portugal under the new rules

Portugal’s property market continues to offer investors a stable and secure investment, providing a gradual increase in prices and a variety of opportunities. The market’s resilience to the pandemic and ability to recover and continue to grow has attracted, amongst other things, numerous foreigners applying for a golden visa (residence permit through investment in the purchase of property in Portugal / other assets).


The associated investment immigration programme, since its launch in 2013 until early December 2021, has attracted more than 10,000 investors from all over the world, who have made foreign direct investments totalling more than €6 billion.


Unfortunately the rules for granting residence permits for real estate in Portugal / on the basis of other capital investments (bank deposits / funding of research projects / support of venture capital funds, etc.) from 1 January 2022 become a little less attractive. In particular, the following changes concerning real estate investments in Portugal must be taken into account:


Investors will lose the ability to buy new residential property in Portugal / invest in renovation projects for old housing in popular cities and areas, including Lisbon, Porto, Setubal and the Silver Coast.

Investors retain the right to buy homes in Madeira and the Azores.

The entry threshold remains the same at €500,000 in the case of a new build / €350,000 in the case of a renovation project in an old building (a 20% discount in both cases is available when buying property in Portugal in a low density / underdeveloped area).

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