The influx of professional and wealthy foreigners to Portugal has many benefits that are being overlooked in the country’s housing crisis debate, says Anne Brightman, CEO of Brightman Group.
February 16, 2023 was a day I will never forget. It was on the eve of a series of seminars that my real estate company was organising in southern Florida to promote Portugal and the Golden Visa programmes.
Of my eight sponsors paying a premium to participate in the event at the acclaimed Coral Gables Biltmore Hotel and the Palm Beach Hilton, most were pitching these Golden Visa products.
That afternoon, one week before we were scheduled to leave for the US, Portugal’s Prime Minister António Costa announced that the government would terminate the Golden Visa programme. The lack of coherent communication from responsible government officials afterward propelled Portugal’s real estate market into short-term chaos.
Since 2012, residency through property acquisition programme has brought in €7 billion in government revenues and generated countless jobs, both direct and indirect. It was seen as the catalyst over the last decade for Portugal’s booming real estate sector and the economy in general.
To make an announcement of this magnitude regarding the end of something as critical to the economy as the Golden Visa programme was reminiscent of 1990 when Brazil’s newly elected president, Fernando Collor, announced at his inaugural speech the end of hyperinflation, the launch of a new currency and, almost as an afterthought, the fact that all bank accounts would be frozen for an indefinite amount of time.
THE NHR PROGRAMME
The NHR programme, which was finally announced to end on January 1, 2024, allowed foreigners to benefit from reduced tax rates for 10 years. The transition to the new tax regime has been complicated and has caused significant delays in the approval of applications.
This situation has been challenging for foreigners looking to move to Portugal and benefit from the favourable tax conditions previously offered under the NHR regime. The introduction of the new Incentivised Tax Status Program (ITS) is expected to replace the NHR with somewhat different and potentially less advantageous conditions.
Since their inception, both the Golden Visa and NHR programmes have been cornerstones in Portugal’s economic revival. Designed to encourage international citizens to invest in Portugal, they have attracted foreign capital and stimulated economic growth leading to significant advancements in social welfare, infrastructure quality and cultural enrichment.
Foreign Investment has injected billions of euros into the Portuguese economy, revitalising various sectors, including real estate, tourism, tech startups and renewable energy. It has created thousands of jobs for Portuguese citizens, reducing unemployment rates and fostering a more robust economy.
While the big dilemma remains the lack of affordable housing for Portuguese citizens, the fact is that the vast majority of foreigners relocating to Portugal through the Golden Visa and NHR programmes were not seeking affordable housing. The investments through Golden Visas targeted a property segment that was not in short supply and did not directly compete with the housing needs of the average Portuguese citizen.
The demand for higher-end properties has increased values and spurred development projects, revitalised neglected areas and contributed to the renewal of decaying neighbourhoods in urban city centres.
A MORE INCLUSIVE AND DIVERSE SOCIETY
There has been a significant increase in the number of international schools and universities that offer diverse opportunities for both local and expatriate families. The private healthcare sector has benefited from increased funding and international expertise. The influx of international residents has enriched the Portuguese cultural tapestry, fostering a more inclusive and diverse society.
Despite the advantages and benefits this foreign capital has brought with it, there is a growing faction of the population that blames the housing crisis and overburdened public healthcare system on the non-taxpaying foreigners and that interprets the growing diversity as a loss of traditions and culture.
As a foreigner in Portugal, I have been on the receiving end of this negative attitude and am trying not to be too upset over the fact that after eight years of living in Portugal, having a company employing over 35 professionals with every team member making well above the minimum wage and paying 48% personal tax and 21% corporate tax to the government, I still do not have permanent residency, let alone citizenship.
The astronomical rent I pay for agencies, offices and housing is painful, but I recognise that it is a result of the growing pains of a burgeoning economy and that rapidly increasing rentals are a reflection of this economic growth.
This foreign influence is indeed changing the vibe of urban areas and sleepy fishing villages that have become trendy hangouts for an international posh crowd. However, those who enjoy the benefits of better wages, more jobs, better quality education and private healthcare would do well to remember that after the 10-year tax benefit period ends, these same foreigners are contributing alongside the Portuguese, and we all have the same goals – a better quality of life, decent wages, good healthcare, safety and an honest, well-run government.