Insight – will Portugal experience a post-Covid investment boom?

Despite Portugal being taken off the UK’s green list from tomorrow, causing bafflement from the Portuguese government and a mad rush home for those currently in the country on holiday, all the other signs are good for the Iberian peninsula's smaller nation – with the slow easing of lockdown reaching its next phase on June 14.

While cases have risen recently, particularly in Lisbon, they are still relatively low – especially in the Algarve – and the number of people in intensive care and dying from Covid is also currently very low.

Portugal’s foreign ministry, when questioning the thinking behind the UK government’s latest move, said it was doing everything it could to protect its citizens and visitors.

Here, we speak with João Pinheiro da Silva, real estate partner at CMS Portugal, and Henrique Peyssonneau Nunes, managing associate immigration at CMS Portugal, for their thoughts on the current market, why people should invest in the country and whether Brexit has had any impact on investment.

With Portugal’s deconfinement plan and vaccine rollout going well, will there be an investment boom? 

JPS: As someone linked to the real estate sector, we certainly hope for an investment boom in Portugal. At least, we are fully prepared and equipped for it. The pandemic forced a reinvention of the market, pressing new supplies given the new demand models that are increasingly being felt.

Along these lines, we believe markets such as rehabilitation will continue to grow, but in the short run, it is our opinion that the residential and logistics markets will emerge victorious from the epidemiological crisis that unfortunately persists until this day.

In fact, in the first quarter of this year, foreign investment was significant (about 1.7 billion euros in capital in the Portuguese economy), which corresponds to the strongest start of the year since 2017.

What has the Portuguese government been doing during the Covid crisis to encourage investment - residential property and otherwise - into the country? 

JPS: The surprise with which Covid-19 devastated the world provoked several and different reactions by the governments responsible for giving a fast and effective response. In this regard, Portugal was, to some extent, an example to follow.

The position of caution and daily analysis of the pandemic evolution, led to a body of legislation produced in order to protect the real estate economy, especially the most vulnerable and affected parties, namely with the implementation of a moratoria regime for the payment of rents.

The encouragement of residential investment continues to be a measure considered in the economic recovery, with the Golden Visa programme regarded as an important driver for attracting investment.

Why should people to be persuaded to invest in property in Portugal? 

JPS: Several reasons can be given for investing in Portugal. The first one that comes to mind - in addition to the fantastic weather of Portugal during practically the whole year - is its security, enabling, from the outset, a stability desirable by all.

Further to this, Portugal is highly developed in its road networks, empowering rapid and efficient connections. It is also worth mentioning the Portuguese quality of life, sustained, namely, on the level of education and access to healthcare.

Moreover, the geographical location of Portugal stands out positively, being Europe’s gateway, stimulating international relations and activities with numberless countries. Besides that, Portugal, being a European Union member state, is considered a relevant partner to have thanks to its political stability.

Has Brexit had any impact on British investment in Portugal? 

HPN: Brexit definitely had an impact on British investment in Portugal. The Brexit transition period ended in December 2020 and therefore the new rules just took effect on the January 1 2021.

However, the rush to Portugal by UK nationals started in 2019 and 2020, during the Brexit transition period, due to a special legal regime approved by the Portuguese government in March 2019, under which the British registered as residents in Portuguese City Halls would be considered as legal residents after January 1 2022, through a straightforward immigration procedure.

From January 2021 onwards, the British became third-country nationals and consequently eligible for the so-called ‘Golden Visa programme’ (an investment visa through which they may have access to Portuguese citizenship after five years, staying in Portugal only seven days per year). According to our recent experience, there are indeed many UK nationals investing in Portugal for Golden Visa purposes.

How will the changes to the Golden Visa impact investment in second homes in Portugal? 

HPN: The Golden Visa regime was amended at the beginning of this year, according to which, from the January 1 2022, investment in real estate for residential purposes will only be eligible for Golden Visa if the investment occurs in inland areas and in the islands of Azores and Madeira.

That is to say that real estate investments for residential purposes will be excluded from the Golden Visa programme in the Lisbon metropolitan area, the Porto metropolitan area and in almost all of the Algarve territory.