Conference "Is Portugal a victim of its own success?" "

Conference "Is Portugal a victim of its own success?" 

On October 21, 2020, during the online Portuguese real estate fair "In Portugal 2020", César de Brito, founder of the agency DE BRITO Properties, he gave a conference

on the key factors and the reasons why the Portuguese real estate market has experienced a spectacular recovery over the past 5 years. Far from prejudices and misconceptions, this presentation aims is to give a realistic light on the actual market.

 

 

 

 

In 2011, Portugal was on the verge of bankruptcy : salaries or retirement pensions had to be revised downwards, a lot of layoffs in the public and private sector, but also increased taxes. Europe came to save the country by lending 78 billion euros, this is the tune that has been called "Troika" in Portugal. 

During this period of economic decline, the Portuguese made enormous efforts and some 122,000 left the country to seek a better future abroad. The Portuguese gouvernment has had to sell some of its strategic investments to foreign groups: sale of electricity from Portugal and the electricity grid to Chinese and investors in the Middle East, or sale of Portuguese airports to French Vinci. Several banks went bankrupt (BES, BANIF, BPN, BPP, ...) and those that remained alive no longer lent money which caused the collapse of real estate prices in Portugal at levels never reached.

With the aim of reviving the national economy, Portugal implemented a series of stimulus measures in 2012. We have identified 6 measures, which we will call the 6 pillars, of the relaunch of the real estate sector in Portugal:

• The first pillar was the revision of the law governing rental contracts in Portugal. This law made it possible to cancel old contracts with old rents blocked at derisory prices (type French law 48). The renovation of properties and buildings in city centers has therefore been possible thanks to this.
• The 2nd pillar is the law on urban rehabilitation which aims to facilitate the administrative procedures for renovation in the historic centers of cities such as Porto or Lisbon, as well as to offer tax advantages for any urban rehabilitation investment (rent and more - value taxed at 5%, VAT reduced to 6% on works, refund of transaction rights and exemption for 5 years from property taxes). Investment was attracted thanks to this law in city centers that had been abandoned by Portuguese residents.
• The third pillar was the launch of the “Golden Visa” programs which offer the possibility to foreign investors (outside the European Union) to obtain a Visa for 5 years to come to Portugal and Europe in exchange for an investment of € 350,000 or € 500,000 in real estate in Portugal or € 1 million on an investment or the creation of a company that employs more than 10 people. The influx of foreign capital has made it possible to revive new construction in Portugal.
• The 4th pillar was the establishment of the status of "non-habitual residents" in Portugal which, for anyone who has not been a Portuguese tax resident during the last 5 years, offers a tax rate of 0% on private pensions from foreign sources on condition of becoming a tax resident and living for more than 6 months in Portugal. Today, more than 45,000 people have come to settle in Portugal.
• The 5th pillar is the Alojamento Local law which came out in 2014 issuing licenses to allow individuals to place rooms or apartments in the tourist rental market. This law makes it possible to rent accommodation to tourists all year round and to benefit from a tax system, at the time very attractive, of 90% income reduction.
• Finally, the 6th pillar in 2016 was the return to access to credit for the Portuguese. Portuguese banks lift restrictions on home loans that year.

Today, we observe that Portugal is doing much better thanks to the increase in its GDP in 2018 (+ 3%) but also the unemployment rate below 8% in the same year. The country has become a model of economic recovery around the world.

Portugal has become in 8 years a very attractive country for foreigners from all over the world who want to live in a stable, safe and sunny country, and have always done so. Many foreign companies continue to set up. Real estate opportunities are still underexploited in certain neighborhoods of Porto or Lisbon and even more in secondary cities across the country. Portugal is therefore far from being a victim of its success, it is rather a driving force, as we have seen with the establishment of the 6 pillars which have supported the country's recovery and which will continue to support it in the years to come.