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  • Lisbon's Investment Prospects

    JBrown International

    Portugal's Investment Attraction

    Portugal has strong economic fundamentals, political stability and firmly positioned on the world radar. In 2018, Portugal saw 23 billion euros invested in residential real estate. According to Eurostat, Portugal recorded the third highest increase in home prices in the EU in 2017.

    The absence of inheritance tax along with two key initiatives have been critical in attracting new investment in the country. Introduced in 2009, the Non-Habitual Residence (NHR) tax rule allows for a flat rate of 20% personal income tax from activities performed in Portugal and a tax exemption, including pensions, on all foreign income. Secondly, "The Golden Visa," which is of greater relevance to the Lisbon market, offers residency to investors outside the EU (enabling free movement across the Schengen area, comprised of 26 EU states) in return for a minimum property investment of 500,000 euros. Operational since 2012, the scheme has attracted over 6,300 applicants and has proved particularly popular with Chinese, Russian, and South African buyers. Despite this, the top three international buyers of Portugal residential real estate consist of Brazil at 25%, the United Kingdom at 13%, and France at 11%.

    Portugal's Investment Attraction

    Portugal was hit hard by the global financial crisis and the ensuing Eurozone debt crisis. The government implemented wide-ranging structural reforms and employment has since picked up significantly, in turn spurring Portugal's economic recovery and radically altering the government's fiscal position. Annual GDP has grown from -3.0% in 2009 to 2.7% in 2017. The economic crisis served as a catalyst to creativity and entrepreneurship resulting in Lisbon's strong reputation as a key hub for technology and startups.

    Lisbon, additionally, has a very good value compared with other western capitals. Low real estate prices make it particularly attractive to investors from countries where property investment is a relatively recent phenomenon and where values are relatively low. It has the opportunity to join the group of global elite, premier cities which enjoy international inward investment in real estate markets offering safe haven, stability and security with high-quality product and lifestyle.

    Lisbon's Residential Market

    The revival of Lisbon's downtown property market began after the previous government eased long held rent controls in 2011 and started offering residence permits and tax breaks to foreigners.

    PWC's Emerging Trends in Europe 2019 ranked Lisbon as the best city for real estate based on their strong overall investment and development prospects. Interviewees cite the city's "quality of life" and "positive" leadership. Lisbon has one of the highest qualities of life due to low crime, good transport links, international schools and healthcare.

    According to INE, during the first nine months of 2018, more than 36% of houses that were sold in Portugal were sold in the Lisbon Metropolitan Area, volumes that represent an annual growth of 22%. Moreover, Confidential Imobiliario cites that Lisbon's Housing Price Index registered a 21.5% increase relative to the same period of the previous year, caused by a persistently superior demand compared with supply. The Bank of Portugal said that the rise in the residential real estate prices have been "particularly strong."

    Ana Gomes of Cushman & Wakefield notes that "The truth is that demand has never been stronger, it's a sellers market. Anything is possible." Average home prices in Lisbon has increased 60% over the last five years.

    Lisbon is a hot property market that is "attracting a new kind of investor that wants to buy something special, regardless of the price," said Jose Cardoso Botelho, head of Vanguard Properties.

    There is an anticipated continuance of a strong demand from domestic and international buyers and investors, characterized by more supply for various segments and diversified zones. Just in 2018, there have been 3,100 new houses in new developments in the city.

    All in all, Lisbon has undergone a renaissance. What makes Lisbon a phenomenal city to invest in property is the city's quality of life, modern infrastructure, climate, easy access to the city centre that appeals, and it's very safe.