This column was first published on ImiDaily.
Portugal is grappling with a housing crisis that has left many citizens struggling to afford homes. The median house price has skyrocketed, with a year-on-year growth rate of +13.5% in the third quarter of 2022. Low-income families are particularly affected, as over half of Portuguese workers earn less than 1,000 euros a month.
In February, the government introduced the “Mais Habitação” law project to address the issue, which suggested ending the Golden Visa program. According to Prime Minister Antonio Costa, investors who buy property do not create job opportunities and are contributing to the housing crisis. The initial version of the bill suggested that already issued visas could not be renewed and new applications would not be considered, even though the program had not yet been officially terminated. This raised concerns regarding the constitutionality of the government’s actions. Last Friday, the final wording of the bill was published that will now be discussed in parliament. The updated version is far less extreme and does not propose any retroactive measures. It is expected that already issued and applied-for visas will be granted as a special type of D2, allowing existing visa holders to renew their permits and retain the seven-days-in-a-year rule. However, the option to invest in real estate will no longer be available.
But are the Golden Visa holders really the ones responsible for the housing crisis? Let’s dive into statistics.
As of February 2023, a total of 11,758 Golden Visas have been granted, along with 19,171 residence permits for family members. 10,755 Golden Visas were granted via real estate purchase, and a total of €6,118 billion was invested in real estate out of a total investment of €6,852 billion.
Using data from the National Statistics Institute (INE) construction and housing reports, we can calculate that Golden Visa investors accounted for approximately 0.76% of the 1,174,000 units traded from the visa launch until the end of 2021, as per the most recent report. It is quite obvious that such an amount couldn’t potentially skyrocket the prices for the whole country.
If we crunch the numbers and divide the total investments made in real estate by Golden Visa holders by the number of Golden Visas issued via the property purchase route, we get an average cost of €568,863 for a single real estate purchase by program participants. But let’s be real – properties in this price range are not the ones that are in short supply in the Portuguese real estate market. And if we’re talking about buying multiple units for rental purposes, chances are those units are already in the rental market.
Founder of Migronis
If you are interested in more detailed statistics, check out our article on Portugal News. In this long read, we accumulated all the important market and Golden Visas information and made a deep analysis of these numbers and the market situation with the top experts in the industry.
Experts attribute the shortage of affordable housing options to various factors, including the booming tourism industry, high immigration flow, and a lack of social housing. Here are some interesting numbers.
The tourism industry in Portugal has been on the rise, with a record of over 26 million foreign tourists in 2019. Now the sector is rapidly recovering after the pandemic restrictions. A study conducted by the School of Economics and Management at the University of Porto showed that transferring real estate from housing to tourism resulted in extreme housing price increases due to an inelastic housing supply.
Additionally, Portugal has seen an increase in its immigrant population, which reached a total of 752,252 in 2022. While the number of Golden Visa holders represents the insignificant 0.38% of all immigrants last year, people coming through other visa programs often seek more affordable housing options, leading to increased competition in the market.
The shortage of social housing also is a critical aspect. Social housing constitutes only 2% of all public housing in the country, in stark contrast to other cities like Vienna, where it accounts for 60% of the stock. This lack directly impacts the most vulnerable groups of the population.
Also, let’s not forget the impact of the COVID-19 pandemic that has exacerbated the global housing shortage, with rising land prices and delays in construction projects.
However, foreign investment in real estate could be used strategically to create a win-win situation for the economy and investors, while addressing the housing crisis. How can it be achieved?
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