It’s Time To Sweep Into The Portugal Property Market
The economic rollercoaster ride for most countries in the Europe isn’t new, with some markets having bumpier rides than others.
While this is usually bad news for most, it could mean good news for investors as this could be their window of opportunity to attractive investments at a lower price. According to Cushman & Wakefield Inc., a New York-based property broker, the Portuguese property market was one of the hardest hit markets in that region, with investment in commercial property dropping by 50%, but is now showing signs of improvement, at least for the next two years.
Before the 2008 financial crisis, Portuguese properties were some of the highest valued in the region and also the most popular among British buyers looking for a holiday home. However, values have since declined throughout the crisis sending the country into an economic turmoil.
So, is 2014 the year for Portugal to rejuvenate its real estate market? Experts seem to think so, and the best time to get a piece of the pie is now, before the market picks up even further.
There’s no better time than now
Investment is all about timing – especially when it comes to the real estate market. When it comes to properties it can quickly skyrocket to an unaffordable level (see the real estate market in Malaysia).
To encourage more foreigners to put their money in the country, Pedro Passos Coelho’s government introduced the Golden Residence Permit Programme in October 2012. Foreigners purchasing property worth more than €500,000 (about RM2.2 million) would qualify for a five-year visa to Portugal and the Schengen area, and eventual Portuguese citizenship.
With this golden visa programme, coupled with the current market outlook there, many from the middle to higher income groups of emerging countries, are looking to diversifying their investments into the country.
According to the Portuguese foreign ministry, quoted by AFP, 356 residence permits have been granted to investors, including 279 Chinese, 16 Russians, 10 Brazilians and nine Angolans.
The market outlook
After more than three years of decline in the real estate market, Portugal is now recovering with an increment of 1.22% in 2013 up to the first quarter of 2014, translating to an average of €993 (RM4,352.63) per square metre. According to Statistics Portugal, this recorded the first year-on-year hike in price since the third quarter of 2010.
Though it is not the only country in the European Union to offer this golden visas scheme, it is one of the few countries who have shown to be able to recover from the recent economic crisis and to be capable of offering a more robust property market in the years to come.
According to Fitch Ratings in a January 2014 report, Ireland, Portugal and the UK are the markets with the most improved outlooks, making now the best time to invest before the market improves further.
“This is partly in step with the economic recovery for a number of countries but also as a result of government and central bank policy changes which are boosting supply and demand for residential mortgages and housing. The outlook has improved most notably for markets in Ireland, Portugal and the UK,” says Gregg Kohansky, a managing director at Fitch to The Telegraph.
According to 2013 Rightmove Overseas Consumer Survey, Portugal has consistently ranked as the top five investment choice for buyers from Britain, Ireland, America, Russia, Germany, Sweden and France.
With more foreigners investing in the Portuguese real estate market, the market is set to pick up, depending on the areas.
Where are the hot spots?
Different cities and municipalities experience varied price growth with some growing fast and others remain struggling. Some of the key areas that see the biggest leap in 2013 to Q1 of 2014 are:
- Marinha Grande, Leiria (24.3%)
- Figueira da Foz, Coimbra (15.9%)
- Tomar (15.6%)
- Bragança (14.2%)
- Penafiel, Porto (12.6%)
- Portimão, Faro (10.9%)
- Aveiro (10.7%)
- Beja (10%)
- Covilhã (9.2%)
- Castelo Branco (7.3%)
- Portalegre, Portalegre (7.2%)
- Guimarães, Braga (5.8%)
Algarve being the most popular tourist spot has the most potential, according to local realtors.
“Despite uncertainties in the housing market, areas in the Golden Triangle in Algarve still stand firm as a positive investment,” says local real estate expert Alison Buechner in an article published on Global Property Guide.
For investors, Algarve offers better rental yields, ranging from 3.84% to 4.32%, coming up to about €500 in monthly rental income for a 120 sq. m. apartment.
Another city to look out for is Lisbon, the largest and the capital city of the nation with even better rental yield at 5.29% to 6.31%, translating to €1,000 per month.
What are the benefits?
Portugal is not just turning out to be a good investment destination, but also a place to reside. Most foreigners consider the cost of living to be low. According to UBS Prices and Earnings 2012, Portugal’s expenditure price index is 67.4 comparing to New York, at 100!
With a vast options of international schools with courses such as I.B. International Baccalaureate or the British GCSE and GCE examination systems, Malaysian families can rest assured of the level of education available for their children.
Portuguese Universities and Business Schools are also renowned by its academic quality and are attracting an increasingly high number of foreign students.
Portugal’s Nova de Lisboa, Católica and Porto universities remain among the best economy and management schools in Europe according to The Financial Times. Due to its strategic location on the map, it is also easier and cheaper to send older children to neighbouring countries for their tertiary education.
Get your foot in now
If you are looking to diversify your investments into other countries or even just asset classes, properties in Portugal is a great start and the Golden Residence Permit is very sweet icing on the cake.
With €500,000, you can get control-free traveling within the Schengen Area, live and work in Portugal with your family (spouse and children), and eventually apply for permanent residency (after 5 years) and citizenship (after 6 years).
Investors are only required to spend, on average, 7 days in the first year in the country, and 14 days in each of the following two year renewals to be eligible for the permanent residency
Its attractive and transparent tax rules for foreign investors makes the country one of the best countries for property investment.
The Golden Residence Permit (GRP) is a programme developed and managed by PGCCI, a Portuguese management and strategy advisory company whose partners combine extensive experience in banking, legal, real estate, and corporate finance.
GRP is a specialised service designed to assist qualified investors from outside the European Union to obtain a Portuguese GRP through the purchase of property in Portugal.
Among GRP partners are accounting and audit firm Price Waterhouse Cooper Portugal and many well-established real estate agents, consultants and technical advisors to ensure your investment is sound.
With this programme guiding the applicant through the process, facilitating the investment and residency application, your journey to becoming a resident of Portugal can be done in the most cost and time efficient way possible.
* [UPDATED 2021] The exchange rate is currently at 1 EUR = 4.76 MYR.