Golden Visas
Article by Savvy Cat - Official Buyers Agent Partner to KipperTree.
Read the full article here
Everyone is talking about the fact that the Golden Visa rules are changed in February this year, some were in favour, and some were against, but what has changed and why is it so relevant? This article will tell you all about it!
Up until the end of 2022, the Golden Visa Program of Portugal has been one of the most successful Investment Visa Programs, that being said it has brought billions of dollars in investment to our little corner of Europe.
This investment brought a lot of good things, recovery of cities and their vast abandonment of real estate, economic flow, public investment in cities & safety and made Portugal grow even more in popularity and tourism. The downside? Our salaries did not grow nearly as fast, which led to real estate in big cities becoming unattainable for locals.
In an effort to control the rising prices and demand, especially in big cities like Lisbon, the Portuguese Government made a choice to limit the conditions of application to the popular Investment Visa Program. In truth, it's a free market and the state can not control the rising prices, so they decided this was the next best thing to give the locals a chance to afford to own in their motherland. The idea is also to try and encourage investment in low-density areas that are in great need of it.
What does this mean in practice?
From the 1st of March 2023, high-density areas will no longer be eligible for Golden Visa Investment purposes, you can check the map below to understand what locations will be eligible or not.
The calculation was made based on population density by municipality, so some districts have municipalities that are eligible, usually on the outskirts, while the main city is excluded.
Black means not eligible, green means partially eligible and gold means eligible.
In truth, some of the locations that were excluded do not have excessively inflated prices, but they have high population densities.
These restrictions only apply to the Investment Visa (ARI - Golden Visa) other types of visas are not at all limited by them. Schengen area natives are not restricted by areas or visas, they can simply inform the relevant public entities of residence and get the necessary documents (SEF).
The main advantage of the Investment Visa in comparison to the other types of Visa is flexibility - it only requires the owners to spend 15 days a year in the country, with the other visas you are required to stay half the year in order to maintain them.
So even when this restriction becomes effective the truth is there will still be a number of other ways to invest in property in high-density areas. The measure will probably help with the inflation, at least to slow it down, but I do not believe it will lead to a drop in the market as the Golden Visa is just one of the many types of real estate investors present in it - the European, and long term future residents will have no limitations.
On the other hand, people that are now realizing the extent of this restriction are jumping for their last chance of securing a Golden Visa in the high-density areas, leading to a strong end of the year in Portuguese real estate.
If you are one of these people that wants the flexibility of the Golden Visa but also wants to invest in a high-density area I would recommend you to buy until October, mid-November at the latest, as you need to submit the application and get it processed/recognized before the end of the year. It does not need to be approved, just registered, however, Portuguese Public Services are usually quite slow, and SEF will likely be very busy, so don't leave it too last minute!
However, if you are already planning to move to Portugal and live here you don't need to be too worried about the Golden Visa, probably a D7 will be cheaper and still allow you to move and get residency in 5 years.
Also, real estate is not the only way to obtain a Golden Visa, although the limits are going up for all the options next year there are still a number of alternatives. Real Estate tends to be preferred as you are required to have a forwarding address for any of the investment options, and therefore buying it ends up being more convenient. If you want to know more about how the Golden Visa itself works please check our article about it.
Some advice
I do believe that excluding the high-density areas will lead many investors to seek their Golden Visa in other European destinations. I also believe that some low-density areas have a lot of potential for growth and can end up being an even better investment, as long as you play it smart.
My advice if you want to pursue a Golden Visa, whether it is now or next year, is not to go for the high-priced units or the construction projects. There are very well-made schemes around these but they will likely not be the best investments for 2 reasons - return will be harder in the high-priced units, and you only get the Visa once the construction is finished in the construction projects (which often takes over a year as they like to sell them pretty early on). Contractors tend to take much longer than they initially predict and most of the Golden Visa agencies that deal with them don't do much to protect and enforce penalties for that.
In conclusion, if it's purely for investment purposes I advise getting multiple units, either villas or T1, or T2 apartments and renting them out, or a bigger but well-priced investment like a country estate or a building. As long as the total invested amount is at the required minimum it does not matter how many units you get. You need to keep the property for 5 years, and then you can sell it. Renting tends to be quite easy almost everywhere as there is a lot more demand than availability in the Portuguese rental market.