'Are foreigners still attracted to Portuguese real estate?'

Portugal has become a popular destination for foreign real estate investors in recent years. They have "shopped" in the country and revitalized the real estate sector in various segments, from residential to commercial. But in the process, the country (and the rest of the world) has experienced a pandemic and is now facing the consequences of an economic and financial crisis that has arisen due to the war in Ukraine, which is not coming to an end. In an international context marked by high inflation and rising interest rates set by the European Central Bank (ECB), Portugal has found itself in an economic crisis, with many market participants pointing to instability, including legal instability due to the closure of the program'' A 'golden visa' inside the More Housing Program (Mais Habitação). What to expect from the future? Will foreign investors, including Americans, remain interested in Portugal? The academics we collaborate with answer these and other questions.

American interest in real estate in Portugal

"I do not believe that Americans are stopping investing in real estate in Portugal, on the contrary. The interest in clients from the US continues to grow. This is mainly due to the interest they have in the country and the fact that real estate prices in Portugal are lower than in the US. US citizens want to come to Portugal because it is a country with a lower standard of living where you can enjoy a greater quality of life," says Diogo Capela, attorney-at-law, partner of the firm''Lamares, Capela & Associates.

According to Bloomberg, however, more Americans are leaving Portugal because of high housing costs. Nuno Garcia, CEO of GesConsult, shares this view. "Over the last three years we have seen a so-called 'love story' between Americans and our country (...). Now we are starting to see this 'new American dream' being shattered. The arrival of a large number of foreigners with much more purchasing power than the Portuguese has led to a dramatic increase in housing costs, which seems to hinder the idea of Portugal remaining an affordable country to become established in," he says.

The future of real estate investment in Portugal

Till then, Diogo Capela notes,''that "the end of the golden visa program will only affect real estate investments," noting that these investments will continue "for other equally attractive forms of investment for US citizens, such as the purchase of units of participation in investment funds (500,000 euros)."' "In addition, many Americans do want to live in Portugal, and in such cases there are residence permits and residence permits that may be applicable and which are even more interesting than the 'golden visa'," he explains.

The role of foreign investors in the real estate market in Portugal

It is important to note that the majority of real estate investment in Portugal comes from foreign investors.

The real estate situation in Portugal and its impact on local residents

The real estate situation in Portugal is putting pressure on locals. Increasing housing costs and limited access to mortgage credit also explain the slowdown in real estate transactions, especially in the residential segment. This comes at a time when the industry requires''more affordable housing.

"There seems to be a slowdown in real estate being carried out by the Portuguese (customers and investors) and more supply in the market. Interest rates may be one of the most determining factors for this, but perhaps the assumption by some of a possible general decline in prices is simply putting investment plans on hold. Another factor that may be important is the More Housing package and the barriers to residential accommodation, measures that may be contributing to a slowdown in investment by national investors," commented Diogo Capela.

Portuguese people and the real estate market

On this point, Miguel Lacerda of Savills is clear. "There is no question that the Portuguese remain''active in our [luxury] market, where the need for financing is also extremely low. On the other hand, investing in real estate is a guarantee of security and allows you to get a return closer to inflation than the conditions offered by banks,' says the head of Savills' residential real estate division.

Otherwise, Nuno Garcia voices concerns about the ability of the Portuguese to buy real estate in their country. "Portuguese people are finding it increasingly difficult to buy and even rent homes in their country. Housing prices continue to rise and the supply in the real estate market cannot meet demand. In addition, wages are not increasing at the same rate as housing costs. Changes in getting''mortgages, both in terms of maturity and repayment capacity, should also be seen as specific barriers to buying a home,' he warns.

In conclusion, the CEO of GesConsult believes that some Portuguese are still active in the housing market, although he believes this is not the reality for the majority of the population. "Many people are leaving the big cities in search of housing in areas with a more affordable cost per square meter (m2)," he says.