Golden visa hunters helped invest 4.2 billion dollars in Portugal last year.

Portugal is facing a challenging situation in its relations with wealthy immigrants, and so far there are no signs of a resolution to this problem. The country's government is taking steps to complicate entry by canceling generous benefits for foreign investors. However, it has once again become clear how deep Portugal's ties are with this group, from which it seeks to distance itself; this could lead to significant capital losses and may not help the local residents whom these measures are intended to protect.

According to data analysis by Banco de Portugal from RE/MAX Europe, nearly half of the direct foreign investments (FDI) that entered Portugal last year came in the form of real estate investments, amounting to about 3.9 billion euros (4.2 billion dollars). This situation was certainly supported by the Golden Visa program, which allowed foreign citizens to obtain residency and later citizenship in exchange for investments in real estate valued at around 300,000 dollars. However, this program was largely abolished last year when the government shifted its focus to wealthy foreign buyers, who were blamed for distorting the local housing market.

Against the backdrop of rising housing prices, local residents are facing difficulties in purchasing real estate in popular cities such as Lisbon, Porto, and the Algarve. Political tension in the country is increasing; the initially open policy towards wealthy foreigners is now seen as a factor contributing to the inaccessibility of housing for low-income locals. Studies by the statistical agency have shown that more and more working people are deciding to take on a second job or move abroad due to the sharply increased unaffordability of housing.

Christopher Willis, managing director of Latitude Consultancy, which deals with citizenship and residency issues, claims that the cancellation of the Golden Visa is likely to have a significant impact on the total foreign direct investment of $4.2 billion recorded last year. He explains that his clients are already starting to lose interest in Portugal, which has long been considered the most attractive European destination for foreign investment, according to data from Henley & Partners. However, it is unclear whether this will help alleviate the tension in the real estate market in Portugal.

As Willis notes, foreign buyers are active in a different segment of the market compared to those who are struggling to purchase housing. A significant portion of foreign investments in real estate is directed towards development projects, and it is clear that buyers are not taking properties away from low-income local residents. "This was not direct competition.

Indeed, RE/MAX experts note that the issues in the housing market in Portugal are related to a lack of affordable housing. "The Portuguese housing market is suffering from a shortage of supply," said Manuel Alvarez, regional director of RE/MAX Portugal. "Final housing prices have started to stabilize, although with slight fluctuations, due to a decrease in demand caused by the chronic problem of insufficient construction, especially for people with average incomes." RE/MAX analysts also emphasize that the "significant gap" between rental prices and salaries in Portugal negatively affects housing affordability and significantly limits the number of locals able to participate in the purchasing process.

Data for November shows that the initial attempts to restrict foreign buyers have not had a significant impact on housing prices in major cities in Portugal. For example, in Lisbon, prices surged by 5.8%, which exceeds the growth rates in Paris and Zurich.

The changes to the Golden Visa program are affecting the behavior of foreign citizens, especially Americans. Over the past year, the shift in government policy on both sides of the Atlantic has also influenced their actions. In October of last year, the Portuguese government announced the cancellation of its Non-Habitual Resident (NHR) tax program, which allowed individuals who became tax residents in Portugal to enjoy certain tax privileges for a period of 10 years. This prompted many potential immigrants to accelerate their plans to relocate to the country before the law changes, as reported by several immigration consultants.

Political events in the U.S. are also having their impact. More and more Americans are considering the possibility of moving to European countries, including Portugal, if Donald Trump wins the next election. Visa companies are reporting an increase in inquiries about relocation ahead of the presidential vote in November.