Is the RNH influencing house price growth in Portugal?

The decision has already been made: the "non-resident" (RNH) regime in Portugal will be definitively ended from 2024, and will be replaced by a new tax break for research and innovation that will be "more limited". The government has decided not to extend "a measure of tax injustice that is no longer justified and is a distorted way of increasing housing prices that have reached unsustainable levels," as argued by António Costa.

But who are the RNH and how do they live in Portugal? How does their presence affect the housing market? In the absence of published studies on the link between RNHs and house price growth, idealista/news contacted several experts to see if there is a connection. They admit that the RNH has a 'negligible'''impact on the purchase of housing and that therefore ending this status will not solve the problem of access to housing in Portugal.

RNH living in Portugal: who are they and where do they come from?

First of all, it is important to know who are the non-residents living in Portugal who have benefited from the personal income tax reduction for 10 years - and even if the status ends in 2024, they will continue to enjoy this tax break as there is no provision for it to be retroactive. We know that according to the latest data from the Tribunal of Accounts, there were 74,258 non-residents in Portugal in 2022 benefiting from this regime, and that the number of RNHs has tripled compared to 2018.

Looking at this data and given their professional experience, experts do not''doubt the RNH have had consistent and significant popularity since 2009, when it was created. "The non-resident regime in Portugal has attracted considerable interest in recent years and is certainly one of the best tools to attract foreign investment," summarizes Rafaela Beire Cardoso, lawyer and head of tax at Belzuz Advogados. She adds that "the number of people who have joined the RNH has increased significantly in recent years" due to, among other things, "the increased awareness of its benefits, as well as the political and economic environment in the countries of origin".

"Non-resident status is the most successful tax program in history," Diogo Capela, attorney, partner at Lamares, Capela &''Associados.

But what is the profile of these non-residents? "

There is no official data yet on the profile of demand under this regime. We have requested such data from the Ministry of Finance but it has not been provided at the time of publishing this article. Based on their professional experience, the experts interviewed say the RNH profile is diverse, ranging from retirees to investors, usually with higher levels of purchasing power.

"We are talking about retirees or pre-retirees, but also digital nomads, whole families who have chosen our country to live in, highly skilled workers. These are usually people with incomes above the average for the Portuguese, respectively with a higher purchasing power,'''Commented Gonçalo Nascimento Rodrigues, coordinator of the ISCTE Executive Education real estate program.

'The profile of people who have obtained non-resident status are people who want to live in Portugal, whether because they plan to spend their retirement here, because they have companies in Portugal or they work here as salaried or independent employees,' shares Diogo Capela, attorney and partner at Lamares, Capela & Associados.

Therefore, joining the RNH has been tangible among 'retirees, entrepreneurs, freelance professionals and investors,''who are looking for tax advantages and at the same time a country that is calm, with good weather, high quality of life and low crime,' summarizes Rafaela Beyre Cardoso of Belzuz Advogados.

Roman Karel, co-founder of Athena Advisers, notes that the RNH regime has attracted "a lot of highly skilled and valuable professionals. Which means there was a lot of investment from entrepreneurial people, entrepreneurs, active people moving to Portugal and starting new businesses, opening offices, hiring people and consuming goods and services. And that had a very significant impact on our economy," he emphasizes.

The PwC also notes the demand for the RNH regime from "workers in areas of activity considered to be'''high performers' and digital nomads, especially during and after the pandemic. Luis Filipe Souza of PwC Portugal also notes the demand for "high-net-worth individuals, who typically receive various types of income, including passive income (dividends, interest, capital gains, real estate income or pensions). "

From the experience of Francisco Castro Guedes, coordinator in the SRS Tax Law Unit, the RNH regime is "particularly sought after" by two types of work profiles:

• "high-income people" who seek Portugal to live in because they find here the best quality of life (including security and excellent climate);
• professionals engaged in high-performance activities, including business executives and''technology professionals. "Recent years have seen a distinctly younger generation attracted to this technology sector due to the introduction and normalization of remote working," he adds.

What countries do RNHs living in Portugal come from? RNHs primarily come from countries such as the UK, Spain, France, Italy, USA, Brazil or China, say Belzuz Advogados. At Athena Advisers, they say they have received people from Brazil, South Africa, Turkey, France and Sweden, among other countries, "who have come here and created restaurants, hotels, technology companies and many other businesses," says Roman Karel.

The impact of the RNH on home buying in Portugal is "negligible "

One of the arguments put forward by the''Antonio Costa's argument in favor of ending RNH status - and creating a new tax break for scientific research and innovation, "more limited", according to experts interviewed by idealista/news - was that the arrival of these foreigners affects inflation in Portugal's real estate market. But is this really the case?

There is no doubt that these families arriving from abroad need to have a place to live, whether renting or buying. But most experts believe that the amount of housing purchased by these families will be "negligible" and even, in some cases, at prices much higher than the Portuguese can afford.

Although RNH status is not directly linked to the purchase of housing - like the golden visa, which ended with''program Mais Habitação, economist Vera Gouveia Barros recognizes that "this regime assumes that these people will become residents here, and naturally there will be additional demand for housing (in the form of buying or renting). And because it is a regime designed to attract people with high incomes, their ability to pay is higher and they are competing with those who are regular residents," she adds.

Gonçalo Nascimento Rodrigues also recognizes that "these residents are buying or renting homes in Portugal." But while he admits that "there may be a link between the RNH and the increase in house prices in some areas or market segments", he argues that "this impact is insignificant, for the demand for real estate in Portugal is mainly provided by the''local buyers and residents'.

The impact of the RNH on the housing market in Portugal thus remains negligible, and ending this status will not solve the problem of access to housing in the country.