Are the RNH influencing house price rises in Portugal?

The decision has already been made: the non-resident regime (RNH) will remain in force in Portugal until 2024, after which a new tax break for research and innovation will be created, but "more limited". The government decided not to extend "a measure of tax injustice that is no longer justified and distorts the real estate market leading to unsustainable prices", as António Costa argued. But who are the RNH and how do they live in Portugal? How does their presence affect the real estate market? In the absence of public research on the link between the RNH and rising house prices, idealista/news reached out to several experts to find out if there is a connection. They recognize that the RNH has a "residual" influence on home buying and therefore the abolition of this status will not solve the problem of access to housing in Portugal.

RNH: who are they and where do they come from?

It is first worth clarifying who are the non-residents living in Portugal and benefiting from the 10-year tax exemption. According to the latest data from the Chamber of Accounts, there were 74,258 non-residents living in Portugal under this regime in 2022, triple the number from 2018.

Based on their professional experience, the experts are confident that the RNH has had a permanent and significant impact since its creation in 2009. "The RNH regime in Portugal has generated significant interest in recent years and is certainly one of the most successful tools to attract foreign investment," summarizes Rafaela Beire Cardoso, attorney and director of the Tax Law Department at Belzuz Advogados. And she adds that "the number of people who have entered the RNH regime has increased significantly in recent years" due to "the increasing awareness of its benefits, as well as the political and economic environment in their home countries."

"The RNH regime is the most successful tax regime in history"

Diogo Capela, attorney at law, partner at Lamares, Capela & Associados.

What is the profile of these non-residents? There is no official data on the profile of demand under this regime yet. We have requested this data from the Ministry of Finance, but it has not been provided at the time of publication of this article. Based on their professional experience, the interviewed experts say that there is a diversity of RNH profiles, from retirees to investors, usually with higher income levels.

"We are talking about retired or pre-retirement people, but also digital nomads, whole families who have chosen our country to live in, highly qualified professionals. They are usually people with a higher income than the average Portuguese, respectively with a higher purchasing power," comments Gonçalo Nascimento Rodrigues, coordinator of the Real Estate Investments program at ISCTE Executive Education. "The profile of people who have obtained RNH status are people who want to live in Portugal, whether because they plan to spend their retirement here, or those who have companies in Portugal or who work here under a subordinate or independent labor contract," shares Diogo Capela, attorney and partner at Lamares, Capela & Associados. They are "Portuguese and Europeans going abroad who have decided to practice their profession or enjoy retirement in Portugal, without forgetting that this is a fundamental aspect of attracting local and international talent," points out Patricia Baran, Head of Residential Real Estate at JLL.

Consequently, joining the RNH has been particularly notable among "retirees, entrepreneurs, free artist professionals and investors looking for tax advantages, as well as a peaceful country with good weather, a high standard of living and low crime rates," summarizes Rafaela Beire Cardoso of Belzuz Advogados.

PwC also notes interest in the RNH regime from "workers engaged in high value-added activities" and digital nomads, especially during and after the pandemic. Luiz Filipe Souza of PwC Portugal also notes interest from "high asset and income earners who typically receive various types of income, including passive income (dividends, interest, capital growth, rental income or pensions)."

In the experience of Francisco Castro Guedes of SRS, the RNH regime is "particularly sought after" by two types of employees: high-asset individuals who seek to live in Portugal because of the better quality of life (including security and excellent climate), and high-value-added professionals, including highly skilled company employees and technology professionals. "The emergence of a younger generation in the technology sector has been particularly noticeable in recent years due to the introduction and normalization of remote working," he adds.

All this allows us to say that the RNH attracts people from countries such as the UK, Spain, France, Italy, USA, Brazil or China, say the Belzuz Advogados. Athena Advisers reports that 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.

"People with RNH status are mainly coming from France and some Scandinavian countries, particularly Sweden. This has coincided with the increase in taxes on high incomes in these countries, which has caused people to look for Portugal as a place to live, although not permanently," explains Miguel Lacerda, director of residential real estate at Savills.

De Brito Properties, a real estateagency that has been following foreign investment in the Portuguese real estate market for ten years, says that "among all Europeans, the French are most interested in the RNH regime." It is from 2016 to 2020 that they have noticed a "boom" of French pensioners and families with children coming to Portugal to take advantage of this regime. In 2020, the change in the taxation of pensions from 0% to 10% reduced the demand for retirees. However, "from 2020 to 2022, we received many more requests from other Europeans wanting to come to Portugal using the RNH, and many of them were young digital nomads," says Cesar de Brito, the company's managing director.

The impact of the RNH on home buying is "residual"

One of the arguments that António Costa made in favor of ending the RNH status - and creating a new tax break for research and innovation, "more limited" according to experts interviewed by idealista/news - is that the arrival of these foreigners leads to inflation in the real estate market in Portugal. But is this the case?

Of course, these families coming 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 "residual" and, in some cases, at much higher prices than the Portuguese can afford.

Although the RNH regime is not directly linked to the purchase of housing - unlike, for example, the golden visa that ended with the Mais Habitação program - economist Vera Gouveia Barros acknowledges that "this regime means that these people become residents and therefore there is an increased demand for housing (both purchase and rental). And since it is a regime designed to attract people with high incomes, it is natural that these people have more options to pay and compete with permanent residents," she adds.

Also, Gonçalo Nascimento Rodrigues admits that "these residents purchase or rent housing in Portugal". However, while he admits that "there could be a link between the RNH and the real estate market", he emphasizes that there is no concrete data or research to confirm this. Making a quick estimate, he says that between 2018 and 2022, non-residents bought a maximum of 8% of the 625,960 homes sold in that period, given that 50,000 new RNHs arrived in the country in those four years.

"As in fact this impact was much smaller - as all of these residents did not purchase a home - it cannot be said that the regime contributed to rising house prices and a growing shortage of supply, and that ending it will help solve the problem of access to housing."