Do real estate investment trusts affect housing prices in Portugal?

The decision has already been made: the independent non-resident (RNH) regime will be definitively ended in Portugal from 2024, but a new tax incentive measure for research and innovation will be created, which will be "more limited". The government has decided not to extend "a measure of fiscal injustice that is no longer justified and is a wrong way to deflate a housing market that has reached unsustainable prices," as António Costa argued. 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 the RNH and the rise in house prices, idealista/news contacted several experts to see if there is a link. They recognize that the RNH has a "residual" influence on home buying and therefore ending this status will not solve the problem of access to housing in Portugal.

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

First of all, it is important to know who are the non-residents who live in Portugal and benefit from a reduction in personal income tax for 10 years - and even after the status ends in 2024, they will continue to benefit from this tax break, as there are no retroactive effects foreseen. According to the latest figures from the Court of Auditors, 74,258 non-residents in Portugal were registered under this regime in 2022. And it is known that the number of non-residents tripled compared to 2018.

Based on this data and on their professional experience, experts have no doubt that the RNH has had a consistent and significant attraction since 2009, when it was created. "The RNH regime in Portugal has generated significant interest in recent years and is certainly one of the best tools to attract foreign investment," summarizes Rafaela Beire Cardoso, associate lawyer and head of the tax department at Belzuz Advogados. She adds that "the attractiveness of the RNH regime has grown considerably in recent years" due to "the increasing awareness of its benefits, as well as the political and economic environment in their countries of origin".

"The RNH regime is the most successful tax regime in history," Diogo Capela, associate, partner at Lamares, Capela & Associados.

But what is the profile of these non-resident non-commuters? There is still no official data on the demand profile based on this status. idealista/news has 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, consulted experts say that the RNH profile is diverse, ranging from retirees to investors, usually with higher levels of purchasing power.

"We are talking about retired or pre-retired people and digital nomads, whole families who choose to live in our country, highly skilled people.

"The profile of people who obtain RNH status are people who want to live in Portugal, whether because they want to spend their retirement here, or because they have companies in Portugal, or they work here subordinately or independently," shares Diogo Capela, lawyer and partner at Lamares, Capela & Associados. They are "Portuguese expatriates and Europeans who have decided to come here to practice their profession or enjoy their retirement in Portugal, without forgetting that this is a fundamental factor in attracting national and international talent," points out Patricia Baran, Head of Residential Real Estate at JLL.

Thus, joining the RNH was felt above all among "retirees, entrepreneurs, free 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 Beire Cardoso of Belzuz Advogados.

And Roman Karel, co-founder of Athena Advisers, emphasizes that the RNH regime has attracted "a lot of qualified and highly valued professionals. This means that there was a lot of investment from entrepreneurial people, entrepreneurs, active people who moved to Portugal and started new businesses, opened offices, hired people and consumed goods and services. And that had a very significant effect on our economy," he notes.

PwC has also noticed demand for RNH status among "workers in activities considered high-performing" and digital nomads, especially during and after the pandemic. Luis Filipe Souza of PwC Portugal also notes demand for "high asset and income earners, who tend to receive various types of income, including passive income (dividends, interest, capital gains, rental income, pensions)."

Based on the experience of Francisco Castro Guedes, coordinator in the SRS Tax Law Division, the RNH regime is "particularly attractive" for two types of worker profiles:

• individuals with high assets who are seeking a life in Portugal due to a better quality of life (including safety and excellent climate);
• professionals engaged in high-performance activities, including highly skilled employees of companies and specialists in the technology sector.

“The involvement of the younger generation in this technology sector has been particularly noticeable in recent years, due to the implementation and normalization of remote work,” he adds.

All of this allows Mikaela Monteiro Lopes, a visiting assistant at the Higher Institute of Accounting and Administration of Lisbon (ISCAL) and a law graduate student, to acknowledge that "this regime strengthens Portugal's image as a country open to international investments and the integration of foreigners."

From which countries do RNH come who live in Portugal?

RNH mainly comes from countries such as the UK, Spain, France, Italy, the USA, Brazil, or China, according to Belzuz Advogados. Athena Advisers reports that they have welcomed people from Brazil, South Africa, Turkey, France, and Sweden, among other countries, "who came here and opened restaurants, hotels, technology companies, and many other businesses," says Roman Karel.

“People with RNH status mainly come from France and some Northern European countries, including Sweden. This coincided with the increase in taxes on high incomes in these countries, which led to the search for Portugal as a place of residence, albeit not permanent,” explains Miguel Lacerda, director of the residential real estate department Lisbon Residential at Savills.

De Brito Properties - a real estate company that has been supporting foreign investments in the Portuguese real estate market for ten years - states that "among all Europeans, the French have shown the most interest in the RNH status." Between 2016 and 2020, they noticed a "boom" of incoming French retirees and families with children who came to Portugal to take advantage of this regime. In 2020, the change in pension taxation from 0% to 10% reduced the demand from retirees. However, "from 2020 to 2022, we received many more inquiries from other Europeans who wanted to come to Portugal and benefit from the RNH, many of whom were young digital nomads," says Kesar de Brito, the company's manager.

The influence of RNH on purchasing property in Portugal is "residual."

One of the arguments that António Costa presented in favor of ending the RNH status - and creating a new tax incentive for professionals in the fields of research and innovation, which will be "more limited," according to experts interviewed by idealista/news - is that the arrival of foreigners leads to inflation in the housing market in Portugal. But is this really the case?

Undoubtedly, these immigrants from abroad need to have a home to live in, whether it's renting or buying. However, most experts believe that the amount of housing purchased by these families will be "residual" and, in some cases, at prices significantly higher than what the Portuguese can afford.

Although the RNH status is not directly related to acquiring housing - like the golden visa, which ended with the Mais Habitação program - economist Vera Gouveia Barros acknowledges that "this regime implies that these people become residents here, and naturally, this leads to an increase in demand for housing (including purchase or rental). And since it is intended to attract high-income individuals, it is natural...