Portugal is scrapping the right to establish residency in Portugal in return for investment through the golden visa program. What prompted the Portuguese government to abolish a scheme which has attracted more than six-billion euros of inward investment since its launch in 2012?
Since its inception, the golden visa in Portugal – one of the most sought-after such programmes in Europe – has offered British expats a pathway to residency in Portugal via investment. Originally created to attract foreign investment and boost the country’s flagging economy, the program allows non-EU citizens to gain a residency permit in Portugal (and with it the right to live and work in the country, as well as travel freely within the Schengen Area) provided they make an investment in the country. There are various options for this, ranging from job creation to supporting scientific or technological research, but the most common is purchasing or investing in real estate in Portugal.
While there have been some changes to the programme – you can no longer buy residential real estate in Lisbon, Porto and certain parts of the Algarve – the golden visa in Portugal has nevertheless generated almost six-billion euros in investments in the last decade. But it has not been without controversy.
New developments
In February 2023, the Portugal government announced that the golden visa scheme would be officially scrapped, part of a raft of measures designed to address the country’s severe housing crisis that also includes banning new licenses for short-term holiday rentals like Airbnb. This announcement follows swiftly on the heels of Ireland’s decision to axe its own golden visa program.
Some in Portugal have blamed soaring house and rental prices on the golden visa scheme, with Portugal’s prime minister, António Costa, stating that stopping golden visas in Portugal would help combat price speculation in real estate.
Is it the right decision?
Has the golden visa scheme created the current housing crisis in Portugal? It may have been part of the problem and poorly thought out in certain areas, but this should have been an opportunity for improvement, not cancellation.
The golden visa in Portugal doesn’t need to be abolished to fix the housing crisis. The better choice would have been for the government to change the criteria for investment from real estate to areas such as government-secured, fixed yield affordable housing; funds that invest in local businesses and start-ups; renewables infrastructure projects; research and development; government bonds; and arts and culture. This would ensure inward investment is directed to where it is needed most.
Other causes of the housing crisis in Portugal
There’s no question that Portugal has a serious problem when it comes to affordable housing, but it’s one that has many causes. While it’s possible that the golden visa scheme has exacerbated the present situation, it’s worth pointing out that some of the cities most acutely affected by the crisis – Lisbon and Porto – are not eligible for golden visa real estate investments. And while there has been a problem with British expats and other foreigners living in Portugal driving up real estate prices, this could be attributed to the purchasing of second homes and holiday homes, rather than the golden visa scheme.
The scarcity of housing stock is also more complicated than it first appears. One factor is Portugal’s planning consent system, which is in dire need of reform. In Lisbon alone there are thousands of apartment developments waiting for approval, and it can take years to obtain planning permission when building new housing in Portugal.
Furthermore, many of the vacant flats in the country are actually owned by the state. The wide availability of short-term tourist rentals, like Airbnb, has also played an important role in the lack of residential housing in Portugal.
Political expediency?
Critics have described the decision to cancel the golden visa scheme as a populist, politically motivated one, designed to demonstrate that Costas is doing something about a situation where ordinary Portuguese people, many on low salaries, struggle to find affordable accommodation. Essentially, it’s a quick fix for Portugal’s ruling Socialist party, which having previously made commitments to improve affordable housing in Portugal is now losing support among the electorate.
Ultimately, cancelling the golden visa in Portugal may be more about ending uncomfortable questions for the government and providing a symbolic ‘win’ that shores up their political security.
What are the consequences?
Time will tell what the ramifications are for Portugal in the wake of its decision to cancel the golden visa scheme. It could have a chilling effect on foreign investment in the country, which would be unfortunate given the billions of euros that the golden visa has brought into Portugal.
This would harm Portugal’s competitive edge in the global market as the country will now attract less investors, with potentially lucrative opportunities missed.
It could also prevent prospective newcomers from the likes of the UK think again about moving to Portugal and try other countries such as Spain, which still has an active golden visa program. The loss of their spending power would be another blow for the Portuguese economy.
