Sara Nobre, director at Info Elite Realty, shared with ee24.com her opinion on the new law that makes it easier for non-residents to obtain a residence permit in Portugal.
Please describe the current state of the real estate market in Portugal.
Now that we´re well into the 7th year of an Internaitonal Crisis, Portugal has noted an increase (especially the Southern Algarve Region) in property sales, mostly “holiday homes” (second residence) with rental potential, villas priced from €400,000 up to €1.8 million, predominately cash buyers from the UK/British market, with a strong emerging Scandinavian market (Norway, Sweden etc.).
Savvy investors are taking advantage of properties which overall suffered 30% decrease in price, along with some proprietors not able to maintain their homes and mortgages; it’s a fantastic time to buy, whereas from 2000-2006 prices were almost unaffordable.
Also noted, is an article from the New York times after the last world recession in the 1980´s, Portugal was proved the best country to hold and regain property value in the shortest period of time, after that recession.
Since the new “Gold Resident Permit” came into effect in October of 2012, a flux of non-EU investors from Hong Kong, Russia, Dubai, Africa and South America have rapidly increased property sales in just 4 months.
Also, for the first time in decades the government has this year allocated billions from their budget into Tourism and promotion of Portugal and specifically the Algarve in order to inject capital into the country and banking system. This is of course been strategic along side with the new tax exemptions and Gold residence permits, all furthermore implemented to attract wealthy investors and pensioners into retiring and investing into the country. As mentioned in local media, the government’s main goal is to make “Portugal the Florida of Europe”.
Now let's talk specifically about the new conditions for obtaining a residence permit in Portugal.
There is a new legal Regime that allows someone to apply for a resident permission in case of proceeding with an investment activity in Portugal. This regime applies to all third State citizens who apply for Resident permit in Portugal and who conduct one of the investment activities: the transfer of funds into Portugal of a value of at least 1 million euro; the creation of at least 10 jobs; the purchase of a property of value equal to or above of 500 000,00 euro.
So, it will be required to have a declaration issued by a bank institution attesting the effective existence of funds in an account of which the applicant is the sole or first holder of capital or the inscription of the new 10 employment contracts applied by the social security department or a certificate of registration that proofs the acquisition of an property or a promissory agreement of purchase of a property.
The Golden Permit Residence will be given to an individual person by itself or as shareholder of a Portuguese incorporated company, a with head office in Portugal or in a EU country or with a permanent establishment in Portugal. The application may be done by the person or by legal representative and it is submitted to the SEF and it is extended to the sons and daughters.
It’s important to note, that several properties under one person´s name can be purchased up to a value of €500,000. Also, 2 people can invest into a €1 million home, with equal shares of €500,000 each, or also 3 people can invest into €1,500,000 property with 3 equal shares of €500,000 attributed to each of them.
The procedure of obtaining a residence permit under the new scheme is quick and almost automatic. Moreover, it is applicable to the investor’s immediate family (wife, husband and children). Investor can sell the purchased property only 5years after the purchase. But they do not need to live in it for all this 5 years.
If a person decides to buy property, what options does he have? Where would you advise him to invest?
It’s best to invest in Algarve properties with rental potential. It can make $4,500 a week between April and October inclusive. While the rest of the country´s real estate market suffers, the Algarve has always been the most attractive area to invest as it holds it value (due to weather, sun, tourism, beaches and standard of living). The rest of the country is predominately residential markets, holding 30 million population, whereas the Algarve is 85% non-residents or ex-pat owned homes.
As for the 10 workplaces, in what economic sphere would you advise to create them?
It can be anywhere in the country. Portugal and the Algarve have also a high unemployment rate; as such the government supports new businesses opening. There is a large number of things that could be done in Portugal to export. With a good marketing internationally success is assured. Labour in Portugal is relatively “cheap” in comparison to the rest of Western Europe, and our Ports and Western Europe location make us the most ideally located country for transport of goods via air, ocean and railway and so on.
Wine of course is one of Portugal hidden treasures yet not marketed/exported sufficiently in comparison to say France and Italy.
Our soil in Algarve is rich, mango trees here grow as mushrooms. And Europe is eating mango from South America, and that doesn`t make sense.
Portugal is good in cheese and olive oil. Portuguese companies are successful abroad. The owner of Olivereira da serra (Olive oil manufacturer) is one of the wealthiest guys in the world and he sells olive oil. Farming land for wine, oil and livestock is usually in the central/east region of the Algarve.
Fashion, textile,leather goods, shoes are quite dominant as well. Factories are normally located in the North. For example, Zara company (part of the Inditex Group from Spain) manufactures all their clothing in Portugal then ships to their stores worldwide.
Also hotel industry may be profitable, especially in the south of Portugal (Algarve).
Portugal also used to have many colonies around the world, which continue to have ties to Portugal in terms of trade/import and export. Such countries as Brasil, Macau, Angola, Timor, Mozambique are the examples.
How do you think this law will affect the real estate market in Portugal?
I think the new law will be fantastic for property market. I definitely think now is the time to buy. Once more demand (and less supply) begins to take place, then we will start to see an increase in property prices again, especially in the Algarve region, which isn´t densely populated/built up to begin with. Building in the Algarve is strict, due to its mix of coastal land and nature reserves, so property will always retain its value, and if anything start to rise again, especially for the price range of €500,000 upward applicable to this new law.
Text: Kirill Ozerov, ee24.com