North Americans lose interest in buying a house in Portugal. But Brazilians continue to dominate the rental market, data shows.
The last few months have been marked by profound changes in the tax incentives for foreign citizens in Portugal: gold visas for real estate investment ended in October and the regime for Non-Habitual Residents (NHR), under the old terms, ended in 2024. The announced end of these tax benefits coincides with a cooling in international demand for houses for sale at the end of 2023, especially by Americans. And in the same period, there was also a decrease in foreign interest in renting a house in Portugal, as suggested by data from idealista/data. But despite this decrease in attraction, foreigners still represent more than 22% of the total demand for homes to buy and rent in our country.
It was on October 7, with the entry of Mais Habitação (More Housing), that the gold visa program came to an end for real estate investment. And, as part of the State Budget for 2024, the regime for Non-Habitual Residents (NHR) also came to an end at the beginning of this year, with only a transitional period being provided for those who can prove that they were planning to move to Portugal in 2023 (with a work contract, a rental contract or even a contract to buy and sell a house). To replace the RNH regime, a tax incentive was created for scientific research and innovation – and is therefore “more restricted” – which still doesn’t have all the beneficiaries clarified, despite being in force.
But have these changes in tax incentives fulfilled their purpose and cooled the demand for housing in Portugal from foreigners? Data from idealista/data suggests that, until the end of 2023, the end of gold visas and the announcement of the end of NHRs (among other factors) had some effect on international demand for housing in Portugal:
- Houses to buy: demand from foreigners accounted for 23.1% of the total in the last quarter of 2023, down from 24.3% in the previous quarter (-1.2 percentage points). Year-on-year, there was a drop in interest in 11 major cities;
- Houses to rent: the weight of demand from foreigners ended the year at 22.2% of the total, the lowest figure since mid-2021. This percentage is therefore lower than that recorded in the previous quarter (23.6%), as well as in the same period of the previous year (29.7%). It should also be noted that demand from foreigners in the rental market fell in all district capitals year-on-year.
Although the data suggests that the end of these tax incentives will have removed international interest in the Portuguese housing market – at a time when houses continue to get more expensive – what is certain is that foreigners continue to account for more than 22% of the total demand for homes , both to buy and to rent. Not least because it’s not just these tax regimes that attract world citizens to live in Portugal: the mild climate, quality of life, security and good health and education services, along with the digital nomad regime, are also important factors in attracting these families who want to change their lives.
Top 5 nationalities most in demand for houses for sale
Buying a house: interest from foreigners cools in 15 major cities
The demand for homes to buy from foreign citizens has varied over the last five years – but it has always weighed more than 20% of the total. It was in 2019 that families from abroad had the largest share of the demand for houses for sale in Portugal (they accounted for more than 25%). But the arrival of the pandemic in 2020 has cooled this foreign interest in housing in the country, given the restrictions on movement.
In the second half of 2021 and throughout 2022, foreigners gained ground, increasing their weight in the total demand for homes to buy, at a time when Portuguese families began to see their purchasing power pressured by inflation and rising interest rates (along with high house prices). In 2023, there was a period of instability in the demand for housing by foreigners, with months in which it rose and others in which it fell, ending December weighing 23.1% of the total. Behind this oscillation and drop at the end of the year could be the end of the gold visas.
This is also clearly visible in the country’s 20 district capitals: demand from foreigners for homes rose in five cities year-on-year, remained the same in four and fell in 11, according to the same data. It was in Faro, Ponta Delgada, Portalegre, Beja and Bragança where interest from foreigners increased between December 2022 and December 2023. In Porto it remained practically stable, representing 21% of the total demand for houses for sale in that city, while in Lisbon it fell slightly to 18.9%. Where interest cooled the most was in Vila Real (-4 percentage points).
It can also be seen that, compared to the previous quarter, demand from foreigners for houses for sale fell by 1.2 percentage points nationwide at the end of 2023, when the end of gold visas for real estate investment came into force. The biggest falls were recorded in Viseu, Coimbra and Viana do Castelo.
What also stands out is that, at the end of 2023, there were four cities where at least three out of every 10 people looking for houses to buy were foreigners. This was the case in Funchal (45.3%), Ponta Delgada (40.1%), Faro (32.7%) and Viana do Castelo (31.1%). Évora, Coimbra and Beja were the cities least searched for by families living abroad.
Houses for rent: where do foreigners look the most?
Demand for Americans drops after the end of gold visas
Among the main foreign nationalities looking to buy a house in Portugal, the French have been the most prominent over the last five years, almost always remaining in first place, only being overtaken by the Americans between the summer of 2022 and the summer of 2023.
In the last quarter of 2023, after the end of golden visas was approved, it emerged that Americans ‘ interest in buying a home in the country cooled from 12.4% in the summer to 11.4% at the end of the year, thus dropping out of 1st place. And interest from Brazilians also fell during this period, so much so that they dropped out of the top 5 after a regular presence since 2019.
This is how the French have returned to first place, and are therefore the foreign citizens with the greatest weight in the total international demand for houses for sale in the country at the end of 2023. In second place are the British, followed by the Americans, Germans and Swiss, the data shows.
Top 5 nationalities most looking for homes to rent
Renting a home: interest from foreigners fell at the end of 2023
After a period of fluctuation between 2019 and the beginning of 2021, the weight of foreigners in the demand for houses to rent in Portugal kept rising, reaching 30% of the total in the second quarter of 2022, which can be explained by the lower restrictions on movement in the post-pandemic that promoted the arrival of migrants (among other factors). After that, the demand for homes by foreigners cooled, ending 2023 representing just 22.2% of the total.
This fall in international demandin the Portuguese rental market was felt in all the district capitals at the end of 2023 compared to the same period last year, with the biggest drop being recorded in Vila Real (-12.1 percentage points) and the smallest in Lisbon (-1.5 percentage points), the same data from idealista/data shows. On a quarterly level, there was a cooling of interest in 14 major cities, including Porto and Lisbon.
It was Funchal, Bragança and Viana do Castelo that most attracted foreign families to rent a home at the end of last year. Évora, Santarém and Portalegre were the least attractive to these households.
Brazilians are the ones most looking for houses to rent
Brazil has been the main country of origin for foreign rental demand over the last five years, ending 2023 accounting for 24.2% of the total. This is because, initially, Brazilian citizens tend to rent a house in Portugal in order to adapt to the distance from their family and the cultural change, as we explain in this article prepared by idealista/news. Only once they have adapted to the country do they decide to buy a house (or even renovate).
The USA has the second highest demand for homes in the Portuguese rental market from foreigners (10.4% of the total), followed by Spain (8.2%), Germany (6.5%) and the United Kingdom (6.4%), according to the same data. Many of these foreigners who decide to rent in Portugal are digital nomads and retirees looking for a mild climate combined with a good cost of living.
