Sun, beach, safety, good food and quality of life. All these factors have attracted foreigners to buy homes in Portugal over the last few years. But the golden age of tax breaks for international citizens has come to an end in the country. After much finger-pointing at foreigners as being “to blame” for the escalation in house prices and the country’s housing crisis, António Costa’s former government decided to put an end to gold visas for real estate investment at the end of 2023 and also to the regime for non-habitual residents at the beginning of 2024. Whether this is a direct consequence or not, the truth is that luxury homes for sale inPortugal are now less sought after by foreigners, and this indicator has fallen to its lowest level in four years, according to data from idealista/data. What’s more, legislative instability seems to be continuing for foreigners, since Montenegro’s new government has said it will revoke various Mais Habitação measures without making it clear whether or not there will be a return to gold visas.
Over the last few years, international interest in buying luxury homes in Portugal has been very noticeable: three out of every 10 people looking for homes priced over 1 million euros in the country did so from abroad. But at the beginning of 2024 there was a drop in demand from foreigners for luxury homes for sale in our country, to 22.8% of total demand, the lowest level since the end of 2021, according to data from idealista/data.
This is the biggest drop in foreigners’ appetite for luxury homes in four years, and it comes just after new gold visas stopped being accepted (on October 7, 2023), whether for the purchase of properties worth 500,000 euros or more, or for the purchase of properties to be rehabilitated for 350,000 euros or more. The data thus suggests that the end of gold visas – and the resulting legislative instability also marked by the end of the non-habitual resident (NHR) regime earlier this year – will have had a downward effect on foreigners’ demand for luxury homes in Portugal:
- Demand from foreigners is now 5.8 percentage points (p.p.) lower than in the first three months of 2023, when the end of gold visas was announced by the former Socialist government under the Mais Habitação program;
- International demand is down 6.3 p.p. at the start of 2024 compared to the final stretch of 2023, when no residence visas were issued for real estate investment and the end of the NHR regime was announced as of the first day of 2024.
The truth is that the end of golden visas has a special impact on Portugal’s attractiveness as a real estate investment destination and in terms of competitiveness among European countries in attracting capital – although other countries are also going to put an end to golden visas for house purchases, such as neighboring Spain. This is because real estate investors are sensitive to legislative changes, especially when it comes to reducing tax benefits.
Even so, the quality of life that Portugal offers continues to be internationally recognized, as do its good health and education services, gastronomy, landscapes and climate. Perhaps that’s why the fall in demand for luxury homes by foreigners hasn’t been even more significant in the country. It should be noted that despite the reductions, international demand for luxury homes in Portugal continues to have some weight: 23 out of every 100 people looking for luxury homes are foreigners. What is now being felt in the market is that foreigners are opting for alternative ways of obtaining gold visas, namely through national companies.
As for the future, it’s not clear whether there will be any more changes in the area of gold visas, since Montenegro’s government has said it will repeal various Mais Habitação measures, but without making any direct reference to this program. It only says that it wants to “clarify the rules for real estate investment and attracting investment (residents and non-residents)”, in the Executive’s program presented this Wednesday, April 10.
North Americans are looking for fewer luxury homes in the country
It is those who live in Europe who are most interested in looking for homes over 1 million euros in Portugal. The UK is the main country of origin for searches for luxury homes, accounting for 11.9% of total international demand at the start of 2024. This is followed by the USA (11.2%), Germany (10.2%), Spain (9.2%) and France (8.6%), according to data from idealista/data.
While international demand for luxury homes in Portugal from the UK rose compared to the same period last year (+0.8 p.p.), interest from the US fell (-4 p.p.). It’s not surprising, since the USA is one of the five nationalities that have applied for the most gold visas since 2012 until September 2023, according to data from the now-defunct Foreigners and Borders Service (SEF). But although demand from the US for luxury homes has cooled somewhat since the end of the gold visas, it’s important to note that Americans are still in second place in the top 10, not least because they continue to look at Portugal as the “California of Europe”, where there’s a good quality of life, beaches and a good climate, as well as good health and education services.
In addition to the USA, gold visas were mainly granted to investors residing in China, Brazil, Turkey and South Africa. Searches from Brazil reveal a significant demand for luxury homes in Portugal in recent years, accounting for 6.2% of the total in the first quarter of 2024. The weight of Brazilian demand remained at the same levels as at the beginning of 2023, but was 1.5 p.p. lower compared to the previous quarter, when the gold visas ran out. Demand for luxury homes from China, Turkey and South Africa has been residual (below 1%) compared to the total.
Foreign demand for luxury homes for sale falls in almost all major cities
Foreign demand for luxury homes fell in almost all of Portugal’s major cities between the beginning of 2024 and the same period in 2023. It was in Faro (-17.3 p.p.), Bragança (-11.6 p.p.) and Évora (-11.2 p.p.) where this reduction was most significant, and it was also felt in Lisbon (-5.2 p.p.) and Porto (2.3 p.p.), albeit less intensely.
It was only in Portalegre, Santarém and Beja, on the other hand, where there was an increase in international demand for houses for sale with prices of more than 1 million euros between these two periods, according to the idealista/data data.
This is also a trend observed when we compare the demand for luxury homes by foreigners between the start of 2024 and the end of 2023, when the gold visas for real estate investment ended. International interest in more expensive housing fell in all the district capitals, with the exception of Viseu. The biggest falls were recorded in Bragança, Ponta Delgada and Faro.
Although foreigners have lost their appetite for luxury homes for sale, the truth is that almost half of the people looking for high-priced homes in Ponta Delgada and Funchal live abroad. Also in Faro and Portalegre, around 3 out of every 10 people looking for luxury homes are foreigners. In Porto and Lisbon, international demand is around 18-19% of the total.
Coimbra, Aveiro and Évora are the Portuguese cities that attracted the fewest foreigners looking for luxury homes at the beginning of 2024, as international demand is less than 15% of the total for each of these district capitals.
