Real estate fourth most significant sector in Portugal in terms of foreign investment
Foreign investment in Portugal’s property sector has surged in the last 10 years, more than tripling in value, according to recent data from the Bank of Portugal.
Numbers show that Foreign Direct Investment (FDI) in Portugal increased by over 55% between the first half of 2014 and first half of 2024, with the property sector standing out as the one that most contributed to the growth.
The boom of foreign investment followed the end of the ‘Troika’ adjustment programme in 2014, when Portugal became more attractive to foreign investors due to lower wages and prices, making the economy more competitive internationally, Diário de Notícias explains.
Foreign investors now hold assets (capital or debt, as they became creditors) in the form of investment with a net worth of €183.9 billion, 55% more than in 2014.
The real estate sector has been the standout performer, experiencing a massive influx of foreign investment. By the end of the first half of 2014, the value of foreign investments in Portuguese real estate stood at €4.9 billion, having skyrocketed to an impressive €15 billion by mid-2024, led by purchases made by a wide range of foreign investors, from companies, funds and banks to individual investors.
Real estate has now become the fourth most significant sector in Portugal in terms of foreign investment, up from sixth place in 2014. When combined with the construction sector, real estate becomes the third-largest sector of the economy, with total foreign investment valued at €18.5 billion – more than 10% of all FDI in the country.
Interestingly, Spain stands out as currently the largest foreign investor in Portugal, with investments totalling almost €37 billion, representing 20% of the total FDI in the country. However, two other key players, the Netherlands and Luxembourg, also play a significant role, despite their small size. As DN explains, these countries are major financial centres that offer substantial tax advantages, attracting investors from around the world who use them as hubs for their investments.
Data from BdP shows that the Netherlands is the second-largest source of FDI in Portugal, with investments valued at €35.7 billion, while Luxembourg ranks third, contributing €33 billion. Together, these two countries account for nearly 40% of all foreign investment in Portugal.
However, BdP notes that the actual investors behind these funds may come from different parts of the world, as some countries use financial hubs like the Netherlands and Luxembourg to channel their investments. For example, China is a significant player in this dynamic. Although Chinese investments directly entering Portugal totalled €3.8 billion in 2023, the Bank of Portugal estimates that the true figure is much higher. When considering the origin of the money and the final beneficiaries, Chinese investments in Portugal is estimated to amount to €12.4 billion – more than three times the official figure.
michael.bruxo@portugalresident.com
