Recent studies and house price statistics, both private and public, from Portugal and Brussels have noted that Portugal’s real estate sector has consistently beaten records regarding house price increases over the past 12 months.
Just last week, bank valuations for properties hit a new record of nearly €2,000 per square metre on average – representing increases for 22 consecutive months.
And in September, Portugal’s housing market saw the greatest ever increase, posting growth of 22.8% – the biggest jump on average across the board since 1988, according to the Residential Real Estate Price Index from Confidencial Imobiliário since it began charting such data.
The inevitable questions are if these increases are sustainable in the long run, is Portugal facing a property bubble, are properties overpriced, and is some kind of market readjustment in the pipeline?
The answer to these questions, and more, were expertly and succinctly answered by a panel of experts from the world of Portuguese property development and residential sales, and legal and tax beagles. The answer was a resounding “No!”
The answer came at the event ‘Living and Investing in Portugal: the New Frontier for North Americans’, organized by the American Chamber of Commerce in Portugal (AmCham) on Tuesday morning at the Hyatt Regency Lisboa hotel.
Giving an overview of the US segment of the relocation investment market was João Bugalho, President of the AmCham Portugal Real Estate Committee and also the CEO of Arrow Global Portugal, one of the most important investors in real estate in the country, acquiring and managing a vast portfolio of credit and real estate assets in hospitality and tourism through a network of companies such as Norfin (real estate management), Whitestar (Non-Performing Loans), and Details Hotels & Resorts (hotel operations).
Go East! Americans coming in droves
The statistics are impressive. In 2024, Portugal registered a record volume of €13.2 billion in Foreign Direct Investment, up 19% on 2023, and, of this total, €11.1 billion was directly applied in Portuguese companies, “reflecting the growing confidence that a number of investors from other countries have in Portugal and its economy”.
The total stock of FDI in Portugal (applied both in Portuguese and non-Portuguese companies and entities in Portugal) stood at a staggering €200 billion, or 71% of Portugal’s entire economy.
“We are highly dependent on overseas money and we have chronic lack of industrial infrastructures; they are excellent for our size, but there is a lack of ambition and home-grown capital,” he admitted.
Nevertheless, there was a clutch of interesting overseas investments using jurisdictions like Spain, Luxembourg and the Netherlands, as well as investors from the United States, China, and France using these jurisdictions to invest in Portugal.
And the weight of US investments in Portugal is much higher than data would suggest, and higher per capita than many other countries.
The quality of life, the 300+ days of sunshine, lovely beaches, golf courses, quality hotels, the security, and the fact that Portugal is far from several world conflicts cannot be underestimated for investors both small and large.
“We feel this in the residential real estate market for both permanent and second home residences in Vilamoura (Algarve), where we have some interesting assets,” he said. Assets include the Dom Pedro Hotels & Golf Collection – Dom Pedro Portobelo, Dom Pedro Marina, Dom Pedro Vilamoura), five golf courses (Old Course, Pinhal, Laguna, Millennium, and Victoria), the As Cascatas apartments, and the Vilamoura Garden Hotel. The company also manages the Vilamoura Marina and the Equestrian Centre, through its partnership in Vilamoura World, and is developing new residential projects like Terracotta and Nobilus.
“We feel that we’re creating an ecosystem with people who have a lot of money and are looking at this micro-ecosystem as a business opportunity around real estate, and the Americans in this respect are game-changers,” said the CEO of Arrow Global Portugal.
Stability and predictability
Miguel Marques dos Santos, Partner at VdA Vieira de Almeida law firm, responsible for Real Estate & Planning, discussed the stability and predictability of Portugal’s legal and urban frameworks who noted that the current conservative Democratic Alliance (AD) government was committed to creating a stable environment to attract international investors.
First off, some statistics about American relocation to Portugal. In 2016, there were just over 2,000 US citizens living in Portugal. By 2024, there was a community of US citizens in Portugal numbering around 20,000; +14,000 on 2023.
Many came in through Portugal’s Golden Visa (residency-by-investment scheme), which in 2023 issued permits to 2,901 overseas citizens of which 567 (by far the majority) went to US citizens.
By 2024, the number had fallen to 406 Golden Visas, but nevertheless, the Americans led that market in 2024 ahead of China (296), UK (248), Brazil (147), and India (199), according to statistics from immigration office AIMA.
The reductions in numbers in 2024 reflected changes to Portugal’s Golden Visa scheme, which removed the investment-via-property-acquisition in favour of investment in Portuguese funds.
In terms of institutional investment, Miguel Marques dos Santos said US investment was “very expressive” with accumulated stock of US$12 billion in 2024 alone and US$2.5 billion of institutional investment over the past five years.
“This shows that there is a great appetite for Portuguese assets from the States, although they don’t invest directly in Portugal from the United States but through other institutions in jurisdictions such as Luxembourg.”
As for investment in real estate, Miguel Marques dos Santos said that, from his experience in the real estate industry and taking part in fairs and conferences all over the world, the topics discussed in Lisbon “reflected what I’ve seen in Dubai, Miami, London or São Paulo.
“Today’s investors are not only interested in returns. They want stability, quality of life, and ESG-aligned growth. It is not by accident that Portugal is in vogue; it is the result of a deliberate alignment between policy, investment and innovation.”
And he added that this had happened because of the positive political and regulatory environment and greater transparency, which is so important for Anglo-Saxon jurisdictions and particularly Americans.
“The road that Portugal is taking is positive and that’s important for all markets, but particularly those which focus on investment. And the US market will certainly benefit from positive changes”, which include a combination of direct financial incentives, tax benefits, and streamlined programmes, including funds for startups, tax breaks, co-financing options, and support from programmes like “Portugal 2030” and the “Recovery and Resilience Plan” (PRR).
“The government now and before the elections, as well as in opposition, drew up a programme outlining its goals, particularly for real estate (it has lowered VAT for developers to 6% on certain affordable housing projects and made changes to the land law to make it easier to free up land for development), as well as changes to Portugal’s rental contract law, but the latter is still “uncertain and complex, and dependent on unstable political bodies” and policies.
“Rental laws on contracts have been made less bureaucratic over the past eight years, but he admitted that there had been errors made in tax benefits and the rental law, with counterproductive reforms that undermined predictability for the investor, and that legislation covering eviction notices was “slow and inefficient!”
Doing things differently
Agatha Bulha, Managing Partner at family office José Bulha International Law Firm, discussing the legal aspects and frameworks for attracting and retaining US investors, said she didn’t see great impediments but rather challenges.
“I think now the government understands the various difficulties from the past and is doing a reset with all the laws and creating an opportunity to do things differently.”
“Overall, the (bureaucratic difficulties) are now being reduced. The US market has been growing in Portugal – and we represent private clients and a US fund – and we’re seeing more openness from the government in trying to simplify processes, but they do exist in order to make these investments easier,” she said.
The lawyer highlighted the increasing efficiency and transparency of Portugal’s residency and real estate investment systems, creating investment vehicles, while for setting up meetings for visas has built a bridge with embassies and consulates in the US to understand how the government can improve processes.”
Bernardo Masteling Pereira, Partner, Tax, at Forviz Mazars on the question of attracting investment and overcoming obstacles, said there were two types of US investor; those who were looking to invest and those looking to live in Portugal.
“What we’re seeing from a tax perspective and tax migration is the part to do with getting visas for residency and the tax aspect which presupposes a more definitive change in the residency of that person who is leaving a specific country to come to Portugal.”
He said the end of the original NHR scheme had a huge impact on not only those who Portugal wanted to attract, but also regarding the certainties that people can expect when they come to Portugal.
Nevertheless, he emphasised that Portugal’s tax framework was “competitive and attractive when taking into account the country’s stability and double taxation agreements”.
“There are new possibilities that Portugal has such as the NHR 2.0 regime, which aims to attract a different type of public.”
This new Non-Habitual Residency (NHR) 2.0 regime offers tax advantages to those working in specific scientific, research and innovation fields, but it is now not open to retirees. In other words, it targets high added-value professionals linked to a Portuguese company (that was not the case before) and still offers a 20% flat rate of tax on Portuguese-sourced income and exemption from Portuguese tax on foreign-sourced income for 10 years. Pensioners resident in Portugal now get taxed at the usual amount.
“Portugal is no longer the Florida of Europe for pensioners and is exchanging that image for being the California of Europe in attracting high-value professionals, particularly in tech and innovation areas and startups,” he stressed.
Bernardo Masteling Pereira also pointed to differentiating factors in tax which other European countries didn’t have.
“We don’t have ancillary taxes, exit taxes for the discontinuation of economic activities (it had been 28%), so the path that Portugal has taken has been more balanced in the decisions taken both for immigration and patrimonial investment, and real estate investment, so Portugal continues to remain competitive on tax.”
Remarkable progress and stability
Manuel Noronha Andrade, CEO of ECS Capital, said that, from an institutional point of view, US capital investment was coming into Portugal through more structured vehicles aimed at hospitality, logistics and sustainable real estate funds.
“We have a friendly environment for business, a stable legal system, a political situation that is relatively stable unlike some other countries in Europe with extremism. The government is pro-business, and the institutional environment is also relatively friendly,” he pointed out adding that, in Portugal, the registration of property was very evident and modern, unlike countries like Greece where registrations were still listed in ledgers.
On the other hand, Portugal had made remarkable progress. “If we look at the Portuguese economy 10 years ago and now, from a macroeconomic viewpoint, there has been an incredible deleveraging in the economy, not just in terms of public debt but also private. We’re one of the countries that has most grown in Europe, so we can offer economic stability. There are some challenges to growth, but we have great stability.”
However, he noted that Portugal was a country that lacked capital, which provided an opportunity from countries like the US that did have high levels of capital.
From the residential real estate point of view, Patrícia Barão, Partner Residential at DILS, explained that American demand was influencing urban development trends, driving quality, sustainability and community-orientated projects in places like Lisbon, Cascais and Comporta as premium destinations.
Patrícia Barão said the reasons why Americans looked to Portugal were legion, but that the Portuguese themselves had forgotten what a marvelous country Portugal was and the quality of life offered to those relocating to Portugal.
“I remember talking to Anne Brightman (a US citizen who relocated to Portugal eight years ago and set up a now successful boutique premium and luxury real estate agency in Estoril – The Brightman Group) and it’s not just the good weather and the cost of living, but it has a lot to do with safety and security.
“We’ve noticed that every time there’s another shooting in the United States, there is a peak of US relocators coming to Portugal.
“This is a good illustration of how security is, in fact, very important for Americans, and then there’s our health system, both public and private, which is very good, is accessible, affordable for Americans, and this is important for pensioners but also families that move to Portugal,” she said.
Property bubble not on the cards – and certainly not caused by foreigners
But back to the possible over-heating and over-valued property in Portugal’s property market, and the possibility of a readjustment in house prices at the very least or a bubble about to burst in the worst case scenario.
The Head of Residential at DILS had something concrete to say about this and it seems the fears are wholly unjustified.
“This is something we track with close attention, and the latest numbers do support these increases. But there are also indicators that show that a bubble is not on the horizon because, when we look at the transactions made, we see that there was a considerable increase in prices on the previous quarter and like-for-like last year, but 88% of the transactions were Portuguese families.
“The truth is that there is a scarcity of offer in new build that doesn’t meet demand, but we’re seeing a lot of buoyancy in the second-hand housing market and these house prices are dictated by the market; prices have risen as well, but there is access to mortgages, although banks are doing this with some caution to ensure that families can afford them. But this talk that foreigners are driving up prices isn’t correct, since only 6% of house transactions were made by foreigners,” said Patrícia Barão, Partner at DILS.
Source: Essential Business
