Following the end of Portugal’s bailout programme by the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB), which lasted from May 2011 until June 2014, Portugal has lived a period of steady economic growth with heavy investments in the property market.
From 2014 to 2017 foreign direct investment increased two times approaching pre-crisis levels, pushed by increased activity in the private sector, mergers & acquisitions and investments in residential and commercial real estate assets.
Investment in real estate boomed. The golden visa programme which gives foreign investors the possibility of obtaining a Portuguese visa with a minimum €350,000 investment in real estate, and the non-frequent residence tax regime, allowing for a 20% taxation on income, and the boom in short term residential leases were the main factors for attracting investment in medium-size properties, especially in the residential market.
Portugal is also becoming one of the preferred European touristic destinations. The afflux of tourists led to increased investments in new hotels and residential projects for short term leases.
Still prices and yields in the current market conditions continue interesting to many investors, as local banks and corporations holding large real estate portfolios continue to dispose of their real estate assets.
The retail and office markets are also attracting the attention of investors. The valuation of street shops in prime areas in Lisbon and Oporto have peaked. The scarcity of new office space is also leading to new investments.
The ECB’s quantitative easing measures, the liquidity of the financial markets and banks’ openness to finance a growing demand for real estate finance are feeding investors’ appetite for real estate assets in Portugal.
As Portugal emerges from its worst crisis in the last thirty years, the Portuguese real estate market continues to offer interesting opportunities, still with good valuation prospects.
This paper provides an overview of the Portuguese real estate market and main legal and regulatory issues affecting the investment in property in Portugal, including, types of property interests, lease contracts, financing real estate assets, investment structures and tax issues.