After almost a decade during which the value of real estate in Portugal stagnated at best, comes news that house prices have recorded their biggest increase in 26 years. Latest numbers out this week show that the cost of buying a house in Portugal has risen by 14.2 percent in the space of just one year
According to the Residential Price Index, published by Confidencial Imobiliário this increase recorded during the first quarter of the year, is the biggest since 1992.
The cost of housing has now climbed for 11 consecutive quarters, with urban areas seeing the biggest rises. This latest increase also brings the average price of properties to above the highs recorded in 2007, shortly before the financial crisis.
But these rising house prices have been met both with concern and opposition.
The Bank of Portugal said in one of its latest reports that “some signs of over-valuation of real estate prices have started to emerge”.
Fears that rising prices could provoke another real estate bubble has seen the central bank issue a recommendation that as from 1 July, banks should exercise greater caution in issuing mortgages and personal loans.
According to the Bank of Portugal, overall foreign investment in real estate in the country in 2017 represented 80 percent of all transactions, with fears rising that domestic home owners are being priced out of the housing market. Rental prices have also shot up to new highs.
Foreign buyers, encouraged by the Golden Visa rule and the non-habitual residence programme, have been buying up properties across the country and are being given the blame for pricing the average Portuguese citizen out of the housing market, especially in urban areas.
The Socialist government’s alliance partners from the Left Bloc are calling for an end to Golden Visas, and on Thursday presented Parliament with a Bill seeking an end to the programme.
According to the decree, the Left Bloc argues that Golden Visas are a source of corruption, money laundering, tax evasion and generalised criminal activity, while also being discriminatory to those who have money as opposed to those who don’t.
The party, who have a decisive vote in keeping the current Socialist government in power, further say that Portugal belies its status as a champion of human rights when it hands residency permits to wealthy immigrants, but refuses to do so for the 30,000 immigrants currently believed to be residing illegally in the country.
Back in April, European Member of Parliament Ana Gomes, a stalwart of the ruling Socialist Party, led a surprise attack against the Golden Visas investment scheme.
Ana Gomes, who is also the Vice President of the European Commission of Financial Crime, stated that the Golden Visa system is a “perverse scheme”.
She explained that Golden Visas, which are aimed at encouraging investment, most notably in high-end real estate, is “a system that prostitutes European citizenship and is a threat to the safety of the Schengen zone. I believe it is a scheme importing corruption and organised crime to the European Union.”
Gomes further said that she was not against visas being handed out to select individuals at no cost, who would benefit Portuguese society, though explained that she would up the ante against Golden Visas being “sold in a system that favours corruption.”
She based these claims on the fact that she was unable to obtain a list of Golden Visa investors due to Portugal’s restrictive privacy laws. Gomes wanted the list in order to conduct a background check, but says she was denied this opportunity.
The most popular means to obtain a Golden Visa is through an investment of 500,000 euros in real estate, with Chinese topping the list of visa recipients.
But Ana Gomes concludes, “China has a limit on transfers out of the country of 50,000 euros a year, so it is obvious that the system can only be fraudulent or criminal.”
Following this demand for greater scrutiny of Golden Visa investors, the Left Bloc has also called for an end to the non-habitual residence programme, a system mostly taken advantage of by expat pensioners from EU member states.
The Left Bloc is arguing that the tax exemption handed to foreign retirees has resulted in large-scale real estate speculation. The party adds that it would also seek to have stricter rules imposed on the issue of Golden Visas, which it says has also led to considerable short-term and artificial hikes in property prices.
But the pressure being exerted on the Golden Visa and non-habitual residence scheme appears only have to driven foreign investors into expediting property purchases before the final curtain falls, pushing prices up to new highs.