Is foreign investment the foundation of financial stability in Portugal?
Is Portugal’s financial stability dependent on foreign real estate investment?
The crisis led to the hard measures of the IMF in Portugal, and the economy slowed down. In order to return to the supposed dynamism, incentives to foreign investment were initiated.
In 2013 programs were initiated to attract foreign investment, one of them the well-known Golden Visa. The aim is to give residence permits to individuals who are citizens from countries outside the European Union. The goal is to invest in the areas of real estate, business, scientific research, and art production, creating new work stations or simply adding dynamic to the national economy. Another incentive created in 2009 and reshaped in 2012, was the tax exemption to the non-habitual residents. It is aimed at retired people and individuals with high added value professions who have not lived in the country for at least 5 years. There is tax exemption for retirees for 10 years and a special rate of 20% on personal income tax for workers with high added value, the 10 years are not renewable. (Know more here)
In the second quarter of 2018 it was the French who led the purchase of houses in Portugal with 30%, followed by Brazilians with 19%, the British with 11%, the Chinese with 9% and Angolans with 7.5%, these being the top 5 nationalities in the list. On this list the Gold Visa has the particularity to encourage the Chinese people, in 2018 there was a simplification in the paperwork that delayed the attribution between 1 and 2 years of waiting. (find out more, here)
Global geopolitical tension, and in particular the European situation, may influence investment in our country. There are still no guarantees as to what will happen in the second half of 2019. The Brexit situation or the economic issue between China and the USA threat global trade. Therefore, there is a dependence on global political situations to obtain an analysis of foreign investment in our country.
It is a fact that in the year 2018, 76,5% of the real estate market transactions came from foreigners. With the obstacles created in 2018 in obtaining house loans, the Portuguese will hardly reach the level of foreigners in Portugal’s real estate market. According to Banco de Portugal (Bank of Portugal), it really is necessary for banks to keep these obstacles in cases of high risk of default. Only this way will the country stay financially stable in the face of the residential market undervaluation.
In conclusion, even in mid-2019, the Portuguese financial stability really needs foreign investment. Investment from outside is essential as the Portuguese people can’t still guarantee stability for the country. Banco de Portugal alerts for a “sharp and abrupt reduction” from the Non-residents.