As published on ft.com, Thursday 16 February, 2023.
Portugal has become the second EU country this week to scrap “golden visas” for wealthy non-Europeans, joining Ireland in abolishing a programme that helped pull in foreign investment but sparked controversy.
António Costa, Portugal’s prime minister, said on Thursday that his government would stop issuing new golden visas in order to “fight against price speculation in real estate”. Ireland had cited EU warnings over the security implications of such programmes in its own decision.
Golden visas have given wealthy people residency permits and access to the EU’s borderless travel zone in exchange for investment. The programmes in Portugal and Ireland were introduced 10 years ago to aid recovery from the financial crisis and proved to be especially popular with rich Chinese citizens.
Portugal’s decision to end the scheme was driven by angst over a surge in house prices that has left many Portuguese people struggling to find adequate accommodation, particularly in Lisbon and Porto, the biggest cities.
It came as part of a package of measures designed to combat the housing crisis, which is the most pressing issue facing Costa’s Socialist government.
Property prices have been driven up in recent years by foreigners purchasing second homes or apartments to rent out to tourists via platforms such as Airbnb.
The golden visas, known officially as residence permits for investment, were issued in exchange for property purchases of €500,000 or more. Holders gain the right to live in Portugal for five years, after which they can apply for permanent residence even though the minimum required stay in the country is only a few days a year. The scheme netted more than €6bn in investment.
Portugal is not cancelling existing golden visas, but Costa said they could only be renewed if the property they were linked to was the permanent residence of the holder or a family member or if it was put on the rental market.
Since the programme’s inception in 2012, the largest number of visas has been granted to Chinese citizens, who have received more than 5,000, according to Portuguese government data. More than 1,000 went to Brazilians while Turkey, South Africa and the United Arab Emirates each received about 500.
Government officials said there had been a need for such a programme when it was introduced and it had broadly achieved its objectives, but the country now faced different problems over housing affordability.
In 2020 the Costa government announced a plan to curb the impact of golden visas on property prices by making it harder for holders to buy in Lisbon and Porto, but real estate executives say some people found ways to circumvent the restrictions.
Government officials acknowledged that the visa programme was not the principal factor behind rising housing costs, but said it was creating uncomfortable questions for the government and ending it was symbolically important. The proliferation of short-let tourist apartments and other tax incentives for foreign residents had played a bigger role in the property market.
Nuno Cunha Barnabé, a tax partner at Abreu Advogados, a Lisbon law firm, said the announcement left many unanswered questions about how golden visas would be phased out. “How will the government deal with foreign real estate developers’ expectations for ongoing projects?” he said.
Nine out of 10 Portuguese people say the country is facing a housing crisis, blaming factors including a lack of public and private investment and inadequate regulation, according to a survey late last year carried out by the Institute of Social Sciences at the University of Lisbon and the University Institute of Lisbon.
The government is cautious about doing anything more that could cool foreign interest in Portugal because tourism and the buoyant real estate market are key to its economy, helping the country grow by more than the eurozone average since the peak of the coronavirus pandemic.
The Portuguese housing package announced on Thursday, which must be approved by parliament, included moves to add more properties to the private rental market and build more public housing, as well as subsidies for families and a simplification of real estate licensing.
Amid security fears, the EU last year called on member states to end so-called golden passport schemes — which offer not just residency but citizenship.