Luxury houses in Portugal: end of golden visas drives away foreigners

Sun, beach, safety, good cuisine, and quality of life. All these factors have attracted foreigners to buy houses in Portugal over recent years. However, the golden era of tax benefits aimed at international citizens has come to an end in the country. After much finger-pointing at foreigners as the “culprits” for the escalating house prices and the housing crisis in the country, the former Government of António Costa decided to end golden visas for real estate investment at the end of 2023 and also the non-habitual resident regime at the beginning of 2024. Whether a direct consequence or not, the fact is that luxury houses for sale in Portugal are now less sought after by foreigners, with this indicator falling to the lowest level in four years, according to data from idealista/data. Furthermore, legislative instability seems to continue for foreigners, as the new Government of Montenegro says it will revoke several measures of the More Housing package without clarifying whether or not the golden visas will return.

Foreigners less interested in Portugal

In recent years, international interest in buying luxury houses in Portugal was quite noticeable: three out of ten people searching for houses priced over 1 million euros in the country were doing so from abroad. But at the beginning of 2024, there was a drop in foreign demand for luxury houses for sale in Portugal, representing 22.8% of the total demand, the lowest level since the end of 2021, according to data from idealista/data.

This, the largest drop in foreign appetite for luxurious houses in four years, occurred shortly after new golden visas stopped being admitted (on 7 October 2023), whether for the purchase of properties valued at 500,000 euros or more or for the purchase of properties for rehabilitation at 350,000 euros or more. The data thus suggest that the end of golden visas – and the consequent legislative instability marked also by the end of the non-habitual resident (NHR) regime at the beginning of this year – has had a dampening effect on foreign demand for luxury houses in Portugal:

• Foreign demand is now 5.8 percentage points (p.p.) lower compared to the first three months of 2023, when the end of golden visas was announced by the former Socialist Government as part of the "More Housing" package;
• International demand represents 6.3 p.p. less at the beginning of 2024 compared to the end of 2023, when no more residence visas via real estate investment were issued, and the end of the NHR regime in its old form was announced to start from the first day of 2024.

The truth is that the end of golden visas has a significant impact on Portugal's attractiveness as a real estate investment destination and in terms of competitiveness among European countries to attract capital – despite other countries also putting an end to golden visas for house purchases, such as neighbouring Spain. This is because real estate investors are sensitive to legislative changes, especially when tax benefits are at stake.

Nevertheless, the quality of life that Portugal offers continues to be recognised internationally, as well as its good healthcare and education services, cuisine, landscapes, and climate. Perhaps this is why the drop in foreign demand for luxury houses has not been even more pronounced in the country. Note that despite the reductions, international demand for luxury houses in Portugal still carries some weight: 23 out of 100 people searching for luxurious houses are foreigners. What is now felt in the market is that foreigners have opted to resort to alternative ways to obtain golden visas, namely through national companies.

As for the future, it is not known for certain if there will be more changes regarding golden visas, since the new Portuguese Government lead by Montenegro says it will revoke several measures introduced by the previous Government, but without making direct reference to this programme. It only says it wants to “clarify the rules of real estate investment and attraction of investment (residents and non-residents)” in the programme presented by the Executive.

North Americans show less interest in luxury houses in Portugal

It is those living in Europe who have the most interest in searching for houses priced over 1 million euros in Portugal. The United Kingdom is the main country of origin for searches for luxury houses, representing 11.9% of the total international demand at the beginning of 2024. Following closely are the USA (11.2%), Germany (10.2%), Spain (9.2%), and France (8.6%), according to data from idealista/data.

While international demand for luxury houses in Portugal from the United Kingdom increased compared to the same period last year (+0.8 p.p.), interest from the USA decreased (-4 p.p.). This is not surprising, as the USA is one of the five nationalities that made the most use of golden visas from 2012 to September 2023, according to data from the now-defunct Serviço de Estrangeiros e Fronteiras (SEF). However, despite the cooled interest from the USA in luxury houses since the end of golden visas, it is worth noting that Americans remain in second place in the top 10, as they continue to view Portugal as the “California of Europe,” where there is good quality of life, beaches, a good climate, and good health and education services.

In addition to the USA, golden visas were primarily granted to investors from China, Brazil, Turkey, and South Africa. Searches from Brazil show a significant interest in luxury houses in Portugal in recent years, accounting for 6.2% of the total in the first quarter of 2024. The share of Brazilian demand remained at the same levels compared to the beginning of 2023, but it was 1.5 p.p. lower compared to the previous quarter, when golden visas ended. Meanwhile, demand for luxury houses from China, Turkey, and South Africa has been minimal (below 1%) in comparison to the total.

Foreign demand for luxury houses drops in nearly all major cities

Foreign demand for luxury houses fell in almost all major Portuguese cities between the beginning of 2024 and the same period in 2023. The most significant reductions were in Faro (-17.3 p.p.), Bragança (-11.6 p.p.), and Évora (-11.2 p.p.), with less intense drops also seen in Lisbon (-5.2 p.p.) and Porto (-2.3 p.p.). It was only in Portalegre, Santarém, and Beja where, on the contrary, an increase in international demand for houses priced over 1 million euros was observed between these two periods, according to data from idealista/data.

This trend is also observed when comparing foreign demand for luxury houses between the start of 2024 and the end of 2023, when golden visas for real estate investment ended. International interest in the most expensive properties fell in all district capitals, except Viseu. The largest drops were recorded in Bragança, Ponta Delgada, and Faro.

Despite the decreased appetite of foreigners for searching for luxury houses for sale, the fact is that nearly half of those looking for high-priced houses in Ponta Delgada and Funchal live abroad. In Faro and Portalegre, around 3 in 10 people searching for luxury houses are foreigners. In Porto and Lisbon, international demand accounts for around 18-19% of the total.

Coimbra, Aveiro, and Évora are the Portuguese cities that attracted the fewest foreigners searching for luxury houses at the beginning of 2024, with international demand being less than 15% of the total for each of these district capitals.