Foreigners looking for a chance to secure residency in Portugal through the golden visa scheme might have to start looking for property outside the capital Lisbon and Porto, as the government moves to check the rapid increase in prices in these cities, putting it beyond the reach of many locals.
But the property industry is fighting against the proposed amendments to the scheme, arguing that foreign investors would be discouraged from investing in Portuguese real estate as other cities are widely perceived as less investor-friendly.
The government has been given authorisation until the end of 2020 to amend the state budget, which could pave the way for the exclusion of Lisbon and Porto in the investment scheme.
"I believe there is a huge probability that the golden visa legal framework would suffer some amendments and I would say there would be fine-tuning," said Hugo Santos Ferreira, executive vice-president of the Portuguese Association of Real Estate Developers and Investors.
This sentiment was echoed by Antonio Mira, who offers advisory services to foreigners seeking golden visas. "I think they will do it," he said.
Investments by overseas buyers are believed to have led to a surge in housing prices. The latest government data showed the housing price index rose 10.3 per cent to 143.12 in the third quarter of 2019, from 129.72 a year ago.
"If this change does occur in legislative terms, the market may experience a price adjustment," said Rafael Ascenso, general manager at Porta da Frente, an affiliate of Christie's International Real Estate. Property investment for golden visa makes up at least 10 per cent of the agency's business, Ascenso said.
Unsurprisingly, the real estate industry is opposing the proposed amendments.
"What we are trying to do is to explain to the government that the golden visa is not the cause of rising prices or lack of housing," said Santos Ferreira, noting that in Porto only 1 per cent of property transactions was related to golden visa.
He added that investors would only be persuaded to invest in these interior cities if they could improve property licencing processes and make them shorter than a year, the usual period it takes for a project to be approved in Lisbon.
"If they can do that we believe that maybe the Hong Kong or Chinese investors will try to go to the interior cities but we have to convince the municipalities to create this friendly environment to investors and if they're able to do that, you can mitigate the risk in investing in the interiors," Santos Ferreira said.
Growing tourism and the short-term rental market, as well as a tax-friendly regime, are also fuelling growth in property prices, according to Rita Ribeiro of INS Portugal, affiliated with the Leading Real Estate Companies of the World.
Other property agents remain upbeat about the prospects of the Portuguese property market, particularly Lisbon and Porto.
"The real estate market remains dynamic in Portugal ... Top locations are unlikely to lose value," said Goncalo Canelas, marketing and technology director of Portugal Sotheby's International Realty.
Meanwhile, JLL expects the amendment could spur investment in other cities in Portugal.
"This could be beneficial for the whole Portuguese economy," said Mandy Wong, head of international residential at JLL in Hong Kong.
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