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The Golden Visa Program Falls Victim to the Sizzling Lisbon Real Estate Market It Helped Ignite

Source: Bloomberg

A decade ago, Lisbon was renowned as one of Europe’s most affordable real estate markets, with its historic center filled with neglected buildings desperately in need of maintenance. However, this landscape began to shift dramatically in 2012 when the government abolished rent controls and introduced the “golden visa” program. This initiative offered a fast-track residency permit to non-Europeans who were willing to invest a minimum of €500,000 in Portuguese real estate. The popularity of this program among Chinese investors was so significant that billboards at Lisbon’s airport were exclusively in Chinese, advertising luxury properties.

Nonetheless, this surge in foreign investment had a downside. Many local residents found themselves priced out of the Lisbon property market as real estate prices more than tripled since 2015. Frustrations boiled over in April when some took to the streets to protest, clashing with the police and resorting to throwing stones and bottles.

In February, Prime Minister Antonio Costa announced the government’s decision to terminate the golden visa program, citing the need to curb property market speculation. However, foreign investors and real estate agents argue that this move is detrimental, as it shuns much-needed foreign investment. Jose Cardoso Botelho, head of Vanguard Properties, one of Portugal’s prominent developers, contended that golden visas are not to blame for rising property prices since they constitute only a small percentage of real estate transactions. He identified the market’s core issue as a supply shortage coupled with high demand.

Nevertheless, Portuguese lawmakers are expected to vote on discontinuing the golden visa program in the near future. Portugal is not alone in this decision, as Ireland already terminated its scheme on February 15th, and Greece intends to double its investment threshold to €500,000 in select regions. The European Union has long implored member states to discontinue these programs, citing concerns about money laundering and corruption.

As Portugal moves to close the door on its golden visa program, some foreign investors are rushing to secure property and apply for a visa before the deadline. Sandy Chen is one such investor who traveled to Portugal in March and is currently deciding between two houses in the rural town of Grandola, located an hour and a half south of Lisbon. If Portugal extends a grace period for the final round of golden visa investors, she intends to finalize her purchase. However, she remains optimistic that, even if she misses this window, opportunities will arise in the future, particularly during the next financial crisis when governments may reopen golden visa schemes to attract investments.

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