Property markets around the world were affected profoundly by the global pandemic, but not always in the way one might imagine. Paradoxically, the restriction of movement for millions of people resulted in a surge of real estate activity as people sort to relocate to safer or more congenial environments.
Portugal, which has the lowest cost of living in Europe, is the best beach destination in the world and is rated the third safest country in the world, is a very attractive destination to which to relocate. In Portugal, demand for property grew by 96.8% between March 2020 and March 2021 according to real estate portal Imovirtual. Around 20% of this demand was from foreign investors. In 2019 foreign investment in Portuguese real estate exceeded 34 billion euros and in the first three months of 2020, investors from 49 countries bought property worth 238.8 million euros.
The Chinese are the biggest investors (33%), followed the French (13%) and the Brazilians (7%). Foreign enthusiasm for Portuguese property is fuelled by a number of factors, the foremost of which, despite year- on-year increases, is its affordability. The ‘Golden Visa Scheme’ which has been running since 2010 is also fuelling demand. The scheme gives foreign buyers, who purchase property in excess of 500,000 euros, residency rights and freedom of travel within the Schengen area. From the 1st of July 2021 this scheme will no longer apply to Lisbon and Porto and in addition, the threshold may be raised, all of which is encouraging a purchase race to beat the deadline. The dramatic increase in property prices in central cities such as Beja may reflect an expectation that the currently low prices will rise to match those of the coast once the Golden Visa scheme is modified.
Portugal’s economy is powered by tourism and this past year has seen a 12 billion euro drop in income as Portugal locked down in a devastating third wave of the pandemic. The economy contracted by 8.1% in 2020, though the International Monetary Fund believes that the drop is closer to 10%. As a result, rental prices for tourist hot spots in the country have dropped by 14.6 % compared with March of last year. Lisbon has seen a drop of 15.8% from an average monthly price of 1,487 euros last year to 1,252 euros and Porto has seen a drop of 19.1% from 1094 euros per month to just 869 euros.
Another factor which has hit the rental sector is the absence of students. There are 134 universities and polytechnics in Portugal and the government has encouraged investors to provide rental accommodation for students by offering income tax incentives. With the closure of educational establishments during lockdown there has been no demand for the rental accommodation which is usually taken up by students. Once the pandemic is under control and the tourist industry revives, the rental sector will certainly bounce back, because Portugal will undoubtedly remain a very popular destination both for tourism and relocation.