From the end of 2013, the economy has been showing gradual signs of recovery, with both national and foreign investors now looking to invest in the renovation of properties located in the centre of Portugal’s major cities (namely, Lisbon and Oporto).
Some investors are initiating new projects and others are purchasing properties with ongoing projects that were forced to stop due to the financial crisis that has affected Portugal since 2009.
The reconstruction revival in the downtown areas of Lisbon and Oporto is also a result of two important Laws which came into force in November 2012: Law 30/2012 and Law 31/2012.
Law 30/2012 granted landlords wishing to repair and renovate leased property the right to terminate lease agreements on six months’ notice, without having to formally evict the tenant. Such termination notice must be given to the tenant in writing and triggers the payment of compensation corresponding to one year’s rent (as calculated by reference to the property valuation made by the tax office) except in limited circumstances (concerning tenants aged 65 or over or tenants with a significant level of disability, for whom the landlord must provide an alternative rental property).
Law 31/2012 sets out other circumstances in which landlords may terminate lease agreements in a period of seven years (though again, not in the case of tenants aged 65 or over, or those with a significant level of disability).
After building works, the renovated properties are being used for investment purposes, for short-term leases and for tourism purposes—these are called “Alojamento Local”. Other properties, mainly those located in the heart of historic districts, are also being converted into small boutique hotels.
Another important trend in the Portuguese real estate market is the growing interest of foreign investors (looking to benefit from their status as non-residents) in properties suitable for residential development.
The golden visa regime which came into force on 8 October 2012 (as an amendment to Law 23/2007) is a third significant trend in the real estate market.
This scheme allows citizens of non-EU Member States (mainly China, and also countries in Asia, North Africa and South America (notably, Brazil)) engaging in investment activity to apply for a residency permit. The investment activity can take various forms, including acquisition of a property worth at least €500,000.The prospect of applying for a visa which allows the investor to travel throughout the EU has helped to make Portuguese real estate an appealing investment. For more on the golden visa regime, see Luís Filipe Carvalho and Maria Barão Assis,“Obtaining a ‘golden visa’ through real estate acquisition” Real Estate Gazette (Issue 12, Summer 2013) page 28.
As at February 2014, 471 golden visas had been granted, 440 of which were via real estate investment. By the end of March 2014, according to information provided by the Ministry of Foreign Affairs, the number of golden visas issued had gone up to 772.
The cumulative effect of the trends noted in this article, which are expected to develop further, leads us to conclude that the real estate market in Portugal is quietly, but definitely, showing signs of recovery.
Luís Filipe Carvalho and Maria Barão Assis