Economic indicators all point to Portugal continuing to outperform its European neighbours over the coming years – further fuelling a wave of inward investment from wealthy expats.
The Algarve’s role in attracting inward investment and high-net-worth individuals (HNWIs), especially into its property market, is not to be understated. CBRE Group forecasted a 15% increase in the Algarve’s property market for the whole of 2024.
According to Statistics Portugal (INE) and the latest Property Market Index report, the Central Algarve saw capital growth of 10.9% in the last 12 months, outpacing Lisbon and surrounding areas, which experienced growth of 9.1% over the same period.
As one of Europe’s most sought-after destinations, the Algarve is renowned for its world-class golf courses, luxury property and resorts, which attract both investors and tourists year-round.
Its appeal as a second-home destination, combined with its reputation for safety, low crime rates, and excellent quality of life, continues to draw HNWIs seeking both lifestyle and investment opportunities.
The region also plays a key role in bolstering Portugal’s tourism sector, which contributes significantly to GDP.
Statista reported that Portugal's gross domestic product (GDP) in current prices is forecasted to continuously increase by 70.3 billion U.S. dollars (+23.2%) between 2024 and 2029.
Meanwhile, the European Commission (EC) predicts that Portugal’s GDP growth will surpass the Eurozone average, rising from 2% in 2024 to 2.3% in 2025, compared to the rest of the Eurozone’s slower growth rates of 0.8% and 1.2% over the same period.
The Algarve’s ability to attract expats, remote workers, investors, and retirees plays a pivotal role in this economic growth. Its thriving community of international residents has spurred demand for premium services, such as international schools, luxury healthcare facilities, and high-end leisure activities, creating a multiplier effect across various economic sectors.
Adding to Portugal’s economic stability, the EC has projected further positive trends for the country's inflation rate. Inflation is expected to decrease from 2.4% in 2024 to 1.9% in 2025, a trajectory that mirrors Portugal’s stronger position compared to broader Eurozone forecasts.
This trajectory compares favourably to the broader Eurozone outlook, where inflation is anticipated to decline from 2.5% to 2.2% during the same timeframe, highlighting Portugal's relatively stronger position in managing price pressures.
This follows a recent report on Portugal’s attractiveness from Ernst & Young (EY) which found 84% of investors, CEOs and entrepreneurs surveyed plan to establish or expand operations in Portugal over the next year, compared to 72% for the rest of the Eurozone.
The same EY report adds Portugal “presents itself as an attractive, stable and safe investment destination within the European context”.
Paul Stannard is Chairman and Founder of Portugal Pathways which supports and guides high-net-worth-individuals (HNWIs) and their families in navigating residency, investment, tax, and property research in Portugal.
He explained: “What we have seen is a significant surge in the wealthy looking at Portugal both as a place to relocate their families and a chance to take advantage of the plethora of investment opportunities. In addition to continued demand for the country’s popular Golden Visa residency-by-investment program.
“Portugal is one of the safest and most secure places in the world. It welcomes inward investment, entrepreneurs and talent wishing to take advantage of the tax incentives, culture, and lifestyle. With more than 300 days of sunshine, it also has a thriving luxury property market, which is in demand.
“While other nations continue to struggle, economically and politically, Portugal is proving a haven of stability, investment and growth.”
The EY report added that in a recent survey of 200 global executives, 77% of respondents expected Portugal’s attractiveness to improve over the next three years, compared with 49% three years ago.
The confidence comfortably eclipses the rest of the Eurozone which had a 67% confidence rating in the report.
Chris Marson who manages the RTi Family Office added: “What HNWIs are looking for is the opportunity to invest in somewhere with enormous potential – and Portugal provides that.
“Its government is known for its welcoming approach to entrepreneurs and skilled workers to help fuel its economy, and the cost of living is one of the best in Europe right now.
“While we await full details of the evolution of the NHR tax regime, it looks destined to continue to appeal to those who can create wealth and opportunity for Portugal.”
The existing NHR tax regime will officially close to new entrants in March 2025 and looks set to be replaced by the Fiscal Incentive for Scientific Research and Innovation (IFICI) tax regime, dubbed NHR 2.0.
It is expected to be a highly incentivised tax rate for highly skilled professions, entrepreneurs and young talent, with the finer details due to be set in stone before the end of 2024.
The previous NHR tax scheme lasted for 10 consecutive years, and the new NHR 2.0 tax regime is expected to follow suit.
The draft also outlines significant benefits, including the fact that most foreign-sourced income, including employment, independent work, capital investment income, royalties, capital gains, and real estate income, carries a tax rate of 0% in Portugal.
However, the new NHR 2.0 tax regime will no longer offer low taxes on foreign pensions.
The Portuguese government has indicated it hopes it will fuel economic growth by ensuring highly skilled professionals and young talent find the red carpet laid out for them in terms of tax incentives.
Meanwhile, Portugal’s Golden Visa residency-by-investment visa remains a driving force in bringing HNWIs to Portugal through regulated alternative investment funds in Portugal approved for Golden Visa, but real estate no longer qualifies.
The Golden Visa's advantages include freedom of travel within the 29 countries that comprise the European Schengen area, a path to Portuguese citizenship after five years, family inclusion, and a minimal stay requirement of just seven days a year.
The most popular route to Golden Visa acquisition is investing €500,000 in a qualifying investment fund, a list of which can be accessed through Portugal Pathways’ Golden Visa residency-by-investment index.
