Portugal’s ‘Golden Visa’ property-for-residency scheme has helped one Lisbon-based estate agent sell over €35 million of property since the scheme started, but in the Algarve the French are moving in courtesy of France's penal tax rates.
Charles Roberts, Managing Partner of Fine & Country Cascais, says the agency’s average sale is €2.7million, “The demand comes 85% from China - also from South Africa, Libya, and Lebanon. There is a significant amount of interest from the Middle East in countries like Egypt due to the political conditions.”
In the Algarve, demand from the Chinese is not so relevant as they are generally looking for city environments but Zoie Hawker of Fine & Country in Carvoeiro says her agency is working closely with Cascais and some Chinese buyers are trickling down to the Algarve,
“We see the main potential for the Algarve in terms of Golden Visa buyers coming from South Africa - we have the advantage of being able to link up with the network of over 30 Fine & Country offices in South Africa.”
Portugal’s Golden Visa scheme, which allows non- European nationals to receive a five-year residency permit by purchasing a property worth at least €500,000, has boosted the Cascais agency’s sales. Roberts commented, “We had to develop a new arm of our business in order to cope with the demand for the scheme. In terms of value we have €35million worth of sales we would not have had if the Golden Visa programme had not been around. We have no reason to believe it will not continue."
Although Spain some other Mediterranean countries offer a similar Golden Visa scheme, Roberts says Portugal’s version has several advantages.
“We don’t have whole towns built during the construction boom that look like ghost towns. The Chinese will not put up with that. They want to be near lots of people. They want brand new, fully licenced, never-been-used, out-of-the-packet homes in an area with lots of activity.”
“More than 40 other countries have schemes of some description. The Spanish scheme is not quite as good. It does not have the option of a Spanish passport at the end of five years.”
Malta is offering a scheme that seems designed to bolster the sale of government bonds rather than entice genuine long-term residents to the island. It offers a passport that entitles the holder to full EU citizenship and among the conditions is the need to buy and hold a +€350,000 property for at least 5 years.
Fine & Country Cascais’ high-end clientele do not need mortgages or loans to complete their purchases - all are cash buyers. Excluding demand from the residency-for-property scheme, the domestic and international markets in Portugal remain fragile. Sales are being achieved but prices are 30% below 2007 level.
“If I was in the business of real estate where I was totally catering to the foreign buyer buying a holiday home or an apartment by the sea I would be very depressed. At the top is it different. Cash buyers are in a very privileged position,” added Lisbon-based Roberts
The allocation of Golden Visas under the Residence Permit for Investment Activity in Portugal programme can be made only if certain requirements are met - the acquisition of property of a value equal to or greater than €500,000, the transfer of €1 million of more of capital, or the creation of at least 10 jobs - the vast majority have been based on a property purchase with nil handed out under the job creation criteria. According to data provided by the Office of the Deputy Prime Minister, Paulo Portas, up to the end of last year 471 Golden Visas were issued of which 440 qualified as the applicant had bought real estate, the remaining 31 were granted as the applicant had transferred a chunk of capital to Portugal.
In the Algarve, Zoie Hawker comments that the Golden Visa system is less important than a benign tax regime for foreigners, “the main change in the market has been the influx of French buyers attracted by a Portuguese government incentive under the ‘non-habitual residence scheme’ where buyers are have been driven away from France by the extortionate tax rates under the Hollande government and can benefit from huge income tax savings in Portugal.”
“It really is a case of merci beaucoup monsieur Hollande for us and most estate agents along the Algarve,” said Hawker of Fine & Country in Carvoeiro, “around half of our sales enquires are from French buyers, we have French speaking staff and marketing literature in French to meet the demand. It's a case of property professionals in the Algarve being on their feet to adapt to these changes in the market.”
The Portuguese government already has awarded 208 Golden Visas in the first two months of 2014 in exchange for a total of €108 million in property investment, according to deputy prime minister’s office last week.
“The Golden Visa programme for investment should exceed €500 million in 2014” according to the deputy PM, Paulo Portas.
The additional income to the state in IVA will be around €5.7 million and the boost to estate agencies in the region of €25 million in gross commissions. Lawyers will be reaping the rewards from buyers ignorant of the fact that it takes no more effort to arrange the sale of a €90,000 apartment than a €5 million penthouse, but so it ever was.
For the Algarve the government website for the visa scheme pushes big resorts rather than opportunities for individual properties and, as Hawker commented, the French economic migrants at the moment are a far larger proportion of her property sales in the Algarve than those attracted by the Golden Visa scheme which have been concentrated in the Algarve's Golden Triangle.
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