Property experts conclude that the UK’s pension law changes have pushed up the prices for prime property in Portugal's top areas.
The fact the pensions now can be drawn free of tax has seen wealthy Brits take advantage of Portugal with top end prices on the move for the first time since 2008.
In comments in today's Telegraph online, property company Knight Frank notes “realistic pricing, the availability of cheap finance, strong investment in infrastructure and tax initiatives” all of which has pushed price and volume upwards.
In 2015, average prices rose by 6.9% in Portugal with some of this due to the non-habitually resident well off who spend 183 days in Portugal being exempted from paying tax on their non-Portuguese income.
This huge tax break runs for ten years from acceptance but Portugal's government has a habit of changing the rules, as it did with offshore property ownership leaving many such legally constituted arrangements high and dry with retirees stripped of cash in order to remain living in their company-owned properties.
Knight Frank said "UK, Irish and German buyers are strong with South Africans and Chinese increasing in number," these latter nationalities able to take advantage of the equally tax friendly Golden Visa scheme for non-European incomers.
There has been a rise in Scandinavian buyers with the exception of the Finns who have been caught in a tax trap sprung by their own minister of finance and complicit Portuguese authorities resulting in the end of a pretty much tax free existence in the sun for many retirees.
The French are here in force, not fleeing civil unrest and terrorist activity so much as taking advantage of the Portuguese tax system which is designed to pander to well-heeled foreigners while leaving local taxpayers to fund the State.
Alex Koch de Gooreynd, partner and Head of Knight Frank’s Portugal commented “Buyers are investing in the Algarve again. They are buying, extending and improving. Increased liquidity is now returning with good quality stock offered at sensible prices selling quickly.”
By many yardsticks, Portugal’s property is under-valued, OECD data shows it as the fourth cheapest behind members Germany, Korea and Japan.
The macro-economic environment remains fragile with Portugal’s banking system close to serious implosion, a second bail-out always on the cards and an inability by the government to control State expenditure or hit deficit targets.
Whether these fears will damage the gentle recovery in prices and sales volume in Portugal's proerty market is anyone’s guess. The current Brexit vote has led many British buyers to shelve property purchase plans with other moving money into euros should there be a devaluation of sterling if the electorate vote to leave the EC.
Investing in Portugal's top end property has long been described as a 'safe investment' by estate agents, whether this is true or will continue we will see in the possibly turbulent months ahead.
