2022 brought about significant changes to the Portugal Golden Visa program, with property investments in popular locations such as Lisbon, Setubal, Porto and the Algarve no longer permitted.

Investment limits have remained largely unchanged with €280k, €350k and €500k remaining the relevant price-points. At the €280k level, properties must be located in low-population densities or be of a commercial nature, whilst €350k properties must be older and subject to renovation and €500k properties remove any limitations, provided the investment is made in an interior region, the Azores or Madeira .

GVP Life, a global residency and investment consultancy focusing on the Portugal market, have noted that Golden Visa investors and property firms are now turning their attentions to towns & cities in the interior of the country with places such as Evora, Castelo Branco, Comporta & Santarem garnering attention. This has seen property prices there rising rapidly and certainly investors can still stand to make good returns both on capital increase and rental yields over the duration of their Golden Visa investment period. “However, risks in these locations are higher given they are not traditionally areas where non-Golden Visa property investors make up the majority buyers, nor are they established safe-havens such as Lisbon, Porto, The Algarve or Setubal” observes Kieron Norris, Chief Executive of GVP Life.

Property firms have also started to look at packaging tourism offerings and other commercial property options for investors looking to come in at the minimum €280k price point. These are often perceived as inflated in price, and those which offer guaranteed buybacks come with risk. In such cases, the buyback is typically offered by a special entity that is setup for the development on offer, and that entity will only be able to buy the unit back if the financial performance over 5 years is sufficiently good enough. This places not only the investors capital at risk, but also the success of their Golden Visa residency altogether.

The other rule change relates to investment funds which have seen an increase in the minimum amount rising from €350k to €500k. Investment funds are diversified investment vehicles which typically invest in Portuguese property & equities, and which are also able to invest 40% of capital under management in other European countries, thus spreading risk over several assets and countries.

“Investment funds also remain able to invest in residential properties in the most popular investment destinations of Lisbon, Setubal and Porto, which diminishes risk, as up to ninety percent of investment is non-Golden Visa based. There are now many Golden Visa qualifying funds in Portugal, but these funds must be researched carefully to ensure they have the right exposure to the right property portfolio and locations, diversification in other geographies, as well as benefitting from seasoned and trusted management that possess a strong track record for delivering on performance. Those which are performing best, are still investing in Lisbon where returns are more stable, and in surrounding areas like Setubal which are increasingly becoming a destination for digital nomads, professionals and expats”, Kieron Norris states.

Investment funds also avoid costly property taxes and enjoy better tax treatment since investment dividends are not taxed in Portugal for non-tax residents, whilst rental income is taxed at 28% regardless of tax status. Investment funds are also managed by qualified fund managers and advisors, who are subject to Portuguese and European regulations which firms offering Golden Visa non- fund property packages are not subject to.

In 2021, despite prime areas being available for investment, GVP Life saw a noticeable shift towards investment funds due to their ease of administration since there are no tenants for Golden Visa investors to manage, no monthly issuance of government rental receipts, no upkeep or maintenance, and none of the issues one might traditionally associate with managing rental properties abroad. During the pandemic funds became far more logical for many investors who had to invest so remotely.

Despite elevated interest in interior regions from Golden Visa clients, the trend towards Investment Funds is one that has continued into 2022, and is a phenomenon which is backed up by the good performance of the well managed funds.

Kieron Norris, Chief Executive of GVP Life.