Should you sell your property in Portugal this year? The Portuguese economy is just coming out of a prolonged crisis, which caused a lot of pain to the public. Property prices in Portugal were depressed for many years. It is only now that the real estate market in the country is looking healthy again.
It’s important to take a look back at the events of the recent past. The property market in Portugal was hit by the global economic recession which began as a response to the subprime mortgage crisis in the United States in 2008. Portugal as a nation was heavily under debt and was hit more severely than most.
Finally it was left to the IMF and the European Central Bank to bail out Portugal, just as they attempted to bail out Greece from its crisis. Portugal had to introduce a series of austerity measures to be able to pay back the huge loan worth EUR 78 billion given by the ECB and IMF.
It was a harsh time for many in Portugal. The unemployment rate in the country was 25 percent. Salaries of public sector workers were cut, and pensioners were hit harder than most. Understandably, foreign investors chose to look the other way during this time of crisis.
Portugal has staged a smart recovery since then. The austerity measures succeeded, and Portuguese banks were able to recapitalise. The economy registered a positive growth rate in 2014 and hasn’t looked back since then.
The performance the residential property market has been most impressive. Property prices have grown in double digits in Portugal over 2014 and 2015. This has continued in 2016 as well.
There are two main reasons for the excellent performance of the Portuguese property market.
One - the interest shown in Portugal by investors from emerging economies such as Russia, China and Brazil. The Golden Visa scheme started by the Portuguese government certainly has a role to play in this.
Two - the fact that a number of people from other European countries such as France and the UK are looking to settle down in Portugal, attracted by the picture perfect climate and the low taxes.
Indeed, foreign buyers accounted for 20 percent of the property sales in Portugal. Britons were the biggest buyers of Portuguese property, closely followed by the French. The Chinese too have shown a strong interest in the country.
Indeed, the Portuguese real estate market grew by 9 to 15 percent in both 2014 and 2015. The growth rate would have been even more impressive if not for the Golden Visa scandal involving officials from Portugal’s biggest bank, the Banco Espirito Santo.
The Golden Visa is a scheme introduced by the Portuguese government, which promises permanent residency permits in Portugal to wealthy non-European Union individuals who invest at least 500,000 Euros on Portuguese properties. The Golden Visa promises the right to travel to any of the 26 European nations in the borderless Schengen zone.
A number of Chinese applying for the Golden Visa were made to overpay for properties in Portugal and this made a lot of news in China and Hong Kong. As a result many of those who were looking to buy a house in Portugal held back their investments.
There is a huge demand for beachfront villas in the Algarve, which has become very popular as an alternative to Spain Costa del Sol. There are a number of French retirees who have relocated to the Algarve, attracted by low taxes, the beaches and the low cost of living. Portugal is also one of the safest countries in the world with one of the lowest crime rates.