Portugal PM claims the country may close their Golden Visa program to new applicants.
Prime Minister Antonio Costa stated on Wednesday that the Portuguese government is set to end its “golden visa” program, which grants affluent foreigners the right to obtain residency in the country in exchange for a capital investment (can be real estate, bonds, or other) in Portugal.
The PM said that the 10-year-old program has served its purpose, and this seems to coincide with the EU’s general anti citizenship and residency by investment stance. Multiple EU countries have already been forced to close their CBI programs (Cyprus, Bulgaria, and Malta is probably the next candidate). Golden visa programs were the only option left for direct a residence permit in the EU after acquiring a residential property or making a capital transfer.
The Portugal golden visa program, also known as the authorization of residence for investment activity for non-EU nationals, has drawn harsh domestic criticism for driving up housing and residential properties’ costs together with rents in Portugal, Greece, and other countries with Golden visas, and the European Commission has urged for an end to such national programs.
6.5 billion euros of Foreign investment
Foreign investors have invested 6.5 billion euros in Portugal, primarily from China, Brazil, and South Africa. The majority of the capital was invested in real estate. This year, the Portuguese government applied new Portugal golden visa changes and regulations were altered to reroute capital from booming urban real estate markets to less inhabited rural areas.
Speaking at Web Summit in Lisbon, the biggest digital event in Europe, Costa said the golden visa was one of several Portuguese visa programs that were now being reviewed. He did not specify if other visa programs such as the D7 visa were also under review. The Portugal D7 visa also allows applicants to obtain a Portuguese passport after 5 years of permanent residency just like the Golden Visa, but it has stricter physical presence requirements.
According to Costa, “(It) probably already served the purpose it was intended to serve and it is not currently appropriate to preserve it.”
When the evaluation is finished, a formal decision will be made public, he said. Portugal does offer alternative investment routes, but all include more permanent residency requirements compared to the Portugal golden visa (under the Portugal golden visa program, an investor only needs to physically visit Portugal 14 days every 2 years, whereas other Portugal golden visa alternatives such as the D7 visa, require the applicants to reside in Portugal for more than 183 days per year).
Portugal Digital Nomad Visa
Costa claimed that Portugal intended to remain enticing people to come to Portugal, citing as an illustration a recent law it passed on Monday that established the so-called “digital nomads visa.” It allows foreigners who can prove they earn enough monthly income through remote employment to live and work in Portugal for a year. Another interesting program is the Portuguese e-residency visa, which can be obtained as a virtual residency in Portugal for banking purposes and setting up an EU company.
The EU has long viewed national programs to sell citizenship to investors as a security risk, and the European Commission has urged EU nations to stop doing so.
Prior to Russia’s invasion of Ukraine, which led to unprecedented Western sanctions against Moscow, Britain abolished golden visas for wealthy businessmen in February on worries about the influx of illicit Russian money.
Is this the end of the Portugal golden visa?
What can potential Golden Visa investors expect? Two important lessons can be learned from what Costa has said here. It’s obvious the Portugal Golden Visa program is open for debate, and investors who are still thinking about applying for a Golden Visa should get started with their Golden visa application asap to obtain their Portuguese residency while the program is still active.
The potential economic impact on Portugal, its funds sector, which is predominantly Golden Visa focused through the real estate investment and investment fund option, is more significant. It would mean a direct halt on welcoming more foreign investors in the Portuguese financial system.
The majority of the Closed-ended Portuguese Golden Visa funds (with a limited capital raise window) are single asset backed securities with a real estate focus, meaning that a single project is enclosed within a fund.
Few people use a diversification approach that includes multiple baskets, such private equity/VC investments in business deals. Even fewer have a geographical asset diversification strategy outside of Portugal, despite the fact that Golden Visa permits it.
What’s in store for Portuguese real estate?
Closing the Portugal Golden visa would undoubtedly have a detrimental effect on Portuguese real estate. Cyprus is a great illustration of how a political-opportunistic government may ruin its economy by ending such a program.
As Cyprus has demonstrated, there will be knock-on repercussions felt across the Portuguese economy, affecting everyone from service providers to ordinary consumers whose household incomes will decline.
Portuguese Government support cannot make up for the destruction of private enterprise and innovation. Real estate funds with a single asset as their focus will fail. Investors will suffer a loss.
Due to this, investors must carefully consider the investment plan and the diversification focus when selecting your Golden Visa fund investment (both in terms of baskets and geographics). A multifaceted fund that leverages the Golden Visa as a convenient supplementary capital increase will be better able to weather the potential storm.
Once more, how the development is conceptualized matters. Does the investment only apply to Golden Visas? Or will the project succeed because it is a quality product that is made for the local market or FDI in general?
The Golden Visa program is incredibly effective and well-managed. Many people who want a brighter future for themselves and their families can still take advantage of the opportunities it offers. To decide whether an asset may withstand a program closure, investors must consider the real underlying asset when making the investment.