Portuguese Prime Minister António Costa’s shock announcement of his intentions to close the golden visa program roiled markets last week. Now, representatives of some of the companies that have contributed the most to Portugal’s economic development through the program, as well as industry associations and the regional government in Madeira, are calling on the government not to throw the baby out with the bathwater.
“Unprecedented attack”
“Portugal has closed itself to international investment and foreigners are no longer welcome. This is the message the government has just sent out to the entire world,” lamented Hugo Santos-Ferreira, President of the Portuguese Association of Real Estate Promoters and Investors (APPII), according to Diário de Notícias.
“Either the government will have the good sense to rethink and realize that this is not the way to go, or it will present us with a study that proves that the housing problem is related to the impact of the golden visa,” said Santos-Ferreira, also calling the measures an “unprecedented attack on and punishment of tourist and foreign investment.”
“It was precisely this program that allowed Mercan Group to create, in recent years in Portugal, a hotel group of reference, one that employs hundreds of workers and will come to employ thousands of workers when all hotel units are completed and operational. This will generate important economic activity in a fundamental sector,” contested Miguel Gomes of Mercan Group, who referred to the measures as “more ideological than logical.”
Expressing hopes that the government would reconsider its decision, Gomes also remarked that, if they go ahead, the measures will cause “the loss of a very significant source of foreign investment, already lacking in the country, particularly in the tourism sector.”
“Foreigners are not to blame”
Pedro Fontainhas, Managing Director of APR, Portugal’s Residential Tourism and Resorts Association, lambasted the government’s actions, warning of the economic consequences of ending the program and pointing out that the announcement had already brought “harmful turmoil”.
“Foreigners are not to blame for anything because they represent a tiny slice of the real estate market, and that slice has no capacity to influence either prices or demand,” said Fontainhas. He also emphasized that the program has raised nearly seven billion euros in direct investments alone and, through construction and renovation, created countless jobs since opening some ten years ago. “This could end from one day to the next, and there is no replacement for this program,” he commented.
Fontainhas also called for urgent clarifications regarding the measures because PM Costa's statements - widely criticized as incomplete, confusing, and indicative of a lack of familiarity with the program - had contributed to "an ocean of doubts." The PM, for example, never clarified whether his decision would impact only the residential real estate routes or whether other parts of the program - such as the cultural contribution, scientific investment, capital deposit, or job creation options - would end too.
Cut residential real estate if you must, but keep the FDI flowing
The entrepreneurs and associations all indicated a restructuring, rather than a wholesale discarding of the program, was needed.
"Ending the golden visa removes the country's competitive advantage," said Aniceto Viegas, CEO of Avenue Real Estate. "Instead of ending it, [the government] should focus on studying what kind of visas would be of interest [to Portugal]. Several regions benefit from the program. Business people allocate investment to industrial zones; agricultural entrepreneurs wish to create new businesses and wealth in [interior] regions."
Daniel Correia, General Manager of United Investments in Portugal, which owns a number of high-end resorts in Portugal, proposed a new version of the program that removes any need for the government to worry that golden visa investment might contribute to rising housing costs for the Portuguese population.
"Keep the business, capital deposits, fund investment, and research contribution options," suggested Correia. "This would ensure we keep attracting fresh capital to Portugal without impacting housing."
Mirroring the statements of Fontainhas, Correia highlights that, even though he suggests the government remove the residential property investment option, golden visa investors are not the reason for the high cost of housing in the country. The government's characterization of the program as a contributing factor to the housing problem, he said, was "not real" because it had "a very small imprint" on the overall market.
The real reason for the high Costa housing
Blaming PM Costa for the housing crisis, Santos-Ferreira underscored that of the 168,000 homes sold in Portugal last year, golden visa buyers accounted for only about 1,000.
"What's causing housing prices to rise is the lack of construction. In the last ten years, we've seen construction levels linger well below the pre-2008 level, which is noticeable in the market," added Correia. "If there's no construction, the law of supply and demand dictates that prices must rise."
The program, he clarified, should "evolve, not end," he said, proposing that the government should make golden visa investors part of the solution rather than the problem by relying on them to, for example, inject capital into the modular construction sector, which can pay an important role in providing affordable housing.
"We are not able to build houses that the Portuguese can afford because we don't work on the supply side," Santos-Ferreira maintained. "We don't have a courageous government that takes measures that would lower the cost of housing. We have to lower the tax burden, and we cannot have the Additional Municipal Tax on Real Estate (AIMI) on housing-designated land, nor VAT on construction at 23%."
The capital may not need more capital, but the regions do
Entrepreneurs and industry associations are not alone in opposing an ill-considered and premature end to the golden visa program. Earlier this week, Miguel Albuquerque, President of the regional government of autonomous Madeira, said he wants his region to keep the program.
"At this moment, to turn everything back, I think it is ridiculous. It is bad for the country and it is bad for the national economy," said Albuquerque, according to The Portugal News. "Nothing justifies Maderia being covered by this set of measures that are fundamentally aimed at Lisbon and Porto."
Accusing the government of thinking it proper to interfere in private property rights, trying to steer the market, and tell entrepreneurs what to do, the regional president said he thought there was "nothing good in these measures" and that golden visas and AirBnBs had become a "scapegoat" for the government, which, he said, "has done nothing about housing" for the last seven years.
Albuquerque called for the government's More Housing (Mais Habitacão) initiative to listen more to the regions rather than sticking to what he called a "centralized and Lisbon perspective" in assessing the country through the "problems of the capital" without heeding the pressing need for investments, housing stock renewal, and historic city center revitalization in the regions.
"The reality is this:" he clarified. "We want to keep golden visas in Madeira, and we understand that it is good for the growth of high-income real estate, also adding that his regional government is already allocating significant funds to the construction of affordable housing.
