Focus: Golden Visa

Fast-track to Residency

Feb. 18, 2019

Portugal emerged from its sovereign debt crisis as the poster child for the success of European austerity measures. Part of its economic growth came from strong foreign investment in the real estate market, boosted by its Golden Visa policy.

October 2018 recorded EUR74 million in foreign investment coming to Portugal through its Residence Permit for Investment Activity scheme, better known as the Golden Visa program. This was twice as much as the previous month and the highest monthly investment level so far since the program first began.

The Golden Visa program is a fast-track system to obtain residence permits, and potentially citizenship, for high-income people who invest into the Portuguese market. It was launched in October 2012, as Portugal found itself at the height of its sovereign debt crisis with a stagnated internal real estate market. The program grants residence permits to foreigners that invest over half a million euros in the real estate market, a million euros in the wider economy, or create 10 or more jobs in the country. If in 2012 only two visas were given under the program, in the first 10 months of 2018 alone, the Portuguese government has issued over 1,100 such documents. Since the scheme began, over 6,500 people have been granted a visa, with further 11,370 residence permits being granted to family members of the investors.

As expected, the sources of these investments are highly skewed toward nations with major investment interests in Europe. China has a clear lead, with nearly 4,000 residence permits issued to Chinese citizens. At 608 visas, Brazilians came in second place, followed by South Africa, Turkey and Russia in third, fourth, and fifth place with just over 200 visas issued each.
The Portuguese visa offer has been of particular appeal to international investors. The country has one of the best passports in the world, allowing travel to 186 out of 199 countries. Furthermore, its openness to allow these investments to focus on real estate makes the whole process not only cheaper but more streamlined. As a result, 95% of the people who were granted visas under the program chose to buy real estate rather than starting new businesses or investing in the wider economy. Out of EUR4.078 billion invested in Portugal through the program since 2012, investment in real estate accounted for EUR3.7 billion, while EUR380 million came from capital transfers.

The program has certainly helped revive the Portuguese real estate sector and has contributed to many derelict buildings being refurbished, mainly across Porto and Lisbon, but it has also received some backlash. For one, the rush for real estate in the main urban centers, that in 2012 was completely stagnant, coupled with explosive tourism rates and the advent of short-term house rental companies like Airbnb, has created skyrocketing competition for housing in the country's two main cities, with housing prices climbing consistently on double digits per quarter. The latest figures, from the second quarter of 2018, show that real estate prices in Portugal grew by 11.2% during the three-month period, nearly three times higher than the European average of 4.3%. The rate is even higher in the country's biggest urban centers. This has caused considerable social issues with Portuguese residents that struggle to find accommodation or afford the rising rents and house prices.

Beyond the social issue, European leaders are growing increasingly concerned with the Golden Visa concept due to security concerns. Independent reports have suggested that the vetting process used to evaluate these visa requirements is lax and inadequate to ensure that criminal offenders are not granted residence in the European space, a problem further exacerbated by the fact that most applicants are Russian or Chinese, countries where border officials have trouble performing background checks without having language skills or specific expertise. In response to these concerns, the Portuguese government recently introduced an amendment to the 2019 State Budget, requesting home-country tax identification and residency number for any Golden Visa application, an amendment likely to pass.