Portuguese Investment Landscape
Lisbon and Oporto were recently featured as Best Cities in the World by TimeOut Worldwide. This ranking was looking to spot the Top50 cities in the world that are perfect for city breaks – Porto can be found in the 10th position and Lisbon in the 13th. However, it’s not only for touristic reasons that Portugal is often spotlighted. It’s also one of the most interesting options for international investment in the most diverse areas.
Real Estate used to lead the investment list. In 2023, this area experienced an investment decrease following a global trend due to the inflation rate, rising debt costs, and other factors. However, there was still an “Avalanche” of money from investors looking to get Portuguese Golden Visas, as one can read in Portugal Resident.
“In 2023, many investors simply shifted from the property route which had been terminated by the government to the investment in a fund route where they mostly invest in Portuguese companies.”
Real Estate
In 2023, Portugal’s real estate market experienced a shift, recording a total investment of 1.6 billion euros, reflecting a 50% decrease compared to the previous year. Factors such as high inflation rates, rising debt costs, and discrepancies in price expectations between buyers and sellers contributed to this decline, according to insights from Savills reported by CASASAPO Notícias.
Key Highlights:
- Investor Demographics: 54% of transactions were led by domestic investors, focusing on retail, hospitality, and office assets.
- Resilient Sectors: Retail and hospitality outperformed, with retail showing a remarkable 42% increase in investment compared to 2022.
Origin of Capital:
- National investors dominated, accounting for 54% of 79 transactions.
- Cross-border investment reached 1.1 billion euros, directed mainly at hospitality, retail, healthcare, and student housing.
Golden Visa Program Continues to Thrive
Contrary to speculation, Portugal’s Golden Visa program remains robust. In 2023, the government’s termination of the property route led investors to shift towards the investment in funds route, particularly in Portuguese companies.
Key Highlights:
- High Demand: 352 golden visas were granted through the investment funds route, amounting to €125 million.
- Investment Surge: Investment funds and venture capital companies witnessed an “avalanche” of funds from investors seeking Portuguese Golden Visas.
- Significant Impact: Between January and September, over €125 million flowed into funds and VCs specializing in Portuguese companies, a 45.4% increase from 2022.
Achievements in Business and Innovation
Portugal’s business landscape has seen notable achievements, reinforcing its appeal to international investors. AICEP mentioned some of the most notable achievements for Portugal in this context:
- MSG INSUR:IT: Increased investment in Porto’s center of excellence.
- Accenture: Established a Cloud Security center of excellence in Porto.
- IP Parking: Opening a new development office in Portugal.
- Bosch: Plans to invest in the Aveiro Plant.
- Vitec: Expanding its R&D office in Porto.
- BPCE-IT: Expanding its team in Portugal at Natixis, creating a tech hub with 320 new positions.
- BIOrbis: Collaborating with Universidade Católica.
- Bedrock Streaming: Expanding to Portugal with a new office.
- Elementis: Unveiling a new R&D and support center in Portugal.
Outlook for 2024 and Key Challenges
The recovery of the investment market in 2024 is contingent on the decline in interest rates, stabilizing economic indicators, and increased investor confidence. Anticipated interest rate cuts in 2024 are expected to drive investors towards diversified strategies, particularly in alternative segments like hospitality and retail. There are 4 key challenges one can anticipate:
- Macroeconomic Uncertainty
- Global Geopolitical Tensions
- Legislative and Tax Changes
- International Governmental Instability
Despite these challenges, we anticipate a market stabilization post-legislative election in 2024. With over 85% of the sector attributed to foreign investment in the past decade, Portugal remains poised to leverage its strengths and attract foreign investors.
And it’s easy to understand why. Portugal is still a politically and socially stable country, considered one of the safest in the world, thus with one of the strongest passports in the world.
Finally, recent changes to the nationality law, which allows the nationality process to be submitted five years after submitting the Golden Visa process, will be an important aspect this year for investors, who see this program feature as the main differentiator when compared to other Golden Visa programs.
To know more about this, understand why and how you should invest in Portugal don’t hesitate to contact our team of lawyers here.
