Is Portugal's Golden Visa Scheme Worth It?

LISBON—On Nov. 7, the same day that Portugal's Prime Minister António Costa resigned amid corruption allegations pertaining to lithium contracts, federal officers in Brazil raided the Portuguese Consulate in Rio de Janeiro.

The Brazil raids were not connected to the Lisbon investigation, a spokesperson said. Instead, according to Brazilian police, they were part of a separate investigation into the falsification of documents in collusion with applicants seeking Portuguese visas and citizenship. Since the 1990s, amid periods of economic downturn and social instability, large numbers of Brazilians have struck out for Portugal. When the country began its "golden visa" program in 2012, wealthy Brazilians became the second largest group to take advantage of it.

Portugal's golden visa grants European Union access to foreigners in exchange for investment. From its inception in the wake of the 2008 global financial crisis, it has faced backlash, and the criticism has only grown more vocal in recent years. Chiefly, it is blamed for contributing to a severe housing crisis that has made affordable housing unattainable for most Portuguese.

In early October, Costa's Socialist government finally passed a law that took aim at the issue, removing the real estate investment pathway from the golden visa program. Previously, people who invested in a qualifying property worth at least 280,000 euros (about $305,000) were eligible. The change, almost a year in the making, has ricocheted around the world of global elites, many of whom had come to regard Portugal as a foothold into Europe. Although more than 30,000 foreigners have benefited from Portugal's golden visa, its benefits for the Portuguese themselves are less clear.

Nine other countries in Europe also offer golden visas, but Portugal's is the most popular. The reason, insiders believe, is because it asks little of investors and provides a straightforward path to citizenship. "You have to live in Greece, fulltime, for seven years before getting citizenship," said Lisbon-based Patricia Casaburi, director of investment migration firm Global Citizen Solutions. "Here, you just have to speak the language passingly and have a legitimate visa for five years." Since Portugal's golden visa is good for five years, requiring holders to spend an average of one week a year in the country, obtaining a passport is easy. What's more, all of Portugal's golden visa benefits extend to the holder's immediate family—parents, spouse, and children.

So far golden visas have ushered in more than $7.3 billion, rescuing Portugal from a crippling recession. Last month, for the second time in nearly 50 years, Costa's government announced a budget surplus for 2023. While the windfall is welcome, there's no doubt that the influx of wealthy foreigners has transformed Portugal. As cited by Bloomberg, in the last decade, according to the National Statistics Institute, foreign residents have risen by 40 percent. Within that same period, the country became a top magnet for high-net-worth individuals. "It started slowly," Casaburi said, "but it's grown over time." Last year, an estimated 1,300 millionaires moved to Portugal.

The same year that Portugal started its golden visa program, onerous restrictions on landlords were pulled back so decrepit buildings could be fixed. Three years prior, a tax incentive was introduced to attract desirable residents. If high-value residents came to Portugal, the government said, they'd enjoy a favorable tax status for 10 years: a 20 percent flat tax on income made in Portugal (high earners usually pay about 40 percent) and a 10 percent flat tax for pensioners. This past fall, Costa committed to scrapping the tax program, saying it had served its purpose but now is unjust. While the future of that action was temporarily in limbo amid Lisbon's unfolding scandals, it seems a version of Costa's proposal will likely be passed on Nov. 29. (The election to replace Costa will follow on March 10, 2024.)

As the numbers of wealthy residents in Portugal ticks up, so too does the cost of living—particularly real estate. According to government numbers released this September, the month before Costa's Mais Habitacao ("More Housing") law formally ended the real estate path, 12,700 golden visas had been issued; of those, more than 11,300 were granted to real estate investors. In major cities, such as Lisbon and Porto, the effects are palpable. Miguel Coelho, president of Santa Maria Maior parish which accounts for most of Lisbon's downtown area, told Bloomberg that since the programs to attract outside wealth began, more than a quarter of the neighborhood's residents have gone. Staggeringly, north of 60 percent of its residential properties are now short-term rentals.

Driving the exodus is a desire to take advantage of tourism, as well as locals' inability to compete in the market. Since 2015, not only have sale prices for homes tripled, rent prices have also shot up. In 2023, despite government incentives to reverse the trend, rents rose 36 percent. Meanwhile, earnings haven't kept up. The average Portuguese salary is below 20,000 euros (around $21,800) and, per last year's numbers, more than 50 percent of workers earn less than 1,000 euros (about $1,090) a month. Since rent in central Lisbon now averages over 2,000 euros (around $2,180) a month, Casaburi said, the problem has hit a tipping point. Though the housing crisis was initially most burdensome on the poor, it touches almost every Portuguese in want of housing today.

For poor, immigrant residents, the implications are grave. In Lisbon, a fire tore through a ground-floor studio apartment in early 2023 and when firefighters stormed in, they discovered 22 immigrants struggling to escape. In the end, 2 died and 14 were injured.

Additional criticisms of Portugal's golden visa scheme pertain to national security. Following Russia's invasion of Ukraine, the European Commission voiced concern about poor oversight of golden visa programs generally and called on EU members to phase out "golden passport schemes." More pointedly, the EC called for a complete suspension of visas to Russians and Belarusians.

Nevertheless, the programs have flourished across Europe. This past year, Spain and Greece issued at least 60 percent more visas than the year prior. "I expect other countries with golden visa programs will benefit from the real estate changes in Portugal," Casaburi said.

So far, only two governments have ended their programs: the United Kingdom and Ireland. The Netherlands, Casaburi added, will end theirs in January 2024. When Ireland ended its program last February, it gave one day's notice to prevent an onslaught of applications amid security concerns.

As is the case in Portugal, Chinese applicants were Ireland's most dominant investment group. "[The] Chinese are the number-one utilizers of golden visa programs the world over," said John Baker of LCR Capital Partners, a firm that helps clients obtain second residencies. In Portugal, as of this September, around 5,400 Chinese investors obtained golden visas.

Following the 2008 financial crisis, Chinese businesses, some with government affiliations, began investing in Portugal through a range of avenues—from financial institutions to real estate to critical infrastructure and natural resources. A reporter in China who requested anonymity to speak freely said that Portugal was a favored destination for the rich because it only required a week's residence per year. "Anything that gets them into the EU is attractive," the reporter said.

While Chinese investment in Portugal doesn't necessarily relate to Portugal's golden visa program, China's influence within the country is far-reaching. Among other ventures, State Grid Corporation of China is the largest shareholder of REN, Portugal's national power grid operator. "Poorer countries within Europe, like Portugal, are places China thinks others aren't paying attention to," said Kristen Gunness, a senior policy researcher at the RAND Corporation who focuses on Chinese foreign policy and security issues. "They think they can gain support for Chinese objectives, both political and economic, by growing their economic stakes and expanding access to things like ports and infrastructure."

More recently, Americans have discovered Portugal, cottoning on to its golden visa program in the process. As of September, they accounted for about 780 visa holders. Though late to the game, Americans now outpace the Chinese as the most dominant group securing the visas. "We saw large numbers come around the [2020] election and [COVID-19] pandemic," Casaburi said.

Joao Ricardo Nobrega, a partner at Raposo Subtil and Associates, a firm that represents golden visa applicants, said Chinese and American investors present differently. "The American retires and lives here," Nobrega said. "The Chinese investor, you don't see that much."

Since the changes to the visa program last month, five investment avenues for Portuguese golden visas remain open. But, Casaburi said, since the real estate option was taken off the table, her monthly business for October was down 75 percent. Nationally the impact will not be known for two years due to processing backlogs. Some real estate firms claim that demand for housing has already fallen 20 percent, but since there's a lack of inventory, prices remain elevated.

Despite recent efforts, fixing the Portuguese housing crisis will not be easy. And given the discrepancy in spending power between Portuguese nationals and those moving to Portugal, even from within Western Europe, the Portuguese buyer and renter remains at an almost insurmountable disadvantage. In 2021, the average full-time annual wage in Portugal was around $21,000, compared to $30,700 in neighboring Spain, $43,800 in France, and $48,500 in Germany. Compounding the problem: only 2 percent of Portuguese housing is public housing, one of the lowest rates in the EU.

As for the investigation unfolding in Rio, a facilitator of golden visas who works in Brazil said it's believed five businesses which help golden visa applicants invest were heavily implicated in the investigation. And, the source added, the Rio consulate where the raid occurred was known to directly process visa applications.

Despite this most recent investigation into corruption, Bloomberg has reported that businesses which help to facilitate  golden visas —a burgeoning space to which Casaburi, Nobrega, and Baker belong—aren't too worried the programs will end because they're big business. In Europe, golden visas have generated more than $27 billion in direct investment.

This summer, when the golden visa's real estate changes were pending, Nobrega emphasized that investors like stability. It's a sentiment Costa, post-resignation, seems keen to stress as well—never mind the deepening scandal that has tarnished the reputation of those nearest to him (envelopes stuffed with cash amounting to $82,900 were found in his chief of staff's office). "To all those who have placed their trust in Portugal," Costa said two weeks ago, as Portugal's president announced the forthcoming dissolution of his government, "I want to say that today, and always, business investment is desired, welcome and will be well received."