Portugal this week became the second EU country to abolish “golden visas” for wealthy non-Europeans, and joined Ireland in scrapping a scheme that helped attract foreign investment but sparked controversy.
António Costa, Portugal’s prime minister, said on Thursday his government would stop issuing new golden visas to “fight property price speculation”. In its own decision, Ireland had cited EU warnings about the safety implications of such schemes.
Golden visas have given wealthy people residency permits and access to the EU’s borderless travel zone in exchange for investment. The programs in Portugal and Ireland were introduced 10 years ago to help recover from the financial crisis and have proved particularly popular with wealthy Chinese citizens.
Portugal’s decision to end the program was driven by fears of a surge in property prices, which has meant many Portuguese are struggling to find decent housing, particularly in Lisbon and Porto, the largest cities.
It was part of a package of measures to tackle the housing shortage, the most pressing problem facing Costa’s socialist government.
Real estate prices have been pushed up in recent years by foreigners buying second homes or apartments to rent out to tourists through platforms like Airbnb.
The golden visas, officially known as investment residence permits, were issued for property purchases of 500,000 euros or more. Holders are granted the right to live in Portugal for five years, after which they can apply for permanent residence, although the minimum required stay in the country is only a few days a year. The program brought in more than 6 billion euros in investments.
Portugal is not canceling existing golden visas, but Costa said they could only be renewed if the property to which they were attached was the permanent residence of the holder or a family member, or if it was put on the rental market.
Since the program began in 2012, the largest number of visas have been issued to Chinese nationals, who have received more than 5,000, according to the Portuguese government. More than 1,000 went to Brazilians, while Turkey, South Africa and the United Arab Emirates received about 500 each.
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Government officials said there was a need for such a program when it was introduced and it had broadly met its goals, but the country now faced other housing affordability issues.
In 2020, the Costa government announced a plan to curb the impact of golden visas on property prices by making it harder for holders to buy in Lisbon and Porto, but property managers say some people have found ways to circumvent the restrictions .
Government officials conceded that the visa program was not the main reason behind the rising housing costs, but said it raised uncomfortable questions for the government and its termination was symbolically important. The proliferation of short-rent tourist housing and other tax incentives for foreign residents had played a bigger role in the real estate market.
Nuno Cunha Barnabé, a tax partner at Abreu Advogados, a Lisbon law firm, said the announcement left many questions about how golden visas would be phased out. “How will the government deal with foreign real estate developers’ expectations for ongoing projects?” he said.
According to a survey conducted late last year by the Institute of Social Sciences at the University of Lisbon, nine out of ten Portuguese say the country is facing a real estate crisis, blaming factors such as a lack of public and private investment and inadequate regulation, according to the University Institute of Lisbon.
The government is cautious about doing more, which could dampen foreign interest in Portugal, as tourism and the buoyant real estate market are key to its economy and helping the country thrive since the peak of the pandemic growing than the eurozone average.
Portugal’s housing package, announced on Thursday and awaiting parliamentary approval, included steps to bring more property to the private rental market and build more social housing, as well as subsidies for families and a simplification of property licensing.
Amid security concerns, the EU last year urged member states to end so-called golden passport schemes – which offer not only residency but also citizenship.