The property markets in the Algarve and Lisbon in Portugal are seeing strong growth with sale and prices up, boosted by the country’s golden visa scheme, a new analysis suggests.

A decade ago, 60% of buyers on the Algarve originated from the UK and Ireland but this has changed significantly with Northern Europeans now active and the UK share declining, according to the report from international real estate firm Knight Frank.

Overall, prime prices on the Algarve increased by 6.5% in 2017 year on year and mainstream prices in Lisbon are now 24% above the bottom of the property market in 2012.

The report explains that the golden visa scheme, which allows overseas nationals from outside the European Union to apply for a residency visa by purchasing property, has attracted over 6,300 real estate investors since it began in 2012 and is particularly popular with buyers from China, Russia and South Africa.

According to Alex Koch de Gooreynd, head of Knight Frank’s Portugal desk, the housing markets of Lisbon and the Algarve are markedly different from one another but both have seen an uptick in sales volumes, price growth and market liquidity over the last year.

He pointed out that the Algarve’s ‘golden triangle’ from Quinta do Lago to Vale do Lobo and Almancil remains the Algarve’s most exclusive second home destination. Villas below €5 million have registered strong sales rates whilst at the Western end of the coast, the area between Portimão and Sagres, villas below the €1.2 million threshold are facing strong demand.

‘Unlike a number of countries, the Portuguese Government has not tightened rules on foreign ownership or increased property taxes. Instead, the absence of inheritance tax along with two key initiatives have been critical in attracting new investment,’ he explained.

‘The Non-Habitual Residence (NHR) tax rule, introduced in 2009, allows for a flat rate of 20% personal income tax from activities performed in Portugal and a tax exemption, including pensions, on all foreign income while the golden visa offers residency to investors outside the EU in return for a minimum property investment of €500,000,’ he said.

He added, that in addition to these two initiatives, Lisbon has one of the highest qualities of life, ranked 38th out of 450 cities in Mercer’s latest benchmark index, due to low crime, good transport links, international schools and healthcare and this also attracts investors.

He also explained that since 2000, Portugal’s foreign born resident population has doubled from 207,000 to 416,000 according to figures from the Portuguese Government. ‘Tourism is frequently a lead indicator of international housing demand and Portugal witnessed almost a 12% increase in foreign tourist arrivals in 2017. The country hosted 12.7 million tourists in total with the UK, Spain, Germany, France and Brazil accounting for 57% of inbound arrivals,’ he added.

Northern European buyers from Scandinavia, Germany and the Benelux nations, are now active and the UK market share has been declining. ‘The most notable trend has been a surge in French enquiries in the last two years, a trend we have seen in Spain as well,’ said de Gooreynd.

‘Lisbon saw very few investment driven purchases until 2012 when rent reforms opened up the market by rebalancing the rights and responsibilities of tenants and landlords. The result has been a significant resurgence in interest from developers and investors,’ he added.

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