Luxury homes: Portugal is one of the 10 favourite countries to invest in

Luxury villa Portugal

Portugal is still in the sights of international property investors, despite recent legislative changes that put an end to golden visas and the non-habitual resident (RNH) scheme. This is the conclusion presented by ‘The Wealth Report 2024’ by Knight Frank, which places Portugal among the top 10 favourite countries for buying luxury homes in 2024.

International investors were asked in this study in which countries they would be most likely to buy a new home in 2024. They indicated that they were 3.8 per cent more likely to buy luxury homes in Portugal, placing the country in ninth place in a ranking of 10 countries.

It is in the UK that international investors are most likely to buy a new home this year (17.7 per cent), followed by the USA (9.8 per cent) and France (7.2 per cent). There are also other southern European countries besides Portugal in this top 10: Spain and Italy, which are, incidentally, ranked higher.

What is also anticipated by the Knight Frank study is that Portugal will experience an increase in international investors with a net worth of 30 million dollars or more. In 2023, 800 luxury housing investors were counted, up 3 per cent on the previous year. By 2028, the outlook is for Portugal to attract 1,000 investors, which represents a 25 per cent increase on last year. This is because Portugal continues to be seen abroad as a country that offers stability and security.

These foreign investors looking for luxury homes in Portugal come from various countries. For example, the Algarve is most sought after by the British, Irish and northern European markets. And the Lisbon and Cascais markets are seeing an increase in demand from American and Brazilian investors, according to Alex Koch de Gooreynd, responsible for the Swiss, Austrian and Portuguese markets at Knight Frank, quoted by Jornal Económico.

Luxury house prices in the Algarve rose 12.3% in 2023 compared to the previous year, the fourth highest increase among the 100 cities analysed. In Porto, prices rose by 5 per cent and in Lisbon by 2.2 per cent. But the high cost of housing in these regions is unlikely to influence demand from wealthy foreign investors, and demand is even expected to grow this year.

Opportunities and challenges for real estate in 2024

Economic and market conditions are more favourable to property investment than they were a year ago. Inflation seems to be under control in several economies, which could lead to a reduction in interest rates as early as 2024, as predicted by the European Central Bank and the US Federal Reserve, for example. In addition, the labour markets are “solid” and house building continues to be restricted, which has mitigated a correction in prices.

It is in this context that the property consultancy highlights three opportunities for the international luxury markets:

• Relaxation of tax and property regulations;
• Greater appetite for property as a way of diversifying risk;
• Capital fleeing to a safe haven such as property.

But there are also several risks identified by Knight Frank that international investors should keep an eye on. This is the case with climate change, the lack of supply of luxury homes and the fact that there will be elections in almost 70 countries this year, which could have implications for wealth flows, with an impact on the property markets.

One of these countries was Portugal, which held legislative elections on 10th March, resulting in the victory of the Democratic Alliance. The programme already presented by Luís Montenegro brings several changes for the country, including for real estate, admitting to repealing several measures from Portugal’s “Mais Habitação” housing bill. However, it is not yet clear whether or not there will be any changes to the golden visa programme or the regime for non-habitual residents, which have come to an end.

Alongside all this, the geopolitical scenario continues to be marked by the war in Ukraine and now by the spreading conflict in the Middle East, following the attacks between Iran and Israel. The markets are now also paying attention to the possibility of this conflict escalating further and having consequences for the evolution of energy prices, which could affect the evolution of inflation in several countries and therefore delay the easing of monetary policies by central banks.