Portugal. Good destination to invest?
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The answer is an inevitable: yes!
Portugal has made an admirable trajectory in attracting foreign investment. In a short period of time, it manages to recover the great economic backwardness that existed compared to other European countries. Renowned companies such as Google, Microsoft, Cisco, Repsol, PSA/Stellantis are an example of the ability to attract investment in Portugal.
AICEP, in 2021, breaks the record for supported investment (2.7 thousand millions euros) — which happens for the third time in four years. In 2020, Portugal entered, for the first time, the top 10 ranking of European Union economies that attract the most foreign direct investment projects.
The reason for such a pleasant investment capacity lies in characteristics such as geographic location, security, the quality of institutions and human resources, among other very important factors that identify living in a European country. If we consider investing in Portugal, we can think of profitability, in an institutional context (public administrations and the business environment) that are stable, just as the rule of law/government in Portugal is stable. There is no concern about carrying out coups d'état, wars or bankruptcies.
Portugal sees itself as a stable country, with a good market where there are advantageous tax incentives and the cost of living is among the lowest in the European Union. If we consider the financial risk, this is not relevant, since interest rates are controlled by the European Central Bank, for example.
In terms of location, even today this is considered a first plan for international investors. Real Estate opportunities exist in a very dynamic Real Estate market, in recent years, and with important potential gains. Portugal is a highly attractive destination in the field of tourism and residential tourism, and as a result, a very active market for renting and selling second homes. However, this market is not only attractive in holiday situations, but it is also an interesting rental market due to the constant newcomers who are attracted to the country, looking for better living conditions, more security and an entry into Europe, among others.
Over the last 20 years, Portuguese Real Estate has seen great development, both because of the quality of the project and construction, which is increasingly sustainable, and because of the evolution in purchasing power. Portugal is internationally recognized for the quality of the work of its architects. Proof of this are the two Pritzker Prizes already awarded to architects Eduardo Souto Moura and Álvaro Siza Vieira. On the other hand, very attractive prices make Real Estate in Portugal a competitive and reliable sector.
But even so, Portuguese Real Estate did not register an exaggerated growth, as happened in other European countries. In Portugal, the number of new constructions kept pace with the respective sales. In the last two years, there has been a recovery in demand which, in addition to ensuring the disposal of the existing panoply, has raised the price index.
Portuguese Real Estate is thus a safe haven for domestic and international investment and all the data presented contradict the existence of a Real Estate “bubble” in Portugal. As well as the potential for growth in values per square meter, comparing products with identical characteristics, especially with locations of the same status level. This fact alone is proof that there are competitive conditions for investment in the sector.
There are also incentives, tax exemptions and tax benefits in the Real Estate sector that attract around two billion euros per year, and transform housing into an attractive investment for large fortunes, international pension funds and banks. However, this may be an extremely conservative value, since it compares the taxes charged by the State to the funds with the average IRC — Corporate Income Tax — of companies and not with the total tax burden that they pay, which is much higher.
Investing in Real Estate is one of the safest forms of investment, more profitable and with less fluctuations compared to other types of investments, such as the stock market, for example. Not only can investors count on a monthly income, they can also find a predictable stream of income and capital protection. There is also a hedge against inflation, because when the economy grows, consequently the demand for real estate increases, influencing the increase in leases. Thus, inflation is not a threat, with the purchasing power of real estate increasingly valued.
A property can offer many tax benefits to the investor, such as: tax deductions on property taxes, depreciation, insurance, mortgage, interest, among other instruments existing in the market.
In addition to all this, Portugal has an excellent geographic location. At the convergence of three continents — Europe, Africa and America, it has always been a central point on the most important international routes. Here we can find international airports in the North, Center and South of the country, with regular connections around the world. Lisbon, for example, is just two and a half hours by plane from Paris or London.
As for the climate of Portugal, winters are increasingly mild and summers are hot. As a curiosity, the number of hours of sunshine reaches 3,300 in the south of the country and 1,600 in the north, one of the highest values in Europe.