Foreigners are often blamed for rising property prices in Portugal, leading to growing tension between local Portuguese residents and foreigners who move to the country and purchase property. However, this issue deserves a closer look to understand the underlying causes more clearly.
Disproportionate Immigration/Emigration
While many locals are supportive of immigration, and are lovely people, however some others believe that the influx of foreigners is problematic, but this viewpoint becomes less convincing when we examine the data. Currently, around 700,000 foreigners live in Portugal, with the largest groups hailing from Brazil, the UK, Cape Verde, Romania, Ukraine, and France. In contrast, the Portuguese diaspora consists of over 2.3 to 2.6 million citizens living abroad (roughly 25% of Portugal’s population).
To put this into perspective, the number of Portuguese citizens living abroad far exceeds the number of foreigners residing in Portugal. This challenges the narrative that foreigners are primarily responsible for the rising cost of real estate.
- France: 600,000 to 700,000 Portuguese citizens.
- United States: Approximately 1.3 million people of Portuguese descent.
- Brazil: Approximately 600,000 people of Portuguese origin.
- Switzerland: Around 300,000.
- Luxembourg: About 100,000.
- Canada: Around 200,000.
- UK: 400,000
With over three times more Portuguese living abroad than there are foreigners residing in Portugal, the backlash against immigration appears contradictory. It suggests a double standard, where some people support the freedom for Portuguese citizens to migrate but resist allowing others to settle in Portugal. For example, there are nearly as many Portuguese living in France alone as there are total foreigners in Portugal. Brazil, with about 300,000 residents in Portugal, makes up the largest foreign group, which is still only half of the 600,000 Portuguese-origin people living in Brazil.
A common argument is that foreigners pay higher prices for properties, driving up the market. However, this overlooks the fact that it’s often Portuguese property owners who are selling to foreigners and benefiting from higher bids. Essentially, foreign buyers are welcomed in transactions, yet later criticized for their impact on the housing market.
Another complaint is that foreigners don’t contribute to taxes. Yet, as reported, Brazilians alone contributed over a billion euros in taxes, setting a record.
This situation underscores the complexities of globalization and its impact on local economies, where migration and real estate markets intertwine, sometimes creating conflicting perspectives.
Population Decline
A recent study conducted by the Faculty of Economics at the University of Porto concluded that Portugal needs a significant influx of immigrants to sustain economic growth and improve living standards. The research highlighted that Portugal would require around 138,000 new immigrants annually to maintain population levels and enable the country to join the wealthiest half of the European Union by 2033.
The study emphasizes that immigration can counteract the country’s declining birth rate and the natural decrease in population. It also points out that immigrants contribute positively to social security and the labor market without displacing Portuguese nationals from jobs, debunking several myths around immigration.
The study suggests reforms and policies to attract and retain immigrants, such as improving public services (e.g., healthcare), facilitating integration, and establishing agreements with Portuguese-speaking countries. This immigration influx is seen as essential to supporting Portugal’s economic dynamism and addressing demographic challenges(Notícias U.Porto)(Portugal Immigration News)(AMAN).
AirBnB
The rising cost of housing in Portugal, particularly in major cities like Lisbon and Porto, is increasingly being attributed to companies, not just individuals, purchasing properties to rent out through platforms like AirBnB. While individual purchases of holiday homes have some impact, the more significant pressure comes from corporate buyers who acquire multiple properties with the sole intention of maximizing rental profits. These corporate investments prioritize short-term returns, which has contributed to the inflation of both short- and long-term rental prices.
How Corporate Ownership Affects Local Housing Prices
- Scale of Investment: Companies and real estate funds are purchasing properties in bulk, often taking entire apartment blocks, to convert them into short-term rentals. Unlike individuals who may own a holiday home for personal use, these entities are driven by their bottom line and the need to generate profits for shareholders. As a result, they are less concerned with the local housing market’s sustainability and more focused on raising rents to maximize returns.
- Impact on Rent Prices: To meet shareholder expectations, these companies consistently raise rental prices—both for short-term lets on platforms like Airbnb and for long-term tenants. In many cases, this practice reduces the availability of affordable housing for locals, who find themselves priced out of the market. As corporate owners set a new precedent for higher rent prices, other landlords, even individuals, follow suit, further driving up costs across the board.
- Local Neighborhoods Affected: Areas popular with tourists—particularly Lisbon’s historic center, Porto, and parts of the Algarve—are seeing an increasing number of homes converted to short-term rentals. This transformation pushes local residents out, as neighborhoods become more geared toward temporary visitors rather than permanent residents. Locals, especially younger generations, find it increasingly difficult to afford to live in the cities where they work.
- Government Response and Regulation: In response to these trends, local governments have started implementing regulations aimed at curbing the spread of short-term rentals. Lisbon, for example, introduced “containment zones” where no new Airbnb licenses can be issued in certain over-saturated neighborhoods. These measures aim to preserve residential housing stock for locals, but enforcement remains a challenge, especially with the financial power these corporations wield.
While foreign investment is frequently blamed for the housing crisis in Portugal, the more significant issue lies with corporate buyers whose focus on profit maximization drives up rent prices across the country. These companies prioritize short-term returns to appease shareholders, often at the expense of local residents who struggle to find affordable housing. Without tighter regulations and enforcement, this trend is likely to continue, exacerbating the housing affordability crisis in Portugal.
Thus far any regulations regarding containment zones and licensing restrictions has not had the benefit the government has hoped. Property prices are still going up and long term rentals are still in very short supply.
There’s no doubt that the surge in properties purchased for Airbnb has impacted property prices and reduced the availability of long-term rentals. However, instead of imposing a blanket ban on all new Airbnb licenses for apartments, exceptions should be made for regions of Portugal that are more sparsely populated or heavily reliant on tourism, such as Alentejo or the Algarve. The government’s proposal to leave this decision to local municipalities is a smart approach. However, there still isn’t a straightforward, transparent way for people to know where these licenses are permitted.
Golden Visas
Before Portugal closed the real estate option for its Golden Visa program in October 2023, there were over 11,000 successful applicants who obtained residency through real estate investments, representing around 91% of all Golden Visa applicants. The total investment from the program reached nearly €7 billion, with over €5 billion coming from real estate purchases. The Golden Visa program attracted significant interest from non-EU investors, particularly from China, Brazil, Turkey, and South Africa(bePortugal)(Portugal Residency Advisors)(Global Citizen Solutions).
Regarding annual property sales in Portugal, in recent years, the country has seen between 165,000 and 180,000 property transactions per year. This number can vary based on market conditions, with a high demand from both domestic and foreign buyers, especially in Lisbon, Porto, and the Algarve (The Golden Portugal).
With around 175,000 property transactions annually in Portugal, the 11,000 Golden Visa applicants over the past 11 years represent a small fraction of the total market. While there is an argument that Golden Visas may go against EU principles by offering a pathway to citizenship for wealthy individuals, the impact of this program on housing prices appears negligible in comparison to overall market activity. A drop in the ocean if you will.
Interestingly, the Golden Visa program was not entirely closed but rather restructured. It remains active, with applicants still able to invest in funds, companies, the arts, and other areas, but real estate investment no longer qualifies. The government’s claim of “closing” the program seems more of a political response to local concerns than a genuine effort to address housing affordability, as the program’s effect on the property market has been minimal.
This adjustment seems aimed at placating critics without fundamentally altering the landscape of property prices
Livable Wages
One of the main arguments from those opposed to immigration is that locals can no longer afford to buy or rent properties. With a minimum wage of just €820 a month, it’s easy to see why this concern arises, especially considering that Portugal has one of the lowest average annual salaries compared to other EU countries.
While it’s evident that these wages are not sustainable for a decent standard of living in Portugal, blaming foreigners for this issue is misguided. The root of the problem lies in the fact that Portuguese salaries have not kept pace with the rest of Western Europe. This wage disparity is a significant obstacle for locals trying to buy property, while residents from other countries, with much higher salaries, can afford the rising prices.
Instead of blaming immigration, which is modest compared to the number of Portuguese leaving the country, locals should be advocating for their government to raise wages to match those in other Western EU countries. This would address the real issue and help bridge the gap between salaries and property prices. It also subsequently hilites why so many Portuguese emigrate to Luxembourg.
Global Issue
Rising property prices in Portugal can understandably feel very personal to the locals, but this is not an issue unique to Portugal. House prices dipped slightly during the COVID pandemic but rebounded at an even higher rate shortly after.
Take Canada as an example, where locals are facing similar challenges, with reports stating, “Affordable rent is out of reach for Canadian minimum wage earners nearly everywhere.” Sound familiar? In the U.S., the situation is just as significant—over the last 12 months, the Case-Shiller U.S. National Home Price Index rose by 18.6%, marking the strongest year-long growth in the history of the series, with other indices showing similar increases.
This is not just a Portuguese issue. Considering that far more Portuguese emigrate than the number of foreigners moving to Portugal, it’s surprising that some people criticize immigration and its perceived impact on housing prices without recognizing that Portuguese emigration has a far larger global impact.
Fortunately, there are signs of global shifts in property markets. For instance, in the UK, house prices are predicted to drop by 5% by the end of 2024, reversing a fifth of the surge seen since the pandemic. France and Germany are also experiencing market adjustments.
Portugal’s situation is somewhat different. While property prices continue to rise, the number of buyers has significantly decreased turning it more into a buyer’s market. Although it’s difficult to predict exactly when prices will align with demand, one might expect prices to eventually follow suit as the number of buyers dwindles which goes to suggest that anyone interested in selling their property should do so sooner rather than later.
Artificial Scarcity
One of the main drivers of rising property prices is the imbalance between high demand and the limited availability of properties for sale. This is partly due to the government’s slow pace in approving building permits to meet the growing demand. In some regions, such as the Loulé District, it is widely known that obtaining planning permission or even approvals for renovation projects can take years. This delay is caused by an inefficient approval system and overworked staff.
Additionally, there is an element of artificial scarcity at play, where building permits are deliberately released slowly to keep property prices high. This controlled release of permits prevents the market from adjusting, further contributing to inflated property prices.
Real Estate Investment Trusts (REITs)
While it’s true that foreigners buying homes and immigrating to Portugal do have some impact on property prices, blaming them misses the bigger issue. The real driving force behind skyrocketing prices are the large-scale corporations buying hundreds or even thousands of properties. These companies are under pressure to deliver ever-increasing profits for their investors, which leads them to intentionally raise rents and sale prices.
Combined, these companies own many thousands of residential properties across Portugal, focusing on both distressed properties and long-term rental markets. The number will fluctuate as these companies continue to buy and sell assets.
If the goal is to reduce property purchase and rental prices, the focus should be on large REITs, which are driving the problem. One potential solution is to impose higher taxes on these large-scale investors, similar to the approach being taken in the UK, to make their profit-driven activities less viable. Limiting or eliminating corporate ownership of properties, or capping the number of properties an individual or corporation can own, would significantly increase market circulation and supply more so than anything else. This, in turn, would help bring down property prices overall.
Conclusion
In conclusion, the number of Portuguese living abroad far exceeds the number of foreigners moving to Portugal. The notion that the individual foreigner buying a home as the biggest problem is short sighted and naive, considering the significant Portuguese diaspora doing the same abroad compared to the relatively smaller foreign population in the country. Those who criticize immigration seem to want the freedom to emigrate themselves while restricting others from moving to Portugal, despite the fact its been shown that immigration is essential to counteract a declining population. In fact, Portugal needs foreign immigration to boost living standards because of all the Portuguese leaving the country. Rather than lowering living conditions as some claim, immigration actually contributes to economic improvement.
Globally, housing prices have been rising, but the blame is often misdirected on individual foreigners purchasing homes, rather than by factors such as artificial scarcity caused by slow or denied building permits, as well as the actions of large REITs gobbling up thousands of properties, and comparatively low purchasing power resulting from low salaries in Portugal. One has to question why we’re not focusing on these three more significant issues, but as history has shown, it’s easier to blame minority groups than to hold those actually responsible to account.
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About the Author:
Scott Kirk is the founder of both www.BuyProperty.com and www.Visas.pt. After moving to the Algarve with his family in 2016, Scott has become a strong advocate for intelligent immigration policies and sustainable growth in Portugal. His work is focused on helping individuals navigate property transactions and immigration processes, while promoting a vision of growth that benefits both newcomers and local communities. With deep insights into Portugal’s real estate market and immigration landscape, Scott is dedicated to fostering an inclusive environment that supports intelligent economic development and opportunity in Portugal.
Sources:
Instituto Nacional de Estatística (INE) – Portugal’s National Statistics Institute regularly publishes data on emigration trends and the Portuguese diaspora.
Observatório da Emigração – A research institution that tracks Portuguese emigration, often used by academic and governmental institutions.
OECD Reports – The Organisation for Economic Co-operation and Development publishes data on international migration, including trends for Portuguese emigrants.
International Organization for Migration (IOM) – They release reports on migration flows and diaspora communities.
Embassies and Consulates – The Portuguese Ministry of Foreign Affairs provides data based on registrations of citizens living abroad.
United Nations Department of Economic and Social Affairs (UNDESA) – Provides international migration data, including estimates for Portuguese emigrants.