Portugal: Property market boom 'contributing to social inequalities' - report

Portugal’s property market last year was two-and-a-half times the size it was in 2014, with 46,000 transactions in the second quarter of the year, but the growth is contributing to worsening social inequalities, according to the Barometer on Crises

‘The new question of housing in Portugal’ is the theme of the fourth report of the Observatory on Crises and Alternatives that has now been released, whose contents are based on research conducted by researchers from the Centre for Social Studies (CES) of the University of Coimbra and the Institute of Geography and Spatial Planning (IGOT) of the University of Lisbon.

According to the study’s coordinator, Ana Santos, the property market “is going through an unprecedented historical moment, with housing prices growing continuously and substantially above wage trends, making housing ever less accessible to ever more groups of the population.”

Housing purchases driven by finance “has been turning itself into a mechanism [that is] ever more crucial in reproducing social inequalities, a result of strengthening of the economic and political weight of property,” Santos writes in the study, which Lusa has seen.

Santos recalls the backdrop of the global economic crisis, which in Portugal brought an external adjustment programme overseen by European Union institutions and the International Monetary Fund (IMF), and which was based on an economic policy of Internal devaluation, under within which the relationship between housing and finance underwent significant changes arising from the growth of foreign investment in property.

She also cites the new law on rental contracts in urban areas, approved in August 2012, as a factor in accelerating property sales.

“Although the objective explained [at the time] was to stimulate urban rentals, the result … has been the acceleration [of the end] of rental contracts, with a view to the sale of buildings or new uses, such as the local accommodation,” she writes.

Since 2014 there has been an accelerated growth in the number of transactions, the vast majority of existing apartments, at the same time as the number of apartments registered as local accommodation (short rentals, mainly to tourists) multiplied by five, to 14,500.

Other measures have also encouraged external demand, such as the ‘golden visa’ ARI programme to fast track residence permits for major investors, which came into force in October 2012.

“Although this measure aimed at productive investment generating new jobs in a period of strong economic and financial crisis in the country, the fact is that between October 2012 and 30 September of 2018, of the 6,562 residence permits granted, 95% were obtained through the … acquisition of property, totalling €4 billion, she noted.

In addition, she recalled, EU citizens can benefit from a specific income tax regime for non-habitual residents, further adding to demand.

These factors have, according to Santos, contributed to housing prices rising steadily in Portugal, especially in Lisbon, Porto and the Algarve region.