Taxation main challenge for Portugal’s real estate sector
Portugal’s real estate sector is optimistic as to the current growth trend but fears that changes in taxes could slow the sector’s recovery and scare away overseas investors.
After the last lockdown, Portugal has begun to get back to economic normality and the real estate development sector believes that the market is recovering back to 2019 levels in this and other segments including the residential housing segment.
The market’s energy slowed with the pandemic but then sped up, closing 2020 with a total investment of €2.7Bn in commercial real estate.
This year has seen a fall according to the latest study from Cushman & Wakefield’s Marketbeat Autumn 2021’ report which points to an investment of €1.130 Bn for the first eight months of the year which represents a fall of 40% like-for-like on 2020 and 29% in relation to 2019.
Up until the end of this year the consultant reckons that the market will achieve the €2Bn mark which means a fall of 27% on 2020, but nevertheless, it will still be the fourth best result in Portugal in the past decade.
In statements to Jornal Económico, Paulo Sarmento, partner and director of C&W capital markets believes that in 2022 investors will continue to enjoy “high levels of appetite for the Portuguese market”.
Looking to the main challenges faced by the sector, he says that the main threats are likely to come from the State and its continued interference in the Portuguese real estate sector in terms of regulation and taxation, among others.
Sarmento gives examples such as changes in the residential rental law, interference in the contractual relationships between owners and shop keepers in shopping centres and malls, increases in property taxes such as the IMI (Municipal Property Tax or ‘rates’) on assets held by specific classes of companies or IRS tax hikes on income from buildings.
The new year will also bring the end of the Golden Visa regime in Lisbon and Porto. According to data from the borders and immigration service SEF, investment in Golden Visas plummeted 38% to €237 million in the first half as investors scrabble around for alternatives in Europe such as Spain, Malta and Cyprus among other competing investment destinations.
Overall, Portugal will continue to be a destination for overseas real estate investment, in particular from France, but also with strong demand from the US and Brazilian markets.