Investments worth 800 million euros in residential tourism have been canceled by April, which would have represented 500 million euros in taxes and the creation of 2,090 jobs. The Portuguese Association of Residential Tourism and Resorts is calling for "common sense" to avoid a "catastrophe."
The government is destroying something that took decades to build in just a few months. It involved the effort of investors, the state, and the people, and now, with a thoughtless decision, we are throwing it all away. The criticism of the end of golden visas, a measure included in the "More Housing" package, comes from the executive director of the Portuguese Association of Residential Tourism and Resorts (APR), Pedro Fontainhas, who accuses the government of making a "blind decision" and harming the country's economic growth.
Since the announcement of the end of Residence Permits for Investment Activity (ARI) on February 16, and until the end of April, residential tourism projects worth 800 million euros have been canceled, which would have had an impact of 4.8 billion euros on the country's economy. Data from the APR, disclosed to Dinheiro Vivo, indicate that 500 million euros in taxes that the state could collect and 2,090 jobs that will not be created will be lost along the way.
The impact will be felt both in tourist regions and in the interior. Alcácer do Sal, Amarante, Beja, Castro Marim, Évora, Faro, Grândola, Lagos, Óbidos, Portimão, Reguengos de Monsaraz, Sagres, Salir, Santiago do Cacém, Sines, Tavira, Troia, Vila Real de Santo António, and Vila Viçosa are some of the regions that have seen projects halted following the government's announcement. Pedro Fontainhas clarifies that these data refer only to the 27 members of the APR, estimating that the true impact on the country exceeds these calculations.
Foreign investment fleeing to Greece
The association's representative warns of the various consequences of ending golden visas, including the flight of foreign investment to other countries. "Investors are looking for alternatives, and many, for example, are already replacing Portugal with Greece. The country had planned to increase the entry price for ARIs [from 250,000 euros to 500,000 euros] and suspended that initiative due to the flood of investors who moved from Portugal to Greece," he laments.
Pedro Fontainhas believes that Portugal becomes "undeniably less competitive" and has no doubt that the territory's reputation as an excellent tourist destination is at stake. "We need to grow, and we need investment as we need bread to eat. This investment has to be foreign because the national economy doesn't have enough capital for this type of renovation and construction of the tourism product. We will fall behind, and we run the serious risk of no longer being an excellent destination," he predicts.
Another consequence of the decline in investment in new tourism developments will be the growth of the parallel vacation rental market. If this is combined with the brake on Local Accommodation (AL), another measure in the government's package that was approved in general last week, the ingredients are gathered for the country to "regress by several years."
"As there is a less available product, fewer tourist apartments in hotels and independent developments, we will return to the old days when the parallel and informal rental market or the clandestine housing rental market will grow again. Without conditions, without legislation, without consumer protection, and without any revenue for the state," Pedro Fontainhas explains.
Parties show openness
The More Housing package, designed by the Socialist government with the premise of mitigating the housing crisis in the country, will now follow the legislative procedures and be discussed in detail over the next few weeks in the Committee on Economy, Public Works, Planning, and Housing.
The APR maintains the "hope" that there will be "common sense" to preserve investments in this type of tourism real estate. "We haven't given up yet. Our developments are not housing, and the real estate is not used for people to live in, it is used for people to take vacations. Foreign investment in this type of product doesn't take away a single home from Portuguese people; it creates jobs. There is a lot of confusion in Portugal about this issue, and we believe that, at the end of the day, there will be common sense," asks the executive director of the association.
Since February, the APR has been meeting with various parliamentary parties to defend the importance of investment in tourism developments and to explain that there is no relationship between residential rentals and tourist apartment hotels.
The APR states that it has not received "any blocking" from the deputies, and even the meetings with the government, notably with the Secretary of State for Commerce and Services, Nuno Fazenda, took place in an open atmosphere, which is why the association believes that the detailed discussion will result in a step back from the decision made on February 16. "Even the less enthusiastic parties agreed with us. The PS itself sees this with a positive outlook; it doesn't guarantee anything, but it understands and agrees with the essential points we are communicating," he says.
Considering the definitive death of golden visas in this business model is still a hypothetical scenario for the APR. "If, by a remote and absurd hypothesis, investment in tourist units were to be prevented, it would be tragic. Many hundreds of millions of euros are invested in this type of real estate, much of the tourist offer in Portugal refers to apartment hotels and tourist resorts. There is foreign investment behind it, and it is not from mega foreign multinational corporations; it is from small savers who invest in their unit and put their unit into operation," he clarifies.
Pedro Fontainhas admits that if it were to happen, the measure could represent the end of a business model, but for now, he dismisses that scenario and asks that investment in tourism be compared to the cultural sector. "The idea is so absurd that there is not much focus on thinking about what the alternative model would be because we believe that this has to be left out, just as visas for culture are left out because they have nothing to do with the housing problem that we want to solve," he adds.
The APR has presented six complementary measures to the government aimed at "contributing to support the government in solving the housing problems of the Portuguese without, however, depriving the rest of the country's regions, particularly the more touristy regions, of investment in tourist products or others on which their development and convergence depend."
The association's first measure is to allow time for discussion - six months for reflecting on the impact of the latest changes to the ARI program that came into effect on January 1, 2022, and on "possible transitional measures that still need to be tested before the final decision to eliminate it." The association then requests another six-month period for implementing the measures and for investors to have time to organize themselves.
The second proposal aims to review the minimum investment amount for capital transfer to qualify for an ARI, currently set at 1.5 million euros. The APR also proposes the creation of a special contribution applicable to the acquisition of non-residential real estate that finances the public construction of social and affordable housing or creates a specific ARI variant aimed at the acquisition and construction of affordable rental housing.
The fifth proposal asks to make "participation units in housing rental funds applicable for ARIs, not necessarily 'affordable,' as a way to also respond to this type of demand."
Finally, the association led by Pedro Fontainhas suggests eliminating "the term 'golden visas' from the government and social lexicon, in favor of ARI or another term that is not perceived negatively by the public." The spokesperson emphasizes the urgent need to make a distinction between "golden visas that exist, for example, in Cyprus and other countries" that grant nationality to investors, and the Portuguese ARIs. "A golden visa holder in Portugal has no advantage when, after five years, they are in a position to apply for nationality compared to a foreign immigrant who comes and can apply for it after the same period. Having an investment is not a criterion for granting nationality," he concludes.