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Why Lisbon is one of today’s most exciting investment destinations

Posted on 27 September 2017

Portugal’s property market is one of the most bullish in Europe right now, with prices achieving a year-on-year rise of eight per cent for the second quarter of 2017, according to the latest house price index by the country’s statistics institute (INI).

Sales by volume were up too, recording a hike of 16 per cent year-on-year with a total worth of €4.6billion nationwide for the same three-month period. Unsurprisingly, Lisbon is driving this growth, with sales in the capital accounting for 48 per cent of the total value of the market. Prices in hot spots in the city have risen by an estimated 30 per cent in the last three years and are expected to continue at five per cent per year for the next five years.

Reassuringly for investors, sustainable rental yields from 5-7 per cent are achievable on quality, well-located residential properties. Further to that, Lisbon is one of few European capitals where short-term rental is authorised and even tax incentivised (currently levied at 8.4 per cent tax if you make your property available for short-term lets). Analysts also highlight a shortage of short-term rental accommodation, adding there has been a 21 per cent rise in revenue generated by the city’s short-term rental market in the past 12 months.

Looking at the potential for capital appreciation, the picture is equally encouraging. The average price per square metre is €6,000 in Lisbon, compared to the EU average of €15,500. This makes the city one of the best value capitals in Europe.

Increasingly, Lisbon’s rental market is supported by young professionals and entrepreneurs, both Portuguese and foreign. This is thanks to the city becoming a hub for start-ups, but in particular new tech firms, so much so it has been dubbed the ‘San Francisco of Europe’.

Lifestyle is another great draw for foreigners moving to Lisbon, which has recently been voted as one of the best countries in the world for both quality of life and safety. Not forgetting the low cost of day-to-day living.
One of Lisbon’s strongest attractions for foreign retirees is its highly favourable taxation incentive.

For qualifying foreigners who relocate, the Non-Habitual Resident regime means they pay no tax on income from pensions or other worldwide assets in Portugal for 10 years after moving there. Meanwhile, the estate of anyone deemed to be domiciled in Portugal typically incurs no inheritance tax.

Another option for moving to Portugal for wealthier foreigners is the Golden Visa programme. Under this scheme, purchasing a Portuguese property worth at least €500,000 entitles a foreign investor to residency in the country. The programme is especially popular with Chinese and Southeast Asian citizens but there are expectations that interest from Middle Eastern buyers will grow.

In the meantime, the city appeal is being strengthened by two significant infrastructure upgrades. A new airport is due to open there in 2019, while the Metro system is set to benefit from a €684million investment, which will include the addition of new stations. Throw into the mix Lisbon and wider Portugal’s booming tourism industry, which grew by an impressive 22 per cent in 2016, and things are looking bright for investors there.

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