International demand is propelling Lisbon s resi market and will expand to other markets

Transcription

1 Research and Forecast Report Lisbon Porto INTERNATIONAL RESIDENTIAL DEMAND 217 International demand is propelling Lisbon s resi market and will expand to other markets Historical Trend > > Portugal has never been an immigration country. > > Lack of natural resources, absent widespread wealth and scarce economical prosperity have never created enough opportunities to attract foreigners. > > immigrants, first, and ern European immigrants, later, usually, accounted for the vast majority of Portuguese immigrants. Both have been, predominantly, blue-collar workers. Policy Shifts > > In 212, the inception of the Golden Residence Permit Programme (Golden Visa) further shifted Portugal s immigration picture, especially, in Porto and Lisbon. > > Prior to that, in 29, it was created the special Tax Regime for Non-Regular Residents (ERNH). But, it wasn t until 213, when a tax exemption was introduced in this special regime, that immigrants started to be seduced by those tax benefits. Main Trends and Property > > The Golden Visa requires investment in property, with a relatively high threshold (5. euros). Notwithstanding, foreigners seeking the ERNH, although not required to, have also been investing in Portugal s property market. > > So far, Lisbon has been capturing the largest slice, with Colliers estimating international demand to account for one quarter of total residential investment in the city of Lisbon. > > With Lisbon s residential market overheating, competing with a nonstop increasing tourism market, the luxury threshold will remain well above the 5. euros, thus driving international demand to other peripheral areas of Lisbon, but also to different cities, with Porto emerging as a strong viable and attractive alternative. SPECIAL REGIMES (yoy) Golden Visas 28% Non-Regular Residential Tax Regime INTERNATIONAL RESIDENTS (yoy) 7% International Residents -1,77% Euro+ Residents (Lisbon) 1% Euro+ Residents (Porto) 8% LISBON RESI MARKET (yoy) Residential Transactions (no.) Residential Transactions (value) 23% 26% Residential Average Price 3%

2 Immigration Distribution (Lisbon) Immigration Distribution (Porto) Lisbon 28 Lisbon 215 NA China Porto 28 China Other Ind+Pak Nepal China Other Ind+Pak Nepal Other LATAM Immigration Distribution Portugal > > Throughout the years, immigration, in Portugal, has been circumscribed to Portuguese-speaking African Countries () and. > > When the European Union implemented the open borders policy, the immigration pattern started to change, with a vast influx of ern European immigrants, arriving in Portugal, reshaping local communities. > > Over the last 1 years, Portugal s total immigrants have stayed close to 4. people, although on a decreasing trend (below 1% pa). > > Lisbon concentrates a little under half the total immigrants, close to 175. immigrants, with an additional 35. people in Setúbal. 8. new immigrants arriving in Lisbon, from the wealthiest Euro countries Lisbon > > Over the last 7 years, Lisbon lost more than 15. immigrants, reflecting a 9% decrease. > > In 28, ian and immigrants accounted for more than 65% of total immigrants in Lisbon. In 7 years, Lisbon lost 3. ians and s. In the same period, Lisbon also lost more than 7. ern European immigrants. > > On the contrary, immigrants from the wealthiest European countries increased more than 8. (8% increase). A similar trend to Chinese immigrants, also up 8%. > > The arrival of, almost, 5. Nepalese immigrants is also noteworthy. NA China Porto 215 LATAM Other Porto > > Porto lost 13% of its total immigrant population, over the last 7 years (almost 3.5). > > ern European and immigrants decreased, approximately, 3.5, representing, at the present, less than one third of Porto s total immigrants (down from 4% in 28). There are also 5 less ian immigrants, in Porto. > > Unlike Lisbon, there were no remarkable increases, however it is noteworthy that there are 15 new European immigrants from the wealthiest countries and, almost, 4 new Chinese immigrants. Colliers International Immigration 217 Research & Forecast Report 2

3 Non-Regular Resident Tax Regime Inception > > The Investment Tax Code, approved in 29, implemented a Personal Income tax system for the non-regular residents, in Portugal. In 213, a tax exemption was introduced, in order to enhance this regime. Immigrants 15. China > > This regime aims to attract non resident professionals qualified for activities with high added value intellectual or industrial propriety or know-how, as well as beneficiaries of pension schemes granted abroad. 75. Regulatory framework > > The Non-Regular Resident Tax Regime is available for residents on Portuguese territory for tax purposes, who have not been deemed resident in Portugal in the previous five years. > > A citizen deemed a non-regular resident will be taxed according to this regime for a period of 1 consecutive years. NRR Tax Regime Applications Approved pension beneficiaries represent one third of total applications Tax Benefits > > In summary, income of category A (employment) and B (selfemployment) obtained in Portugal, is taxed at the special rate of 2%. > > When some requirements are met, income obtained abroad is exempt from taxation, in Portugal. This exemption includes pension benefits obtained abroad, as long as they are taxed by the source State or they cannot be considered to have been obtained in Portugal. Numbers > > Until 213, this special regime was virtually unused by foreign residents; when the exemption was introduced in the regime, granted applications increased 1 times. > > Between 214 and 216, applications approved under this regime have increased more than 7%, on a yearly basis, and are expected to increase further, based on the available figures for 217 H1. > > Foreign pension beneficiaries have been accounting, on average, for one third of the overall applications granted. > > French pension beneficiaries represent just under half of the total pension beneficiaries applicants. > > Overall, there are more than 15. foreign residents in Portugal, included in the Non-Regular Resident Tax Regime Q Source: Colliers International, DN NRR Tax Regime Applications Approved for Pension Beneficiaries by Country (average) Others Finland Source: Colliers International, DN Sweden France 3 Research & Forecast Report 217 Tax Regime for Non-Regular Residents Colliers International

4 Golden Visas Issued Golden Visas by Investment Activities 5. Prop. Golden Visas per Nationality (217 H1) South Africa H1 Others Turkey Lebanon Russia Others Capital Transfers China Golden Visa (ARI) Brief History > > The Golden Residence Permit Programme was created in 212. After a 2 year success, a corruption incident in 215, triggered adverse public criticism, with permit numbers falling 5%. > > In 216, ARI permit numbers recovered to 214 values. By 217 the booming Portuguese residential market was reflected in record-breaking first half Golden Residence Permit figures, although not as impressive as the first quarter projections. although decreasing in Q2, ARI Requirements > > The program offered 3 investment options: purchase of a 5. euro property; capital transfer of 1 million euro or the creation of 1 jobs. > > In 215, the program was further improved including, among others, the introduction of attractive additional forms of investment: purchase of a 35. euro 3 year + property for refurbishment purposes to be carried out by the applicant. Numbers > > Despite the additional investment options introduced recently, the 5. euros property acquisition remained the most popular route to acquiring residency by investment in Portugal. > > The latest investment option property for refurbishment accounted for less than 1% in 216. Although scarce, it increased, in the first half of 217, to just under 4%. > > Properties acquired as a condition of the ARI were mostly concentrated in the Greater Lisbon area, with Setúbal, Madeira and the Algarve emerging as attractive alternatives. Nationalities are on track to break records > > In the early days of the Golden Visa program, Chinese accounted for over 8% of total applications, followed by a greater margin by Russians, ians and South Africans. > > The problems emerged in 215 took a severe toll on Chinese applicants. Hence, after falling to 6% in 216, the golden residence permits issued to Chinese nationals fell below 5% in the first half of 217, with ians emerging as the fastest growing nationality. > > ian applications for residence permits increased 2.5- fold from 215 to 216 and, in the first half of 217, it already surpassed by 25% the golden visas issued in 216. > > Turkish nationals have become relevant over the past year, certainly, due to the political unrest in Turkey. Angolan demand fell due to internal constraints on exporting hard currency. Research & Forecast Report 217 Golden Visas Colliers International 4

5 international demand has been accounting for, approximately, a quarter of Lisbon s overall residential market yearly transactions

6 Value of Residential Purchases ( euros) Source: Colliers International, INE Number of Residential Purchases (Lisbon metro) Source: Colliers International, INE, SEF Average Area of New Apartments (city of Lisbon) T T T T T1 T2 T3 T4 T5 Source: Colliers International T T T Lisbon Residential Market General Performance > > Portugal s Residential Market recovery started to show in late 214, and it is anticipated that the final figures for 217 will continue to highlight further increases. > > The total value of property purchases has been increasing steadily since 212, although steeper from 213 to 216. > > Overall, in 216, more than 17 billion euros of residential properties were purchased in Portugal, still distant from the maximum recorded in 26, when more than 26 billion euros were purchased. > > There were several explanatory factors to this trend, but among the most relevant, is the growing international residential demand (e.g., Golden Visas). Lisbon s Performance > > Lisbon s increase has been faster than the overall country, with transactions increasing 17% yoy, since 212. Notwithstanding this sharp rise in transactions, Lisbon s present values are still lagging the maximum reached in 25 and 26, by 2 to 3% (Lisbon city and Lisbon metro). > > Residential purchases increase, in Lisbon, has been steeper, growing 22% yoy, since 212, also outperforming the overall country. > > The total value of transactions, in Lisbon, also lag the maximum values achieved in 25 and 26, when, in Lisbon metro, almost, 12 billion euros of residential property were purchased (more than 4,5 billion euros in the city of Lisbon). Lisbon s residential market has been outperforming Portugal s Average Area and Rooms > > This recent surge has also shifted Lisbon s residential market, inducing an unparalleled growth in smaller apartments. > > Colliers International studied new apartments in the city of Lisbon and concluded that apartments with less than 1 room account for 42% of the total supply in central Lisbon. > > Apartments with 4 and more rooms represent more than 11% of the total apartments for sale in central Lisbon. > > Although some developments have opted to diminish the average area of the apartments for sale, this trend is not yet highlighted by the data retrieved, with 1 bedroom apartments close to 7 m² and 2 bedroom apartments above 11 m². > > On the contrary, larger apartments have a wider gap between minimum and maximum areas on offer. > > More than half of the sample has a kitchenette. Colliers International Residential Market 217 Research & Forecast Report 6

7 Average Prices > > Average prices have been going up for 2 years. > > The prices of the smallest apartments for sale in central Lisbon, have peaked, reaching 7.5 euros/m². > > But even the largest apartments for sale are recording asking prices well above 5. euros/m², propelling average prices above 1 million euros and even close to 1,5 million euros for 5 bedroom apartments. International Residential Purchases > > Although SEF does not disclose the location of properties acquired under Golden Visas, Lisbon real estate market attracts most investors. Lisbon is, not only the largest residential market, but also concentrates the vast majority of international demand. > > After the downturn of 215, Colliers estimates that deals closed by foreigners have stayed close to 15% in 216 and H1 of 217. > > The average value of properties acquired by foreigners is much higher than the market s average, with GV average property acquisitions above 6. euros, increasing international demand weight in Lisbon s market. > > Colliers estimates that, after the boom year of 214, international demand has been accounting for, approximately a quarter of Lisbon s residential market, since 215. > > Chinese and French nationals are largely predominant, representing virtually half of total international demand. Although with distinctly different profiles and motivations, this demand looks set to continue for the foreseeable future. Future Trend > > In H1 217, GV and ERNH have been driving international demand upwards. > > In, political, social and economic unrest shows no sign of abating anytime soon. Although Chinese applications have fallen considerably, direct flights from China to Lisbon will start in the summer of 217, potentially triggering more Chinese applications. > > Lisbon residential market upwards trend, with strong competition from smaller apartments and a luxury market threshold well above the 5. euros, combined with SEF s struggles coping with applications, will induce different dynamics to international demand. > > For starters, other markets will emerge as viable alternatives, not only Algarve, but also Porto, where the luxury threshold is lower. > > On the other hand, direct flights from China will slash travelling times, making Lisbon peripheral market a viable alternative, with up-market prices closer to the 5. euros threshold > > In conclusion, it is highly improbable that foreign demand in the Portuguese residential market will fall in 217. Average Prices of New Apartments (euro/m²) (city of Lisbon) T T1 T2 T3 T4 T5 Source: Colliers International Average Value of Deals (euros) Source: Colliers International Weight of International Deals (no. and value) 37,5% 3,% 22,5% 15,% 7,5%,% T T1 T H1e, Ci, INE T3 Av. Deal Golden Visas Av. Deal Lisbon (metro) T4 T5 217 H1 Average Value T4 217 H1 Average Value T3 217 H1 Average Value T2 217 H1 Average Value T1 217 H1 Average Value T 217 H1 Average Value Foreign /Total Deals (value) Foreign /Total Deals T5 Av. Deal Portugal H1 7 Research & Forecast Report 217 Future Trend Colliers International

8 554 offices in 68 countries in 6 continents 2.3 billion in annual revenue 17 million sqm under management 15, professionals and staff FOR MORE INFORMATION INVESTMENT Joaquim Chambel joaquim.chambel@colliers.com RESEARCH AND FORECASTING Gustavo Castro gustavo.castro@colliers.com This report gives information based primarily on Colliers International data, which may be helpful in anticipating trends in the property sector. However, no warranty is given as to the accuracy of, and no liability for negligence is accepted in relation to, the forecasts, figures or conclusions contained in this report and they must not be relied on for investment or any other purposes. This report does not constitute and must not be treated as investment or valuation advice or an offer to buy or sell property. January 217 Colliers International Portugal Largo das Palmeiras, Lisboa colliers.com/portugal