Are investors focused on rental income? Is this an investment purely for the Golden Visa, with a view to moving to Portugal later in life? Do they have a 10-year plan for capital gain to support retirement plans? Do they want to utilise the NHR (Non-Habitual Residence) programme to heavily reduce their tax exposure over 10 years?
Six years ago, such questions were important, but they were secondary or tertiary to the Lisbon buzz, which still fuels investor demand today (see our video below). With short-term rental restrictions in some Lisbon districts and prices rising each year, the difference now is that international investors need to have a crystal clear picture of their long term objectives. To achieve these objectives, a strategy then has to be put in place.
Most seasoned investors know their game plan has had to change. Whether or not they apply enough thought to this (or find the right people to help them) is another matter. But what is certain is that property developers in Lisbon now know their strategies must change too and the results are starting to be seen. These results are almost always in the forms of answers to questions borne from concerns:
- In a rising market, investors are often worried about realistic capital gains over three to five years. How can developers address this?
- For Golden Visa investors, most application processes can’t actually start until the renovation or property redevelopment has gained its ‘horizontal license’. This is normally around six months into construction. It then takes them four more months to get their temporary permit allowing them free access to the Schengen countries, the visa’s first of many benefits, but it only kicks in around 10 months down the line. How can developers address this?
- With short-term rental restrictions for some Bairros and a more competitive short-term rental market in general, investors are worried about reliable and sustainable income generation. How can developers address this?
Fortunately, because Portugal has a well-structured and regulated market, it’s possible (with a lot of hard work) for developers with the right mindset to create opportunities that meet these challenges. For example, with one of our newest launches in the popular Avenidas Novas district, close to Lisbon’s brand-filled prime spine – Avenida da Liberdade – it’s possible to invest in two ways. Firstly, a traditional property purchase, be it with mortgage finance or not. Secondly, through an SPV (Special Purpose Vehicle), a type of trust if you will, with the same rights to the property as if you were investing in a traditional manner.
No waiting & guaranteed capital gains?
Why have they created this new way of investing? There are a few key benefits. Under this structure, there’s no requirement to wait for the ‘horizontal license’ which means Golden Visa investors can start their application immediately. This can shave at least six months off the process. Secondly, on a €350,000 deposit, investors are guaranteed 10% interest on this capital during construction.
Other developers, especially those with business ventures in the tourism market as well as development, are offering sustainable guaranteed rental yields. Anything above 5% guaranteed is probably unrealistic, but with a good usage plan for a few weeks during sunny periods and guaranteed yields of 4%, investors can gain some real peace of mind in terms of sustainable income generation.
If by the time you read this our webinar has already happened you can always get in touch to see when the next one is or speak to one our Advisers in Lisbon, London, Rio or the rest.