The new proposals yet to be finalized may achieve the opposite effect, reducing short-term rental inventory in the long run while pushing rental prices up. The government should be cautious given tourism's significant 17 percent contribution to the economy.
Portugal’s move to end its “Golden Visa” program and curtail new short-term rental licenses will not impact the vacation rental market in the country — not in the short-term anyway.
As a measure to tackle the housing crisis and rising inflation in the country, Portuguese Prime Minister Antonio Costa has proposed to end the Golden visa program, which offers residence to non-European Union nationals for investments made in the economy. Costa also proposed a ban on issuing new licenses for Airbnbs and other short-term holiday rentals.
Real estate investments account for over 92 percent of all Golden Visa applications. In the 11 years of the program’s existence, foreign investors have poured over €6 billion ($6.5 billion) into income-generating properties in Portugal. While it’s unlikely to have an impact on the inventory numbers for short-term rental properties, it’s likely that the prices will rise.
But some industry professionals think it’s too early to make any pessimistic predictions, as the proposal is still up for public debate until March 16.
“The government made dramatic announcements, but we don’t know the details yet,” said Filipa Leitão de Aguiar, founder and CEO of Lisbon-based property management firm Rent4Rest. “If these measures are passed as they were announced, that will have a huge impact on not only vacation rentals, but also tourism in the country. But I believe the proposal requires a lot of polishing.”
Aguiar is certain that the government will proceed with caution on short-term rental-related regulations given the prominence of local accommodations in Portugal’s tourism industry. “We have enough data to show that short-term rentals account for more than half of total guest nights booked in all of Portugal,” Aguiar said.
The potential curbs on short-term rentals is a step to assuage public outrage and yield to demands of the populace as the country is in the midst of a cost-of-living and housing crisis. In 2022, house prices rose by 18.7 percent and inflation hovered around 8.3 percent. The monthly minimum wage in the country is €780 ($850) and last year more than half of the Portuguese earned less than €1,000 ($1,090) euros per month.
The crisis had thousands of Portuguese take to the streets demanding reforms. And unsurprisingly, programmes like the golden visa which grant wealthy foreign investors citizenship in return for investment are facing the heat.
And rising rents (Lisbon alone saw a 37 percent in 2022) have pushed the government to consider a ban on issuing new short-term rental licenses across the country. In 2019, Lisbon had the highest ratio of houses to rent for tourists on Airbnb, than any other European capital – with more than 30 rooms per thousand inhabitants, according to the rating agency Moody’s.
But stakeholders hope that the government treads this with caution and believe there is a lot to be negotiated upon.
“There is an urgent need to show that the short-term rental ecosystem is complex and rich, much more than just a few owners getting extra income from their properties,” said Eduardo Miranda, president of Associação do Alojamento Local em Portugal (ALEP), the national association of local accommodation. “We are worried about some of the measures announced for short-term rentals, but they are still vague and ALEP will be working on a proposal for the public consultation that intends to show a new path of sustainable development for short-term rentals.”
A sustainable solution to the economic problems is what all parties are gunning for. The government cannot overlook the fact that travel and tourism accounts for more than 17 percent of the country’s gross domestic product and the sector is still working towards a pre-pandemic level recovery.
And, the vacation rental sector is a prominent contributor in this regard. “In Lisbon, the tourist tax shows that short-term rentals represent 50 percent of all guest nights booked,” said Miranda. “That is what is in danger when the housing department of governments decide to create restrictive regulations in areas they don’t know. In Portugal they can damage an industry that represents almost half of touristic activity.”
But some worry (with reasonable cause) that the proposed measures, though still vague and not official, may have the exact opposite effect than the one intended.
“The demand for tourism and short-term rentals will not go down,” said immigration lawyer Sara Sousa Rebolo. “The measures, if implemented this way, could have the opposite effect, where the remote workers and digital nomads with salaries way above the country’s standard will push the prices up.”
Portugal is a digital nomad favorite, especially Lisbon and the Azores islands. The country requires such remote workers to have an income proof of roughly €2,800 ($3,052), which is four times the minimum wage in the country. Last year, Lisbon was named one of the 20 destinations Airbnb partnered with for its Live and Work Anywhere program.
No Lost Gains
It would take more than restrictive regulations to dampen the sunny promise of Portugal. Rebolo noted that the golden visa applications in the backlog will still remain protected. And then there are those who are rushing to get their foot in the door while they still can.
Vikas Tandon, whose Mumbai-based firm Golden Homes Portugal people get the golden visa, said that though some of his clients are taking a step back, a lot of them are also rushing to get the process in order. “Portugal’s golden visa category is the most popular one given how accessible, straightforward it is and it provides a path to citizenship, without too many strings attached, ” Tandon said. “These are just proposals right now, without any legal details.”
The industry is corralling to get the most agreeable solution that can be negotiated while it still can.
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Photo credit: View of the coastline in Lagos, Portugal Marco Verch / Flickr