Portugal's property market continues to expand at double digit rates
Lisbon - AFP
Portugal's property market continues to expand at double digit rates thanks to foreign buyers, including China's new wealthy, despite a corruption scandal over visas used to lure in rich non-Europeans.
More than one in five residences sold in Portugal last year was bought by a foreigner, according to provisional data by the Portugese Real Estate Agents Association.
Britons were in top place among the 23,000 buyers, followed by Chinese and French.
"The property market grew by between 9 and 15 percent in 2014," said the head of the association, Luis Lima.
"If it hadn't been for the Banco Espirito Santo debacle and the golden visas scandal it would have been 25 percent," he added.
The collapse of BES amid suspicions of multinational accounting fraud and the visa scandal that saw senior officials resign raised concerns about the integrity of the market.
However Portugal's warm climate, low property prices and tax breaks for European retirees continued to pull in many buyers.
"We've seen a small drop in demand from the Chinese since the visa scandal in November, but the number of French moving into Portugal has exploded," said Miguel Poisson, director of the ERA real estate agency network in Portugal.
In fact Portugal has now dethroned Morocco as the top foreign destination for French retirees.
Serge Pasquier, a 75-year-old former businessman was among the 3,680 French buyers in Portugal last year.
"I sold my furniture store and my 90-square-metre (970-square-feet) apartment in Saint-Mande outside Paris and bought a 300-square-metre apartment with an ocean view near Lisbon for much less," he said.
"The climate is very nice, the cost of living is considerably less and you feel safe. I don't regret my choice," said Pasquier, who is married to a Portuguese woman.
Not only is the climate attractive, but the prices are as well. Property prices slumped by a third after Portugal was tripped up in the eurozone debt crisis and needed to be bailed out by the EU and IMF.
The 78-billion-euro loan came with unprecedented austerity measures that slashed public sector salaries and pensions while raising taxes by 30 percent. As unemployment soared to 17.5 percent in 2013, the property market was in a morose state.
Foreign retirees are not the only ones who have taken advantage -- Chinese and Brazilian investors have as well.
But the flood of foreign buyers has also "helped increase the prices of nice apartments in Lisbon and the Algarve" region along the southern coast, said Pascal Goncalves, head of the Maison au Portugal real estate agency.
- Seaside villas -
The Chinese, like the French, have a taste for houses with pools in the coastal resort town of Cascais just a short drive from the capital Lisbon, as well as seaside villas in the south of the country.
But their tastes diverge when it comes to Lisbon: the French opt for renovated apartments, preferably with a view of the Tagus river, while the Chinese choose new apartments in ultramodern buildings.
Portugal has been trying to lure in China's new well-off class by offering them residence permits that allow them to travel freely throughout most of Europe.
Under the scheme, foreign investors buying property worth 500,000 euros ($566,000) or more and keeping it for at least five years receive residency rights in Portugal.
The residence permits, dubbed "golden visas", also allow their holders to travel without visas throughout the 26 European nations in the borderless Schengen zone.
Since its launch, the scheme has raked in more than 1.2 billion euros. A total of 2,022 golden visas have been granted, mostly to Chinese nationals.
However that programme received a serious setback in November when 11 people including senior officials were arrested as part of a corruption and money laundering.
They were suspected of colluding to inflate prices so properties would qualify for the golden visas. Several Chinese filed complaints they were duped.
"When there is a lot of money in play the temptation to enrich oneself is great," said Domingos Amaral, an economics professor at the Catholic University of Portugal.
He doesn't believe the scandal will damage property investment in the long term, a view shared by real estate agents.
"The visa scandal has certainly slowed the recovery of the market and harmed investor confidence, but real estate should continue to stimulate the Portuguese economy in 2015," said Lima.