A Lisbon-based financial journalist, Rod James also dabbles in urbanism and architecture.
Combined with a thriving tourism industry, the popular residence program has been mixed bag for historic neighborhoods across Portugal’s capital.
Summer in Lisbon means snails. In restaurants around the city, revelers armed with toothpicks tear through mounds of molluscs, washed down with a few glasses of beer.
One spring day a few years ago, in a restaurant in Graça, an old neighborhood of crooked streets and charmingly dilapidated houses, something was awry. The garlicky sauce that brings out the best in the snails was overloaded with pepper, making it nearly inedible. An unpretentious place up to now, the waiters had suddenly started taking orders on iPads.
It soon emerged that the restaurant had been taken over by new owners from China, who had replaced the head chef and installed their daughter as manager. The locals voted with their feet. After six months of declining takings, the old chef was reinstated, the iPads consigned to the attic, and normal service resumed.
While there’s no reason someone from China can’t run a Portuguese restaurant in Lisbon, it does seem incongruous. In fact, this episode was a striking result of a government policy that has had a significant impact on Lisbon and Portugal as a whole: the introduction of golden visas.
In October 2012, reeling from the global financial crisis and facing harsh austerity measures attached to a €78-billion ($89 billion USD) bailout from the European Union and IMF, Portugal’s government needed money. A scheme was created through which wealthy foreign investors could gain a temporary residence permit in exchange for inward investment.
This investment could take a number of forms, such as donating €250,000 ($285,000 USD) to a cultural, heritage or arts institution or by transferring €1 million to a Portuguese bank. But the most popular way of gaining a foothold in Portugal, and by extension the 27 member nations of the European Union, was through the acquisition of at least €500,000 ($570,000 USD) of real estate.
To be eligible for a golden visa investors would have to spend at least seven days in Portugal, consecutive or not, in their first year, and 14 days in the subsequent two-year period. After six years of residency, they gain the right to apply for full citizenship.
The scheme has proved popular, particularly in and around Lisbon. According to data from the Portuguese government, 4,423 visas have been granted to foreign investors between 2012 and today, along with 7,038 residence permits for family members. The Chinese make up a big majority of applicants with 3,154, followed far behind by Brazilians with 282. Around €2.7 billion ($3.1 billion USD) has been invested in the country through the golden visa scheme, €2.4 billion of this through the purchase of real estate, the rest by capital transfer.
The effects have been mixed. The old neighborhoods such as Graça and Alfama had been in long-term decline. Defined by tall, narrow houses with steep staircases, often in states of serious disrepair, they had fallen out of fashion with young families seeking more space in the suburbs. In recent years many have been rejuvenated, to a great extent by golden visa holders. João Gonçalves, a 60-something taxi driver who has lived in Graça his whole life, is pleased with the impression they’ve made.
“This place used to be full of drug dealers,” he says, pointing towards Jardim da Cerca da Graça, a well-kept park featuring one of Lisbon’s trademark Art Nouveau kiosks. “Apart from that it was all old people and their lazy grandchildren. I welcome the changes.”
Not everybody is so pleased. Since 2012 housing costs in central Lisbon have risen considerably. The New York Times even published a Lisbon version of its “House Hunting In…” column last February. But while golden visas are a contributory factor, they are only one of a number that have combined to create what many consider to be a housing crisis.
Also around 2012, the Portuguese government decided to aggressively promote tourism as a means of economic growth. Its efforts have been extremely effective, with Lisbon’s tourism industry growing at a rate of more than 50 percent a year for the past three years. With the rise of Airbnb and the short-term rental market, growing numbers of foreign investors have found reason to invest in the city whether there’s a visa in it or not.
“Of course there’s a huge impact [on house prices from golden visas],” says David Machado, co-founder of PT Golden Visa, which helps people through the application process. “But they are just one of the factors. Prices are going up in the hot spots where tourists want to stay and it’s where [local] people can feel a difference. Then you hear people complaining that prices are higher than they used to be. The fact is that before tourists came to Lisbon, people didn’t want to live in those areas. It seems a bit late to complain.”
Andre Carmo, a researcher at the Center for Geographical Studies at the Lisbon University and an activist with housing rights group Habita, believes that tourism has overtaken golden visas as the main driver of the city’s housing problems. If anything, all the scheme did was highlight and exacerbate an existing bias in the local government’s housing policy.
“Nowadays, it is tourism that has been reconfiguring the urban fabric of Lisbon,” he says: “The urban policy of the municipality is completely aligned with speculation and large real estate investors, and the housing sector has always been, just like in many other countries, the wobbly pillar of our welfare state.”
While tourism has blown up, the flow of golden visa approvals has been going the other way of late, much to the frustration of Machado. Though the demand is still there, a huge backlog of applications and an immigration authority struggling with budget and staffing cuts has meant that some applications have been stuck in the system for many months, causing some applicants just to give up.
The government has promised to boost the efficiency of the bureaucracy and in May expanded the golden visa program to include investments in small and medium-sized business, a €350,000 cash injection being enough to clinch a temporary visa.
The true impact of these changes won’t be felt for a while, but in the short term, more Chinese-run Portuguese restaurants cannot be ruled out.