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Europe’s Hottest Property Market Is Getting Too Hot for Some#


Variations on Portugal’s incentives have been adopted across Europe and in 
countries around the world — from the U.S. and Canada to Spain and Greece. They tend to last until a critical mass of vocal opponents conclude the costs — soaring housing prices, absentee homeowners and allegations of corruption — outweigh the benefits, and politicians drop them.
Portugal’s particular circumstances may forestall that outcome for longer than in other places as there are still plenty of properties in need of renovation, and prices remain relatively reasonable compared with other parts of Europe.

Still Cheap

Lisbon home prices remain one of the lowest among western European capitals
Not long ago, as Europe recovered from the global financial crisis, Portugal lagged behind its neighbors in attracting investment — and it showed. Buildings in historic Lisbon were crumbling, their tile work and masonry faded and cracked.
All that began to change after the government scrapped rent controls in 2012 and introduced the golden visa and tax breaks to attract wealthy foreign residents and property investors. At the time, about 12,000 buildings were in poor condition or in ruins, about 20% of the total, according to city council estimates.
Now, Lisbon’s cobblestone streets and hilltop palaces are being restored, and hundreds of buildings converted into new hotels, short-term rental apartments and luxury retail stores. Investment in real estate and the tourism industry has broken records, boosting the Portuguese economy, which expanded for a fifth consecutive year in 2018.
Lisbon has never been better in terms of the restoration of its buildings,” said Francisco Bethencourt, a history professor at King’s College in London. “The number of decrepit buildings has been reduced and some of the misery that existed in some neighborhoods is no longer visible. However, this change has had huge social costs as locals with fewer financial resources are being pushed to the periphery.”
Ana Pinto, the president of the Association of Residents of the County of Marvila, can see some benefits of more money coming into her town, which now draws comparisons to hipster havens in New York’s Brooklyn.
But she complains that some of the more than 600 members of her association are moving elsewhere after home prices rose 88% in the first quarter from a year earlier, according to Portugal’s National Statistics Institute in Lisbon.
“Real estate prices have simply become unbearable for us,” said Pinto. “What can we do?”
“What the investor program became was a kind of de facto retirement program,” said Dan Hiebert, an expert on international migration at the University of British Columbia in Vancouver. “Instead of propelling the investment side of the Canadian economy, it propelled the consumption side of the Canadian economy,” including home purchases, expensive cars and so on, he said.
In Europe, about 20 countries operate investor residence programs, which allow the holder to travel freely within the continent’s Schengen Area during a limited period of time, according to the European Commission. In January, the commission warned that the programs expose the bloc to money laundering and security risks.

Chinese Interest

Percentage of chinese applicants to investment programs around the world
It also can change the way people live in cities.
Last month, an online ad promoting the rental of container homes in Marvila made headlines in the local press, which linked the 600-euro-a-month converted shipping containers to the lack of affordable housing in Lisbon. A few days later, the city council ordered the removal of the containers, daily newspaper Publico reported on its website.
About six miles away, in the town of Amadora, City Council President Carla Tavares said Lisbon’s real estate boom has helped turn a suburb that was once seen as a hot spot for crime into a vibrant hub for foreign residents and companies like Siemens AG. Real estate prices in Amadora increased 23% in the first quarter from the same period a year earlier.
“It’s very positive to see so much rehabilitation in the city,” Tavares said in a phone interview on Aug. 14. “We must let the market function.”


Variations on Portugal’s incentives have been adopted across Europe and in 
countries around the world — from the U.S. and Canada to Spain and Greece. They tend to last until a critical mass of vocal opponents conclude the costs — soaring housing prices, absentee homeowners and allegations of corruption — outweigh the benefits, and politicians drop them.
Portugal’s particular circumstances may forestall that outcome for longer than in other places as there are still plenty of properties in need of renovation, and prices remain relatively reasonable compared with other parts of Europe.

Still Cheap

Lisbon home prices remain one of the lowest among western European capitals
Not long ago, as Europe recovered from the global financial crisis, Portugal lagged behind its neighbors in attracting investment — and it showed. Buildings in historic Lisbon were crumbling, their tile work and masonry faded and cracked.
All that began to change after the government scrapped rent controls in 2012 and introduced the golden visa and tax breaks to attract wealthy foreign residents and property investors. At the time, about 12,000 buildings were in poor condition or in ruins, about 20% of the total, according to city council estimates.
Now, Lisbon’s cobblestone streets and hilltop palaces are being restored, and hundreds of buildings converted into new hotels, short-term rental apartments and luxury retail stores. Investment in real estate and the tourism industry has broken records, boosting the Portuguese economy, which expanded for a fifth consecutive year in 2018.
Lisbon has never been better in terms of the restoration of its buildings,” said Francisco Bethencourt, a history professor at King’s College in London. “The number of decrepit buildings has been reduced and some of the misery that existed in some neighborhoods is no longer visible. However, this change has had huge social costs as locals with fewer financial resources are being pushed to the periphery.”
Ana Pinto, the president of the Association of Residents of the County of Marvila, can see some benefits of more money coming into her town, which now draws comparisons to hipster havens in New York’s Brooklyn.
But she complains that some of the more than 600 members of her association are moving elsewhere after home prices rose 88% in the first quarter from a year earlier, according to Portugal’s National Statistics Institute in Lisbon.
“Real estate prices have simply become unbearable for us,” said Pinto. “What can we do?”
“What the investor program became was a kind of de facto retirement program,” said Dan Hiebert, an expert on international migration at the University of British Columbia in Vancouver. “Instead of propelling the investment side of the Canadian economy, it propelled the consumption side of the Canadian economy,” including home purchases, expensive cars and so on, he said.
In Europe, about 20 countries operate investor residence programs, which allow the holder to travel freely within the continent’s Schengen Area during a limited period of time, according to the European Commission. In January, the commission warned that the programs expose the bloc to money laundering and security risks.

Chinese Interest

Percentage of chinese applicants to investment programs around the world
It also can change the way people live in cities.
Last month, an online ad promoting the rental of container homes in Marvila made headlines in the local press, which linked the 600-euro-a-month converted shipping containers to the lack of affordable housing in Lisbon. A few days later, the city council ordered the removal of the containers, daily newspaper Publico reported on its website.
About six miles away, in the town of Amadora, City Council President Carla Tavares said Lisbon’s real estate boom has helped turn a suburb that was once seen as a hot spot for crime into a vibrant hub for foreign residents and companies like Siemens AG. Real estate prices in Amadora increased 23% in the first quarter from the same period a year earlier.
“It’s very positive to see so much rehabilitation in the city,” Tavares said in a phone interview on Aug. 14. “We must let the market function.”

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