Betting on human capital to make the Interior grow
After a quarter of the entry into force of the amendment to the Law on Residence Authorization for Investment, aka "Golden Visa", which ends the eligibility of investment in residential real estate on the coast, it can be said that it is still early to make a real assessment of its impact. However, anyone, like me, who works directly in support of foreign people and companies that come to live or invest in Portugal, can and should look at the data we have, namely on the effect of this legislative change on investment in the interior of the country.
After all, one of the intended effects is to "divert" investment, especially investment in real estate, from the large centers to the interior of the country. Looking at the figures published by the SEF on "Golden Visas", granted in the first quarter of the year and which may also refer to investments made in 2021, that is, before the restrictions on residential investment on the coast, we can already see a trend of reduction in real estate investment and a significant increase in investment in investment funds. In global terms, there is a decrease in the capital that is entering Portugal, with an average of around 40 million euros per month in 2022, a value lower than the approximately 60 million monthly, in 2021.
Investment in real estate was diverted to commercial real estate (which can still be done in Lisbon, Porto or Algarve) and some players who intended to invest ended up abandoning their plans. For now, there is very little or no investment made in the interior of the country.
In reality, this is not so bad news. Let me explain, the reduction in foreign capital raised via the "Golden Visa" is negative, but we also find ourselves in a context of great uncertainty. On the other hand, the increase in demand for investment funds is a very positive sign. As for the absence of investment in the interior, namely in the real estate investment sector, it is no surprise. I have previously written on this topic:
Investors looking for the "Golden Visa" are essentially looking for one thing: Security. The "Golden Visa" is a way for small investors to guarantee access to a space that guarantees security and, first of all, protects their savings. Thus, we are talking about investors with low risk aversion and who are therefore even willing to have low returns. However, prime locations provide these guarantees and therefore it is preferable to invest in tourist real estate in Lisbon or the Algarve than to buy a residential property in the interior of the country.
What's more, these investors, for the most part, do not come to live in these houses, choosing to place them on the rental market. And who are they going to lease? The interior first needs people and businesses to be able to develop. And, in today's world, where digitalization and remote work are definitively asserted, the focus must be on attracting Human Capital first.
This is a great opportunity for regions and communities that are further away from large centers. Portugal is becoming increasingly attractive to foreign companies that choose to place their most innovative "hubs", in addition to increasing interest in the relocation of "Digital Nomads", who have the possibility of being able to work from any place. Well, not from anywhere, from anywhere that offers a better quality of life and broadband.
What's more, these investors, for the most part, do not come to live in these houses, choosing to place them on the rental market. And who are they going to lease? The interior first needs people and businesses to be able to develop. And, in today's world, where digitalization and remote work are definitively asserted, the focus must be on attracting Human Capital first.
This is a great opportunity for regions and communities that are further away from large centers. Portugal is becoming increasingly attractive to foreign companies that choose to place their most innovative "hubs", in addition to increasing interest in the relocation of "Digital Nomads", who have the possibility of being able to work from any place. Well, not from anywhere, from anywhere that offers a better quality of life and broadband.
Vasco Rosa da Silva - Founder & Chief Executive Officer
Apostar no capital humano para fazer crescer o Interior (jn.pt)
