Sometimes in life, it’s good to give your property market a bit of a kick up the backside: get growth firing, keep house prices ticking up, and make sure that there’s plenty of buying and selling and new developing going on.
To anybody living in London – or indeed, most of the rest of the UK – this is a pretty horrifying idea. Indeed, many of us have rejoiced at news suggesting property prices might finally be starting to fall – particularly at the upper echelons of the housing market, where sales of the most expensive properties in London are down 44 per cent over the last year compared to the previous year.
But Lisbon, Portugal’s capital, knows what happens when the opposite is true. For decades, properties across the capital – and particularly in its gorgeous historic centre – were crumbling, peeling, dilapidated, and run-down.
Strict government-enforced rent controls meant that there was no incentive to improve properties that were let out to tenants – or even merely to keep them looking up to shape. And thanks to high tax rates targeting the housing market, it often just didn’t seem worth selling a property.
Enter a CityMetric hero of sorts (there’s nothing we love more than a good city mayor). António Costa was elected mayor of Lisbon in 2007, and quickly got to work deregulating the housing market – perhaps a surprising move, given his credentials as a Socialist Party mayor.
António Costa, now Portugal's Prime Minister. Image: FraLiss.
Rent controls were stripped back, and the long system you used to have to go through to get any planning permission to improve and upgrade a property was made less complicated. At the same time, Costa also cut taxes – most prominently the sales taxes affecting property sales, and VAT levied on new property developments.
Suddenly it became easier to improve a property, knock down a bashed-in old building and build a new development in its place – or even just sell a property on to someone else without getting hit by a huge extra bill.
At the same time, though, the national picture was changing. 2012, possibly the worst year in the story of southern Europe’s debt and the Eurozone crisis, saw Portugal saddled with punitive austerity measures as part of a £65bn bailout package from the EU and the IMF.
So Portugal came up with the ‘golden visa’ programme, in which foreign investors could get a residence permit for Portugal in exchange for throwing a load of money at the Portuguese economy.
Off its main squares, Portugal's back streets were being neglected. Image: Luca Galuzzi.
Though there were all sorts of ways to do this – you could donate €250,000 to a museum or a heritage centre, or you could simply transfer €1m into a Portuguese bank. But thanks to a condition whereby investors have to spend at least a week in Portugal in the first year, and two weeks across the following two years, the most popular way into the golden visa scheme was to buy at least €500,000 worth of real estate. After all, Portugal’s a pretty nice place.
According to the Portuguese government’s own figures, 4,423 such visas have been given to foreign spenders since the scheme was introduced in 2012 – and though the Chinese were originally the vast bulk of such investors, the Turkish have recently surged to take up the offer.
More than £850m has been invested in property through the golden visa scheme in the past year – adding up to just over £2.5bn since the scheme launched.
And it’s worked. Average property prices in Lisbon went up by six per cent in the last financial year, and by 16 per cent over the past three years.
Aggressively photogenic Lisbon. Image: Yasmina2410.
The oldest neighbourhoods in Lisbon’s heart have perked up, retaining their hilly, cobbled, winding charm but shedding the certain “is it going to fall over, am I safe walking alone here at night”, clapped-out chic these areas used to have.
Of course, the visa scheme and Costa’s deregulatory measures as mayor cannot be taken in isolation. Portugal has pushed tourism, and Lisbon’s tourism business has grown by more than 50 per cent a year for the past three years.
Investing in and improving property has also become more lucrative as services such as Airbnb make it easier for anyone to let out a flat in Lisbon’s old core to city-breakers and summer holidaymakers.
This is all good news, bringing a city that was on its knees economically back to greater health, and keeping its streets in good state by giving property owners an incentive to perk things up.
But Lisbon now needs to be careful. Though the city is still a relatively affordable place to buy property – at an average of £1,193 per sq metre, in comparison to £11,321 in Kensington and Chelsea, or £6,959 in Wandsworth – the incomes of local people haven’t necessarily kept pace with that growth.
If Lisbon can keep a happy equilibrium between supporting government-promoted, deregulation-backed growth in the housing market and avoiding a London-style, income-draining housing crisis where rents and mortgages soar out of the reach of ordinary people, then it’ll have managed something formidable.
In the meantime, I’ll keep rooting down the back of the sofa for that €500,000.