If there is a paradise: is Portugal still a desirable real estate destination for Israelis?

How do you invest, who gets a visa, what is the yield, why did quite a few deals fall through and is it still profitable?

Portugal is one of the favorite destinations of Israelis, but is it still attractive in terms of real estate? Itai Mor asks and answers

Itai Mor, guest column

08/21/2022

Sunday, August 21, 2022, 2:40 p.m

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A constant renewal process.

Lisbon (photo: Mira Eitan)

Portugal is a country that is known for its inviting scenery and beaches, its welcoming population and its extensive Jewish history, and also offers inviting conditions for relocation.

Some see it as a place to fulfill a dream, even if temporary, an opportunity to experience a comfortable economic reality in which a balance is maintained between family life and work, a calmer and quieter life, and buying a dream home at half the price in Israel.

Until recently, many Israelis gained access to the country relatively easily, through the law that allowed Jews descended from expulsions from Spain and Portugal to obtain Portuguese citizenship and move to live there.

Recently the law changed, and this door was closed.

Instead, a solution is found in the form of a program called "Golden Visa".

As part of the visa, it is possible to invest in real estate in the country, among other things, and according to certain criteria - to obtain Portuguese citizenship.

How attractive is the real estate sector in Portugal?

The potential is clear from day one.

If in 2016 you could find a lot of abandoned buildings in the country, some magnificent buildings, and some crumbling - today this is no longer the case.

Portugal is in an extremely accelerated renewal process, in the premium areas prices have jumped and there is a lot of construction.

However, opportunities still exist for most.

The demand is no longer only for the center, but also for the nearby areas.

Those who are well acquainted with the trends of Portugal and the settlement movement in it which consists of foreign tourism, immigration as well as domestic tourism, know how to identify many business opportunities.

At some point tourism stopped because of the corona, but on the other hand a phenomenon was created - Europeans who wanted to immigrate to move the epidemic to a sunny and cheap country and started buying properties.

Now, when the epidemic is over, everything has started to wake up in terms of demand.

Still cheap compared to Israel, but property values ​​have increased.

Those who invested even during the Corona period are now reaping the fruits.

How big are the differences in buying an apartment compared to Israel?

According to the website Numbeo, which compares costs from all over the world, the average price of an 80 square meter apartment to purchase in the center of a large city will cost around NIS 850,000 (NIS 10,578 per square meter).

Outside the center, you will pay about 590 thousand shekels for the same apartment (7,354 shekels per square meter).

The average monthly cost of renting a 3-room apartment in the center of a large city in Portugal is 4,458 shekels. If you rent outside the city center, you will pay an average of 3,379 shekels. These prices are low About 40 percent on average from Israel.

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Much cheaper than Israel.

Porto (Photo: ShutterStock)

The minimum investment amount is around 50-70 thousand euros, and can of course be higher than that.

The local banks provide about 70 percent of the financing.

For the Israelis who are always looking for opportunities, this is very beckoning.

Of course there are risks to this and you need to know the market very well.

What about the other associated costs?

Let's take an example from the life of an apartment worth 425 thousand euros that was recently purchased for rent.

It is located in the center of Porto, the second largest city in Portugal.

The purchase tax for this apartment was 9,000 euros, the furniture of the entire apartment cost around 8,000 euros, the payment to a Portuguese lawyer was 1,2000 euros.

Regarding living costs, the total amount for all basic bills in Portugal (electricity, heating, cooling, water, garbage disposal ) in an 85 square meter apartment is about NIS 380 on average, 51% lower than what is charged in Israel.

How do you characterize the Israelis who come to Portugal for the purposes of relocation or real estate entrepreneurship?

In general, and in contrast to the past, today the option of moving abroad is seen as more legitimate and accessible. What usually motivates families to seriously consider relocation is the economic situation and the stress level. As a rule, a young generation is growing up in Israel who feel financially blocked, who are not afraid to test whether their living conditions will improve elsewhere, Even if it's for limited periods of time. There are also those who came with a fantasy that all their problems in life would disappear as soon as they landed, but pretty quickly found that the problems remained, only the surrounding landscape is more beautiful and calmer. There is no magic.

A country full of potential.

Nazara, an attraction that draws many tourists due to the high waves on its shores (Photo: ShutterStock)

Regarding the ages, it is not only the age, but also the change in the characteristics of those who come to examine life in Portugal.

In the past these were people of retirement age and today there is a constant flow of families - parents, children and sometimes grandparents too, who all come.

On the other hand, there are also guys at the age of 25 who work with a laptop and are able to experience and taste the world and are not afraid to try.

What are the returns in real estate?

An average increase of 13% in property value every year.

But it's not just real estate. Buying a property in Portugal can also earn Israelis Portuguese citizenship and a passport of the country. This means the right to work, study, live and travel freely in all the countries of the European Union, in which Portugal is included.

How does that happen?

The "golden visa" can be obtained by investing in several avenues: real estate investments, investments in a Portuguese venture capital fund (under government supervision), opening a business in Portugal and investments in cultural and artistic ventures. Each of these avenues has its own conditions, with the minimum investment for obtaining a "golden visa" stands at 280,000 euros. The golden visa immediately grants residency status to the investor and his nuclear family in Portugal. After 5 years, the investor and his family will also be able to obtain the status of Portuguese citizens and of the European Union. Many of those who have chosen to invest in the country in recent years have also done so in order to obtain such a visa, And in Portugal, they decided on this outline in order to bring foreign investments to the country that would stimulate growth. A few months ago, Portugal even opened the possibility of signing a real estate deal electronically without physically coming to the country at all, to make it even easier for investors.

Itay Mor (Photo: Alona Avisdris)

The blueprint did bring billions from investors to the big cities, Lisbon and Porto, but it also pushed locals away, and did not contribute to a similar development in the rest of the country.

Therefore, as of the beginning of the year, the law no longer applies to these two cities, and those who want to invest in the golden visa route can only do so in peripheral areas.

There are quite a few stories about projects that got stuck, deals that didn't come to fruition. How accurate is this?

There are Israelis whose investment money went down the drain.

This was due to haste and the thought that it is possible to move forward quickly without consulting or from the thought that it is possible to save on professionals.

Sometimes this is caused by a lack of knowledge on the part of the entrepreneur or investor.

There is a lot of value in the interpersonal aspect and in understanding the two cultures - the Portuguese and the Israeli - in order to successfully complete transactions in the country.

It is recommended to use in every transaction a professional who knows the law, the most reliable and best suppliers and contractors, who will manage the process and take care of all the details of the contract.

What is the difference between buying real estate in Israel and Portugal?

The legislation is different.

For example, if you are interested in renting an apartment in Portugal, there is special legislation with an emphasis on tenants' rights.

This is mainly reflected in long-term rental contracts, where it is difficult to evict a tenant who violates the contract from the apartment, and the legal proceedings may drag on for years.

In addition, it is important to remember that although it is a magical country that sits on the ocean and enjoys an influx of tens of millions of tourists a year, it still suffers from outdated construction.

Buying such an apartment requires a thorough inspection, and taking into account maintenance costs.

Another thing, although there is a shortage of Airbnb apartments, the municipality of Lisbon imposed quotas by region, and not everywhere it will be possible to operate such apartments.

Despite the challenges, Portugal has been seen for years as one of the most profitable countries for real estate investments. But even for those who are simply looking to lower the stress level, even if it is beyond a short period, Portugal offers a lot, with its unique landscape and culture.

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