Why U.S. Investors Are Choosing Homes in Portugal - November 2024 Update

Following the re-election of Donald Trump this month, many American investors are expected to continue pursuing overseas opportunities, with Portugal high on their list. While the political landscape in the U.S. remains volatile, the economy is projected to react positively to the recent news of Trump’s return, with record highs for the S&P 500 and Bitcoin in the week following the election results. This economic stability is expected to give many investors the confidence to diversify their portfolios. With its booming property market, including luxury homes in Portugal, and its laid-back lifestyle, the country remains an obvious choice.

Over the last 12 months at our office in Tavira, we have been fielding an increasing number of enquiries from U.S. investors eager to explore the Algarve's real estate market. Whether it is looking for a second home, a rental property or even residency options, we are witnessing greater numbers of Americans choosing Portugal as their European base.

Why Portugal? Why Now?

Positive U.S. Economy Fuels Global Investment

The U.S. economy has shown strong resilience in 2024, but it is important to note that while growth continues, there are forecasts of slower expansion in the coming year (Source: Capital Economics). The U.S. dollar remains relatively strong compared to many global currencies which gives American investors greater purchasing power abroad. This economic stability combined with the success of the stock market and the rise of digital assets has made international real estate investments more appealing. Portugal, with its favourable tax environment and stable real estate market, is a top choice for U.S. buyers looking to diversify their portfolios.

Changes to Portugal’s Golden Visa and NHR Programmes

While the Golden Visa and Non-Habitual Residency (NHR) programmes were once significant drivers for foreign investment, changes in 2024 have begun to reshape the landscape.

Golden Visa: As of 2024 the Golden Visa no longer includes real estate investments in Lisbon, Porto and many parts of the Algarve. The programme now focuses on alternative investment vehicles such as venture capital, scientific research and contributions to job creation and the arts. The minimal residency requirement of just seven days per year remains, which continues to make it appealing to investors looking

for flexibility. However, the closure of real estate investment in major cities and regions means that investors will need to consider other avenues to obtain residency.

Non-Habitual Residency (NHR): The NHR programme has also seen updates with the old programme ending and relaunching as NHR 2.0. New applicants who haven’t been tax residents in Portugal for the last five years no longer qualify. While this could affect some investors seeking tax advantages there are still several opportunities for those looking to benefit from Portugal’s attractive tax policies for business and

Income generating activities.

Why Portugal Still Stands Out to U.S. Investors

Despite these changes, there are plenty of reasons why Portugal continues to be an attractive destination for American investors:

Affordability: Compared to the sky-high property prices in places like California and New York, Portugal offers relatively affordable property. Areas like the Algarve allow buyers to purchase high-quality homes at a fraction of the cost of a similar property in the U.S. Combined with the country’s mild climate, relaxed pace of life and world class amenities, it’s no wonder many Americans are seeking second homes or retirement spots here.

Rental Market: With its growing popularity among tourists, the Algarve including Tavira, offers solid returns on short term rental properties. The Algarve remains one of Europe’s top vacation destinations, ensuring that vacation rentals continue to be a promising investment for those looking to generate passive income.

Path to Residency: While real estate investments may no longer be eligible for the Golden Visa in certain areas, Portugal still offers alternative residency routes. These include business investments, contributions to scientific research and donations to the arts which can lead to eventual citizenship. This pathway provides U.S. investors access to the European Union and its many benefits.

The Strength of the Dollar

In 2024, the strength of the U.S. dollar continues to make Portugal a more appealing investment destination. For American buyers the dollar’s purchasing power remains robust enabling them to secure better value when purchasing property in Portugal. This is especially true in regions like the Algarve where coastal homes and modern apartments are becoming increasingly popular among U.S. investors.

Conclusion

Despite recent changes to Portugal’s residency and tax programmes, the country remains a top choice for U.S. investors. With a stable economy, affordable properties and an unmatched lifestyle, Portugal continues to offer an attractive environment for those seeking second homes, investment properties or residency options. Whether for a new home, investment property or the pathway to residency, at Compass Property Sales, we would be delighted to help you explore the opportunities available in Portugal’s real estate market.