In spite of all Portugal’s financial woes, the country is still a popular location in which to invest, and with good reason. Portugal is still a top tourist destination, and benefits from a temperate climate year round. It has high living standards, and according to the Mercer 2011 Quality of Living Survey, Lisbon is more highly rated than other popular cities such as Madrid, Milan, Tokyo and Rome.
Although always a sought after destination amongst European travellers, Portugal is also growing in popularity with tourists around the world. A recent report from the Portuguese national tourist board found the number of US visitors to the country increased by 7.5% during the first six months of this year, compared to the same period a year earlier.
There were 135,000 visitors from the US, making it ninth in the list of countries of visitor origins. This huge growth in visitor numbers is down to a sustained campaign to promote the country’s unique attributes, and as more Americans visit Portugal’s popularity is growing through word of mouth.
During the past twelve months a number of Portuguese provinces have been profiled in prestigious publications such as the New York Times, as the tourism supplement of this paper has carried articles on the Douro and Alentejo region, as well as the Madeira archipelago.
Spending by tourists visiting Portugal from the US also increased by 17.5% to reach €180 million. Americans took advantage of Portugal’s numerous amenities including excellent restaurants and luxury spas and golf courses.
Portugal looks likely to backtrack on its plans to finance a reduction in company costs through raising workers contributions, and is searching for alternative austerity measures. The previous plans had provoked a backlash from the country’s workers, as it would have been the equivalent to losing a month’s wages.
Now the Portuguese Prime Minister needs to convince employers and trade unions that further increases in taxes, coupled with spending cuts are necessary in order for the country to meet its €7 billion bailout programme.
In early September the county had received praise from the International Monetary Fund and the European Union for sticking to a tough austerity regime, but this latest move proved to be too much for voters to cope with.
It looks as if the unions will not be prepared to compromise in any way, and will not accept any proposals involving a reduction in wages. If this happens then it could result in political instability and a rise in social tensions that could ultimately derail the austerity programme.
It is necessary for Portugal to find ways of making even deeper cuts as tax revenues have fallen, and the global economic outlook is deteriorating. In September the troika, which consists of the European Central Bank, the European Commission, and the International Monetary Fund, agreed that Portugal should be given another twelve months to meet fiscal targets previously agreed. The revised budget deficit is now 5% of economic output for this year, up from 4.5%, and for 4.5% in 2013, up from 3%.
Recent plans by the Portuguese coalition government to raise social security contributions has led to the opposition, unions and employers uniting and demanding a rethink on this policy. Up until now Portugal has largely been united in trying to stick to the terms for its €78 billion bailout, but recent protests saw around half a million people demonstrate their displeasure at these latest proposals.
Austerity measures have already resulted in unemployment reaching record highs, and the country is in its deepest recession since the 1970s.
Earlier on in the month the government announced it would raise workers social security contributions to 18%, costing them the equivalent of one month’s wages, while cutting the same tax for companies to 18%, a reduction of 5.75%. It also announced its intention to raise capital gains and property taxes.
Shortly afterwards the troika announced the approval of Portugal’s bailout, resulting in the relaxation of the country’s fiscal goals for the rest of this year and 2013. Many Portuguese are having difficulty understanding why there is any need to increase the austerity measures, especially as the government recently announced the recession will extend into next year.
Now it looks as if the government may rethink these tax plans, as it recently announced they are still a work in progress and may change before the draft budget is presented in the middle of next month. The finance minister said it was the government’s intention to make every possible effort to cut administrative spending to help soften the fiscal measures planned.
Part of the coalition government has also asked the taxes not be raised any further in the draft budget, and that the government should only do what is absolutely essential.
Buyers looking to purchase holiday homes or homes to rent out in Portugal have traditionally chosen to purchase property in popular resorts along the coast. It’s easy to see why as Portugal has miles of beautiful sandy beaches, and the longest coastal National Park in Europe. However the country has much more to offer than sun and sand, and more buyers are choosing to look for properties away from the major resorts.
The scenery in Portugal can be absolutely beautiful, and it can offer rolling hills, enticing vineyards and Roman ruins, all of which are easily accessible. Property here presents excellent value, and compares very well with popular areas in other countries such as Provence or Tuscany. Many travellers are becoming more sophisticated over their demands for holiday destinations, and are constantly on the lookout for something offering something a little different combined with the familiarity of holidaying in Europe.
The number of overseas visitors is increasing, as in 2011, 14.1 million people visited Portugal, an increase of 3.8% compared to the year before as the country enjoyed record levels of tourism. Some 1.2 million were British, and this figure had increased by 12%. All in all, British tourists spent 6.3 million nights in Portugal, an increase of 14%.
This is just as well as the Portuguese economy receives around 10% of its revenue through tourism. A recent report in Reuters showed hotel revenues increased by 1.5% in July compared to a year earlier, and 915,000 foreigners visited the country, spending more nights in Portugal on average compared to a year ago.
In spite of its economic woes, Portugal will always remain popular with British buyers, and it is estimated around 50,000 British nationals now live permanently in the country, and numerous other Brits have chosen to buy a holiday home there. It’s easy to see the attraction as Portugal has a reputation of being very safe with a low crime rate.
A survey by the UN found Lisbon to be the safest capital in Europe. The countryside is beautiful and quite diverse, ranging from sandy beaches in the Algarve to more mountainous terrain and vineyards in the North. Prices have declined in recent years and it’s possible to find affordable and realistically priced homes.
This is especially true if you choose an area that is slightly less touristy. One region that is becoming increasingly popular is just north of Lisbon, and is ideal for anyone looking for a quieter retreat on the Silver Coast.
It’s relatively easy to buy property in the country, although non-residents need to obtain a Fiscal Number and need to appoint a Fiscal Representative. This number is very important as it appears on all documents related to the property purchase, and couples purchasing a property must make sure to both obtain separate Fiscal Numbers.
The costs of buying a property are relatively straightforward, although they are subject to change. Estate agent fees are paid by the seller, but other costs include Land Registry fees, Stamp Duty, and notary fees. VAT is payable on new properties, but this cost is normally included in the price.
The Portuguese prime minister, Pedro Passos Coelho recently announced a fresh round of austerity measures, as he feels they are necessary to ensure the country is able to meet its targets in return for receiving a €78 billion bailout from the IMF and European Union.
Next year’s budget will include an increase in social security contributions from 11% to 18% for all workers, and this equates to roughly one month salary. Even though the Prime Minister feels the country has made a good start in attacking the problems, he has been at pains to point out they haven’t yet been conquered.
This move is hardly likely to be popular amongst the Portuguese who have already seen across-the-board tax increases combined with spending cuts since the country was forced to seek a bailout last year.
In addition the Prime Minister is cutting the Social Security contribution of companies from 23.75% to 18% in the hope this will boost employment. Portugal will miss its budget deficit goals for this year, and economists think this is due to the government underestimating the depth of the recession that has led to lower tax revenues.
In July a court ruling prohibited a cut in salary benefits for public sector workers, making next year’s budget goals more difficult to meet. The increase in social security contributions is partly to make up for the shortfall due to that decision.
The opposition has urged the government not to adopt any further austerity measures, especially as the economy is expected to contract by more than 3% in 2012. However Portuguese banks’ borrowing from the European Central bank fell by 3.5% in August, and now stands at €54.9 billion.