Foreign Drect Investment in property triples in 10 years
Spain, Holland and Luxembourg are the main sources of foreign direct investment in Portugal according to data released by the Bank of Portugal.
However, in the case of the latter two, both leading European financial centres, these are used by third-party countries to enter Portugal since they offer considerable tax and financial incentives.
FDI in Portugal increased 55% over the past 10 years since the troika’s financial adjustment programme was completed in 2014.
But the sector that contributed most to the explosion in FDI over this period was, by far, real estate, where the inflow of foreigners more than tripled the value of stock investments, now in the hands of companies, funds, banks and individuals with purchasing power based abroad.
This very significant increase in FDI happened as early as 2014, driven by the internal devaluation of the economy (wages and prices in general), which made it much cheaper and more desirable at the time.
The collective of foreign investors now holding assets (capital or debt since many investors also became creditors) in terms of investment in equity now stands at €183.9Bn, 55% more than in mid-2014.
In real estate activities, the Tsunami of FDI was huge, increasing from €4.9Bn at the end of the first half of 2014 to an impressive €15 billion now, ten years later.
The most important investment sector remains “education, health and other activities”, with a foreign investment standing at €41Bn, up 19% over the ten years.
Consulting activity is the second most important group, with €22.5Bn in FDI according to the calculation made by the Portuguese central bank at the end of the first half of the year.
Since 2014, the real estate sector has exploded, driven by the high demand for and subsequent high prices of houses, while rental demand and attractive yields for property in retail commerce, offices and other business spaces have meant that the real estate sector went from the sixth to the fourth most important sector in the FDI economic activities ranking, measured by the value of the balance value (assets/liabilities) of these operations.
If the construction sector is combined with real estate, it becomes the third largest supply of FDI in Portugal’s economy, valued at a total of €18.5Bn of investments made by overseas investors and their agents, equivalent to more than 10% of the total FDI.