18 Sep

MESPIL and Brexit: What does Brexit potentially mean for European Property and MESPIL

In the recent wake of Boris Johnson’s election, and the political storm that has risen in the subsequent months, Brexit looms once again in daunting form, looking increasingly more like something that could be forced through.

Asset and investment management firms are invariably planning for life after the UK departs the European Union and MESPIL is no exception.

Given the uncertainty about the outcome of Brexit come October 2019, MESPIL is deep in scenario planning, prioritising actions to ensure access to clients and markets after the negotiation period ends.

While the prospect of a no-deal Brexit represents challenges for Ireland and Europe, MESPIL sees the current situation as an opportunity. Through our development and investment in Portuguese property, we are presented with the chance to expand and invest across the continent.

Having successfully developed and sold Pine Hills,Vilamoura we are now moving towards the launch of our latest Portuguese development, this time in Lisbon. Lisbon, the capital of Portugal, is fast becoming the place to live and do business in Europe. MESPIL’s next project is a mixed development of 17 apartments and 5 commercial units in a 1950’s building perfectly located in a prime residential area brought to market turn key condition.

Now is the time to invest in Lisbon. The combination of high profitability and affordable prices vis-a-vis other capitals makes Lisbon a destination with the best valuation potential in the medium and long-term. (Source: ECB, The Economist, Bloomberg, Confidential Real Estate)

But why Portugal for post-Brexit?

Since the recession, Portugal has been welcoming foreign investment with open arms. This alone should be comforting for British citizens, as Portugal won’t want to give up their UK investors when the shutters of Brexit roll down. They have in place schemes for taxation and citizenship which will protect the interests of UK citizens  who want to remain and keep themselves a part of the EU.

More importantly, Portugal and the United Kingdom are the oldest alliance, ratified at the treaty of Windsor in 1386, and Portugal has had a double taxation agreement with the UK since 1968. So even a ‘hard-Brexit’ would not halt current relations. 

What strategies and legislations has the Portuguese government introduced?

1. The Golden Visa Program
To attract Non-European investors and their family members, the Portuguese government introduced the Golden Visa program. Several types of investment allow non-EU citizens to obtain Portuguese residency after 5 years, the Portuguese nationality one year later, and allow them to work, live, and travel freely through the Schengen countries. Since its introduction in 2012, 5000 + permits have been granted, and through this program, over 3 billion euro has been invested in Portuguese real estate.

For more information on the Golden Visa Program and how to apply, speak to one of MESPIL’s expert advisors. Contact us for further details.

2. The NHR Tax Program
To attract European investors, skilled employees and HNWI, the Portuguese government introduced the Non-Habitual Residency (NHR Program). Since its introduction, 8100 NHR applications have been approved up to October 2016 and an estimated 50% more since that date. The success of the program lies in its simplicity: If you have not been a Portuguese tax resident in the last 5 years, if you have a qualified income, and if you will live in Portugal at least 6 months a year, you can apply for 0% tax scheme for a period of 10 years. This application is now electronic and it takes less than 7 days to get approval. 

A flat tax rate of 20% income tax also applies for high value activities brought to Portugal. These activities need to be qualified on a case-by-case basis and can take up to 6 months for approval. ‘High value activities’ include a multitude of activities, ranging from designers to dentists, and painters to psychologists.

3. Urban Rehabilitation
A third program introduced is the Urban Rehabilitation Program. This program was introduced to incentivise investing in the renovation of existing properties in ‘urban rehabilitation areas’ or that are more than 30 years old. Some of the tax incentives put into place are 1) the refund of property transfer tax, 2) the exemption of IMI for 5 years, 3) the decrease of VAT to 6% (instead of 23%), 4) a flat tax rate of 5% over rental income & capital gains.

4. Start ups
A fourth way to grow and attract investments is by the creation of programs such as StartupLisboa, which supports the creation of companies and tracks their first years of activity. These programs, in combination with the attractive investment scenario due to the surge in the start-up market in Portugal, has resulted in tens of thousands of new companies starting in Portugal in the last three years.

Aside from these governmental schemes, other factors are boosting the potential of the small Iberian nation for foreign investment.

Low-cost airlines freedom of movement will not be affected by Brexit which will continue to allow operation of budget airlines between the UK and Portugal allowing the continuation of access to the continent for holidays, business and 2nd homes.

Contrary to expectations, obtaining a mortgage in Portugal has become easier as the various aforementioned factors influencing the attractiveness of the location increase the numbers of applicants, the banks are becoming far easier to work with.

Wealthy foreign property buyers who may have previously looked to London will now be easier to attract to Portugal, with LIsbon being touted as a new mecca for business and technology and the Algarve’s optimum quality of life and buy to let potential being a constant draw. The influx of purchasers will also increase the value of property in these areas, although at this point property is still good value when compared with other major cities.

MESPIL sees Portugal’s virtues as a place not yet overloaded with inflating property prices but also highly attractive to those seeking to stay in the EU. It still retains the “hidden gem” status globally but its growth potential is being discovered and developed. Something MESPIL had realised some time ago.

Portugal is on its way to becoming the best place to holiday, live and do business in the EU, and Brexit will only serve to highlight and drive forward the uptake of property there. MESPIL are capitalising on this now while the time is right and we have immediate investment availability in both Lisbon and the Algarve. Though Brexit might be upon us without a deal before the end of October, there’s still time to claim a foothold in Europe in its most welcoming country via investment with MESPIL.