PROGRAMMES
A selection of residency and citizenship investment programmes.
Golden Visa Fund Option
The fund investment option for the Portuguese Golden Visa was introduced by the government in 2019 as an alternative route to the traditional direct real estate purchase. While the fund route offers certain advantages it has had limited effect so far on overall Golden Visa numbers in Portugal.
In 2020 fund investors made up 48 of the total 1182 approved for the Golden Visa. In 2021 so far in the first six months they are running at 33 applications out of a total 445. A niche market for the Golden Visa maybe but behind this lies a deeper potential problem for investors.
More Funds than Investors
Research carried out by Smart Citizenship and published on IMI Daily suggests there are 30 approved funds so far and another 60 or so in the pipeline waiting to be approved. Based on the average fund size that equates to an appetite for €1.2 Billion in investment, or around two full years of total investment for the whole Golden Visa programme. Put another way there are more potential funds than investors approved in the first two years.
Clearly something has to give and that could well mean each fund in itself attracting little or no investment. All funds have fixed overheads and management charges to cover and have a minimum number of investors required to make them viable. The danger for clients is of course becoming tied in as just one of a few investors covering the costs with less scope for the fund achieving the necessary investments.
Advantages to Fund
There are a number of advantages to the fund route. They include:
- Lower taxes on yields/rent
- Diversification (as opposed to investing in one property)
- Lower acquisition costs
- Professionals managing your investment
However there are some key questions to be asked by investors too, such as:
- What is the fund exit strategy?
- How liquid is the fund?
- What is the risk level?
That is on top of the obvious question which is “am I the only client investing in this”.
Future Changes
The government set investment limit for the fund route is due to rise from €350,000 to €500,000 on 1st January 2022. That puts funds at a distinct disadvantage to direct property investment as most direct investments will require €280,000 in qualifying projects from this date. This could well put downward pressure on the number of investors looking at the fund option and increase the risk of funds that fail by not attracting sufficient capital.
Sophisticated Investors and Due Diligence
Funds may well appear an attractive choice for some clients. But it is important to understand the risks and to undertake the necessary Due Diligence on any investment, be it fund or direct property. La Vida has been offering the Golden Visa in Portugal since 2013 and as the largest single agency in investments for the Golden Visa we are well placed to advise on the options available. Please contact us for further details.
