RMBS: End of the Golden Visa Scheme in Portugal and Its Implications

This commentary delves into the impact of the golden visa scheme on Portugal’s residential property market in recent years, as well as the potential implications arising from the recently announced measure concerning residential mortgage-backed securities (RMBS) with collateral originating from the country.

Summary highlights include:
-- The consultation period for comments on the Portuguese government's proposed measures (Mais Habitação programme) concerning the country’s residential property market ended on 24 March 2023 and following their approval by the Council of Ministers, they are now subject to parliamentary debate. Among these measures is one that ends the concession of residency associated with new golden visas.
-- The Portuguese golden visa scheme (Autorização de Residência para Atividade de Investimento) has been in force since 2012 and the majority of the investment has been channelled into real estate acquisition. Such schemes have come under intense scrutiny from the European Commission given the risks of sanctions evasion and security concerns. Portugal follows the recent announcement of the Irish government to terminate its golden visa scheme and other countries could follow suit.
-- The weight of such transactions in the Portuguese residential property market is limited if we consider the overall volume and value of the transactions. However, these acquirers tend to purchase properties in specific regions of the country more than in others, particularly Lisbon and Algarve.

“From an RMBS perspective, this decision is expected to only have a limited impact in the residential property market. However, in a medium-term horizon, were this to translate into reduced foreign investor interest, property prices could be negatively affected. In the short term, other fundamentals should have a larger impact such as the adjustment of floating-rate loans, which are the predominant product, and the current uncertain macroeconomic environment. Nevertheless, the lack of new housing supply, tighter underwriting criteria, and the recently announced mortgage affordability relief measures should limit any potential negative effects”, said André Soutinho, Senior Analyst of European RMBS at DBRS Morningstar.