This time around, impediments are mounting from governments on both sides. The EU has increasingly made clear its disdain for residence and citizenship-by-investment programs, currently offered in some form by 10 member states, with Cyprus and Malta already scrapping their golden passport initiatives after coming under scrutiny from the bloc. Portugal has an application process that requires an in-person interview — something China’s Covid travel restrictions have made almost impossible.

The dual pressure is putting the once-popular programs in jeopardy continent-wide, with 2022 shaping up to be the first year in which Chinese investors aren’t the biggest group getting Portugal’s golden visas. It leaves wealthy Chinese with dwindling options and business leaders and real estate brokers in Portugal with a shrinking source of reliable foreign investment.

“A lot of Chinese investors made investments after the golden visa program and started working with the country,” said Bernardo Mendia, secretary general of the Portugal-China Chamber of Commerce and Industry.

Portuguese real estate was a “dead market” before China’s government policy encouraged companies to seek investments abroad in the 2010s, he said. “Lately, the political direction has changed.”

Portugal’s so-called golden visas were conceived a decade ago as part of a wholesale effort to fix its public finances following a 2011 bailout from the EU. Another part of the plan was privatizing state companies. The combined result was the country’s biggest-ever wave of Chinese investment.

Chinese tycoons bet big, snapping up stakes in energy distribution, health-care, finance, construction and aviation companies. The interest went beyond corporate titans: Thousands of affluent Chinese acquired Portuguese residency through the golden visa program. Official figures show the country has doled out about 10,000 investment visas since 2012, mostly to Chinese citizens.

However, just 16% of successful applicants are Chinese so far this year, down from 81% in 2014, according to data from Portugal’s Immigration and Borders Service and Investment Migration Insider, a website tracking residency and citizenry.

Citizenship Springboard

Portugal’s program grants residency in exchange for a minimum 350,000 euro ($358,400) investment in real estate or 500,000 euros in an approved local venture fund. As the lowest investment requirement in Europe after Greece, it’s often used as a springboard for EU citizenship.

Yet European Commission President Ursula von der Leyen is now warning that the region’s values “are not for sale.” It’s a stark contrast to the early 2010s, when countries like Portugal offered up state companies from almost every sector, said Philippe Le Corre, a researcher at Harvard University. He was there when Portugal’s public news agency Lusa signed a partnership with China state media giant Xinhua in 2016 — the kind of deal that would seem unlikely these days.

Starting this year, Portugal restricted the golden visa program in Lisbon, Porto and high-density coastal areas, pushing investment to the less-developed countryside, which proponents see as an unrealized opportunity. Commercial real estate in Lisbon, however, isn’t covered by the restrictions, so some developers are selling serviced apartments that will allow buyers in Lisbon to apply for a golden visa, while others are setting up real estate funds so potential investors can buy a stake.

“Golden visas are important for how much they’ve helped the economy,” said Alexandra Victoria-Bonte, co-founder of Lisbon-based One Stop Properties, and associate of a private equity fund that invests in Portuguese real estate. “A lot of people think of it as a golden ticket, but it’s not. It’s much more than that — a secure investment that’s going to give a high yield.”

She said Portuguese officials were pressured to change the rules because many investors put properties on Airbnb or left them empty. That raised concerns about the impact on communities and housing affordability, especially in Lisbon, where foreigners have priced out many locals.

The additional barriers haven’t stopped Fong Tak-ho, 54, who bought four properties in Portugal since first visiting from Hong Kong with his wife five years ago. He submitted his golden visa paperwork in July, after the process was interrupted by the pandemic, and moved to Lisbon earlier than planned after street protests swept through Hong Kong and some of his friends were jailed.

“It was really nice and we thought ‘maybe we could retire there,’” he said of his first visit. Fong, who works in media and lives near Lisbon’s Chinatown, just hopes he isn’t caught up in the backlog of investors and Ukrainians fleeing the war.

New restrictions and visa delays mean immigration firms are shifting focus to markets like Greece and Malta, said Y Ping Chow, head of the Chinese League in Portugal, a Lisbon-based group that promotes the Chinese community. Golden visas now account for as little as 3% of property deals in Portugal, according to Paulo Silva, head of real estate consultancy Savills in Portugal.

Meanwhile in China, investment migration consultants say government authorities have thrown up subtle impediments as well, like delaying passport renewals and questioning why certain documents need notarizing.

Geopolitical Turn

Luis Santos, a managing partner at Alpac Capital who has studied China’s investment in Portugal, said few initially questioned China’s investment push, which was understood to be part of “a fire sale launched by a desperate government in a bankrupt country.” But it has drawn more attention as the US increasingly views China as a competitor.

Source: Bloomberg