Hello,
As every month, we bring you the hottest international real estate news from around the world.
This month we want to draw your attention to:
A. Legislative changes in Portugal that may make life harder for real estate investors.
B. The delay in Bulgaria's accession to the eurozone may lead to a downgrade of Bulgaria's credit rating.
C. Analysts at the consultancy Colliers estimate that in Romania demand for rentals will grow and apartment sales will slow because of price and interest rate rises.
Enjoyable reading,
Ilan Leibovitch, Adv., and the office team
Changing the rules of the game in Portugal - cancellation of the Golden Visa and restrictions on Airbnb
On 16/2 the Portuguese government passed a number of laws and legislative changes aimed at fighting the country's housing crisis, which may change the rules of the game for real estate investors in the country. Among the changes: no more short-term rental licenses will be granted in the country's main cities - that is, no more new Airbnb listings.
Portugal is also ending its “golden visa” program, which granted residency and a European Union passport to non-EU residents in return for an investment of more than 350,000 euro in real estate in certain areas. Those who wish to renew their visa will have to prove that they use the property “for the permanent residence of the owner or of the owner's family, or that they rent it out long term”, unlike the current situation, in which being in the country for only 14 days is enough.
For a little over a decade, the country - one of the poorest in Western Europe and among all OECD countries - aggressively courted international tourism, investment and development in an attempt to grow its economy and revive its historic cities. And on paper, Portugal's policy worked. The country became a destination for investors, property seekers and digital nomads looking for sun and sea on a budget.
But now, the drawbacks of such a policy have clearly overshadowed the benefit to locals.
Annual wages in Portugal have remained relatively constant in recent decades, averaging less than 30,000 dollars. Between 2020 and 2021, the average wage rose by only about 2%, according to OECD data. In 2022, more than half of workers earned less than 1,000 euro a month. Yet the average cost in Lisbon rose by 37% in the last year alone, according to a Reuters report.
In the city center, short-term rentals now make up more than 60% of listed properties. And across the country, the number of foreign residents rose by 40% in the last decade, according to Bloomberg.
In 2019, the Portuguese government passed a law making housing a fundamental right. And this new set of regulations is a big step toward fulfilling the promise embodied in that declaration. Although, for many, it is still not enough.
Housing advocacy groups argue that the measures passed this week are incomplete, as long as the government continues to support other programs designed to attract wealthy foreigners, such as the “digital nomad” visas that the country began offering in October 2022.
Airbnb has also contributed to rising housing costs and limited the availability of long-term rentals in the US and around the world.
Many other countries besides Portugal offer or have offered “golden visas”. But, facing pressure from locals and developing housing crises, several other countries have also ended their programs. Britain canceled its program about a year ago, and Ireland closed its “golden visa” route earlier this week.
On 1 September the law allowing descendants of those expelled from Spain and Portugal to obtain Portuguese citizenship was canceled, and the cancellation of the golden visa will make it even harder for many Israelis to obtain Portuguese citizenship. Investments through the golden visa route reached 654 million euro in 2022 - a jump of 41.9% compared with 2021, according to the Portuguese border control agency. By comparison, when the golden visa was first introduced in 2012, only two visas were approved that year under this route. In 2022, 1,281 were already approved.
The European Union forecasts that growth in Greece in the coming years will be higher than in the eurozone
A report by the European Commission published in mid-February forecasts that growth in Greece in 2022, which stood at about 5.5%, will continue in 2023 and 2024 and will be above the average growth rates of the European Union and the eurozone.
The Greek economy recorded solid growth in the first half of 2022, but rising inflation took its toll on growth in the second half of the year. However, government measures cushioned the effect of energy prices on businesses' input costs and on households' real disposable income. Overall, real GDP growth is expected to reach 5.5% in 2022.
A decline in inflation is expected to gradually ease the burden on households' real income and to benefit private consumption. As the external environment improves slowly from the second half of 2023, exports should pick up pace in 2024. Receipts from international tourism are expected to grow in 2023 and 2024. Overall, real output is expected to grow by 1.2% in 2023 and to rise to 2.2% in 2024.
The announced minimum wage increase, due to take effect in April 2023, was not included in this forecast because the Greek authorities have not yet defined its scope. Greece's growth forecast is subject to downside risks related to the potential impact of geopolitical tensions on international tourism. As for risks to the inflation forecast, upside risks relate to the minimum wage increase mentioned above.
Experts forecast that Hungarian property prices will start rising again in the summer
The downturn in the Hungarian real estate market has lasted eight months already and the trend may continue into the spring. In February there were still many apartments for sale which, owing to the rise in utility prices, have terribly high maintenance costs, and apartment prices fell. Despite the expansion of supply, demand may remain low.
In some segments, prices are still expected to fall in the coming months in the real estate market, but from the summer we will witness a nice slow rise. According to industry professionals, it may take 3-4 years for prices to return to the level before the downturn. Compared with neighboring countries, real estate in Hungary is still cheap.
Zoltán Gadanecz, founder and owner of GDN Real Estate Network, told the Hungarian media that, according to forecasts, a slow rise in the market may begin from the summer. At the same time, unlike the months after the outbreak of the Covid pandemic, the graphs will not show a big jump. According to him, investors too are expected to return to the market toward the summer.
Bulgaria postpones its entry into the eurozone
Bulgaria's finance minister, Rositsa Velkova, announced in mid-February a postponement of Bulgaria's entry into the eurozone, which had been planned for 1.1.2024. At the Union's Eurogroup meeting in early February the accession was not discussed, even though the subject was on the agenda. The reason is that Bulgaria is lagging in adopting the relevant legislation, and also does not meet the inflation criterion. Within the Eurogroup it was agreed that Bulgaria should aim for the new date - no later than 1 January 2025.
At present, Bulgaria does not meet the inflation criterion, which states that the candidate country has price stability and that its average inflation rate over the year before the examination does not exceed the rate by more than 1.5%. But the more important problem is that several laws, whose drafts the caretaker government submitted to the National Assembly in October and December, were not adopted. These include changes to the commercial insolvency law, the Bulgarian National Bank (BNB), the insurance code and the law on preventing money laundering. All three projects - excluding the BNB project - were adopted only in first reading by the National Assembly, which has already been dissolved.
The question of adopting the euro has been seen as a political goal to fight against by various parties, the most active in speech and action being the pro-Russian party of Kostadin Kostadinov. They were also the initiators of holding a referendum on the euro by collecting signatures for that purpose.
Bulgarian economists warn that the delay in joining the eurozone may harm Bulgaria's credit rating.
The Economist: Romania is last among European Union countries in the Democracy Index
Romania is ranked last among European Union countries in the annual Democracy Index of The Economist, with a score of 6.45 (167 countries are ranked in total and in the overall ranking Romania is placed 62nd), the criteria used to compile the ranking being electoral process and pluralism, functioning of government, political participation, political culture and civil liberties.
Romania is classified among the “flawed democracies” together with most countries of Central and Eastern Europe.
Bulgaria is ranked 57th in the overall ranking, Hungary 56th and Poland 47th.
Growth in Romania in 2022 - 4.8%
According to data from the Romanian National Institute of Statistics, growth in 2022 stood at 4.8% compared with 5.8% in 2021. Growth of only 2.8% is expected this year.
The European Commission forecasts that Romanian GDP will grow by 2.5% in 2023.
The apartment market in Romania is expected to slow in 2023 as a result of price rises and interest rate hikes
According to a report by the real estate consultancy Colliers, in 2022 there was an 11% rise in apartment sales in Bucharest compared with 2021, and a 21% rise in the total area permitted for construction (over 2 million sq.m.), but overall across Romania (excluding Bucharest) there was a 10% decline in the number of transactions registered.
The different development between Bucharest and the rest of the country continues in 2023, with apartment sales in January down significantly in the large cities, other than Bucharest.
Nationwide, Colliers advisors noted a 20% decline in transactions compared with the start of last year and said that the rise in interest rates will cause a marked slowdown in the residential market, with demand continuing to adjust faster than supply. For 2023, Colliers advisors note growing interest among Romanians in rented housing - driven by prices that continue to grow faster than incomes against the backdrop of rising construction material costs and current economic conditions.
Accurate as of the issue date. Laws, tax rates and procedures change; check the current position before any decision.
Translated from the Hebrew original. עברית