A Wealth of Opportunity

17th of March 2023

If you are thinking about investing in a second home in Portugal or around the world, Knight Frank has a wealth of research material. One of these is the Wealth Report, which gives a fascinating insight into the spending decisions made by the super-rich.

Sadler’s Property is an associate of Knight Frank in the western Algarve, selling property in Portugal to their database of global buyers. Every year the international real estate company release their Wealth Report, which is a key tool for financial journalists, investors and asset managers.

Knight Frank’s Wealth Report is an annual publication that provides a comprehensive analysis of the world’s high-net-worth individuals (HNWIs) and their investment behaviour. It is published by the global property consultancy firm Knight Frank and covers various aspects of wealth management, including real estate, investments, and luxury lifestyle trends. The report also provides insights into the changing dynamics of global wealth distribution and wealth creation patterns, as well as the evolving HNWI demographic profile. The Wealth Report is considered a valuable resource for individuals and businesses involved in managing wealth and investments.

Using data from their annual Attitudes Survey of more than 500 private bankers, wealth advisors and family offices combined with in-depth conversations with industry experts, Knight Frank has produced an assessment of the key themes for wealth in 2023.

Real estate is the top cited opportunity among their Attitude Survey respondents seeking diversification and a hedge against inflation. They focus on UHNWIs – persons with investable assets in excess of $30 million.

From this report, they have released a teaser document analysing the Outlook 2023 insight, which identifies key themes of the year ahead.

Five Key Themes for 2023

  • Inflation
  • Opportunities to Reset
  • Real Estate
  • Geo-political Tensions
  • The Big Three, including China, the US and India

“For many investors, it’s been a difficult year, but others have made gains despite the headwinds. Four in ten respondents to Knight Frank´s Attitudes Survey said their clients had grown their wealth during the year, while 16% said they’d seen no change. The drivers of this performance were cited as real estate, currency trades, market timing, and, for the first time in more than a decade, the return on cash.”

Certainly, anyone investing in property in Portugal would have seen their assets grow in 2022. The Portuguese Institute of National Statistics cited that house prices increased by 13.1% – in the 3rd Quarter of 2022. The report cited that “the acquisitions of dwellings by Households corresponded to 36,647 units (86.8% of the total), totalling 6.9 billion euros. In the quarter under review, 2,767 dwellings were acquired by purchasers with a tax residence outside the National Territory, representing a year-on-year increase of 12.6%.”

A healthy growth in the tourist sector has precipitated this growth, with many investors buying to let. In a flash estimate from the Portuguese office of national statistics overnight stays from non-residents doubled in January 2022 from the same time last year.  They report that the British market represented 14.8% of the total overnight stays from non-residents, followed by the German (11.3%) and Spanish (10.2%) markets.” For the year 2022, the tourism accommodation sector’s revenue grew by 114.7%.

Real estate was the top-cited investment opportunity among 46% of Knight Frank´s survey respondents, whether for its attributes as an inflation hedge or due to the benefits of diversification. “Many panellists highlighted the opportunity to secure enhanced return profiles as a key advantage. Plus, when investing directly, real estate enables greater control and value-add opportunities.”

Global movement has been tempered by the pandemic, but the desire to be mobile is proving resilient. Some 13% of UHNWIs are planning to apply for a second passport or new citizenship, down from the 15% recorded in last year’s report.

Alex Koch de Goroyend, who works on Knight Frank´s Portugal desk in London, has noted the success of foreign investment schemes in Portugal, “Lisbon saw very few investment-driven purchases until 2012 when rent reforms opened up the market by rebalancing the rights and responsibilities of tenants and landlords. The result has been a significant resurgence in interest from developers and investors.”

Portugal has recently been awarded the distinguished accolade of ‘the best country to buy a second home’ by Compare the Market in Australia after evaluating 34 countries that fell within the category of OECD (Organization for Economic Cooperation and Development).

Portugal received recognition in the survey for its proportion of restaurants, with 349 per 100,000, which was noted as “surprising for a small country” and scored well for its average cost of living. Portugal is considered one of the cheapest countries in Western Europe and is, on average, 50 per cent cheaper than living in the United States. Portugal ranks 12th in Global Citizen Solutions’ pioneering Quality of Life Index.

Portugal´s tax incentive schemes initially drove interest in the Iberian country as an investment opportunity. Firstly, the Non-Habitual Residence (NHR) tax rule, introduced in 2009, allowed for a flat rate of 20% personal income tax from activities performed in Portugal and a tax exemption, including pensions, on all foreign income. The second measure, ‘The Golden Visa’, arguably of greater relevance to the Lisbon market, offered residency to investors outside the EU (enabling free movement across the Schengen area, comprised of 26 EU states) in return for a minimum property investment of €500,000. Operational since 2012, the scheme has proved particularly popular with Chinese, Russian and South African buyers. In addition to these two initiatives, Lisbon has one of the highest qualities of life (ranked 38th out of 450 cities in Mercer’s latest benchmark index) due to low crime, good transport links, international schools and healthcare.”

Now Knight franks´s Research predicts that the Portuguese government is set to end the golden Visa scheme as part of a package of measures aimed at tackling its housing shortage. The nation is one of about a dozen that offers residency in exchange for foreign investment. Official figures suggest the government has issued almost 12,000 resident permits to investors since 2012. Those investors acquired more than €6 billion worth of real estate and transferred more than €700 million into Portuguese bank accounts.

Knight Franks Wealth Report points out that “The average UHNWI owns 4.2 homes globally. UHNWIs in Asia have the greatest appetite, owning an average of five homes each. This demonstrates the unwavering global appeal of residential property.”

So whether you are super-wealthy or just looking for a better standard of living, Portugal ticks all the boxes for property investors.


You can read the Wealth Report here https://www.knightfrank.com/wealthreport

Or learn about the key themes here: The Wealth Report Invest : Outlook for 2023

To find a property investment in the western Algarve  www.sadlersproperty.com

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