If you’ve been following recent trends in Portugal, you may have noticed a common theme: digital nomads being blamed for the increase in the cost of living across the country, particularly in Lisbon and Porto.
The impact of the digital nomads is seen as twofold: not only have they been welcomed in through various tax incentives including the Non-Habitual Residence (NHR) program, allowing them to pay lower tax rates than the locals, but they have also helped to drive up the rent prices in Lisbon by more than 37% in 2022 alone, according to the Portugal News. Add in the fact that high-wealth individuals, some of whom also continue to work remotely, were able to buy property in Portugal’s two largest cities in exchange for golden visas from 2011-2022, and it’s easy to point the finger at digital nomads for higher prices. But are they really to blame?
According to Politico, 16,000 digital nomads were living in Lisbon last year, a city with a population of 3 million in 2023. This is roughly .5% of total Lisbon residents. Digital nomads, according to Gonçalo Hall, comprise only .1% of the total tourism numbers in Portugal, which also reached record numbers in 2023 with 30 million visitors to the country, as reported by the European Travel Information and Authorization System.
In the meantime, open EU borders allow local Portuguese to become nomadic themselves and go where they can be paid best. They may get location-based work in other EU countries or find remote work and choose to work around the world. At the same time, EU citizens looking for better weather and the chance to live near the beach can move to Portugal with very little paperwork, and many could qualify for the reduced NHR tax rate before this tax benefit closed at the end of 2023.
For example, although German citizens are paid in the same currency, the fact that German wages are much higher allow Germans to afford higher rent in Lisbon, and landlords are happy to charge higher rents if there are no legal controls against it. In fact, it was only recently, in 2023, that the Portuguese government moved to put in rent increase controls, but this only applied to new lease contracts that succeeded contracts signed in the last five years. New housing going up for rent or those being leased for the first time can be set to any rent that the landlord chooses.
When you travel around Lisbon in 2024, what becomes immediately apparent is the number of abandoned buildings right next door to new construction. Seemingly half of central Lisbon is under construction, but often the sign under the new construction promises expensive new apartments or fancy hotels, not any place that a hard-working middle-class Portuguese family could afford.
It’s easy to blame digital nomads for a cost of living crisis that stems from a whole range of issues.
If you want to keep the Portuguese in Portugal, start with using a portion of the money coming from tourism to increase the local wages, cap more of the rents, and give landlords incentives to rent to people with Portugal-based employers. Only then can the tide truly start to turn.