Are Digital Nomads to Blame for the Rising Cost of Living in Portugal?

Last Updated on 30 December 2024

If you’ve been keeping up with the latest news in Portugal, you might have noticed a recurring theme: digital nomads being held responsible for the surge in the cost of living throughout the country, particularly in Lisbon and Porto.

The Impact of Digital Nomads

The impact of digital nomads is believed to be twofold. Firstly, they have been welcomed into the country through various tax incentives, such as the Non-Habitual Residence (NHR) program, which allows them to pay lower tax rates compared to locals.

Secondly, they have contributed to the skyrocketing rent prices in Lisbon, which reportedly increased by over 37% in 2022 alone, according to the Portugal News.

Furthermore, high-wealth individuals, some of whom also work remotely, have been able to purchase properties in Portugal’s two largest cities in exchange for golden visas from 2011 to 2022.

This has added fuel to the fire, making it easy to point fingers at digital nomads for the surge in prices. But are they truly to blame?

Putting Things into Perspective

According to Politico, there were approximately 16,000 digital nomads living in Lisbon last year. This number may seem significant, but it accounts for only around 0.5% of the city’s total population of 3 million in 2023.

In fact, digital nomads make up just 0.1% of the overall tourism numbers in Portugal, which reached record highs in 2023 with 30 million visitors, as reported by the European Travel Information and Authorization System.

Meanwhile, the open borders within the European Union (EU) allow local Portuguese residents to become nomadic themselves and seek better-paying opportunities elsewhere. They may find location-based work in other EU countries or opt for remote work that allows them to travel the world.

Simultaneously, EU citizens looking for better weather and the chance to live near the beach can easily move to Portugal with minimal paperwork. Many of them may even qualify for the reduced NHR tax rate, which was available until the end of 2023.

For instance, German citizens, despite being paid in the same currency, have higher wages that enable them to afford higher rents in Lisbon. Landlords, in turn, are more than willing to charge higher prices when there are no legal restrictions.

It wasn’t until 2023 that the Portuguese government implemented rent increase controls, but these only applied to new lease contracts that followed agreements signed within the past five years. New housing available for rent or those being leased for the first time can be set at any rent price chosen by the landlord.

Unveiling the Bigger Picture

When you explore Lisbon in 2024, you’ll quickly notice the abundance of abandoned buildings right next to new constructions.

It often feels as though half of central Lisbon is under development, with signs promising expensive new apartments or luxury hotels, rather than affordable homes for hard-working middle-class Portuguese families.

Blaming digital nomads for the cost of living crisis oversimplifies the issue, as it stems from a wide range of factors.

A Potential Solution

If the goal is to retain the Portuguese population within the country, it’s crucial to utilize a portion of the revenue generated from tourism to increase local wages, implement stricter rent caps, and provide incentives for landlords to rent to individuals employed by Portuguese-based companies.

Only then can we truly begin to reverse the tide.