Golden Visa chasers helped pump $4.2 billion into Portugal last year—scrapping the scheme probably won’t help locals get on the housing ladder

Portugal’s complicated relationship with high net-worth immigrants has shown no signs of resolving itself, even as the government intervenes to make it harder to get into the country by removing generous incentives.

But the extent of Portugal’s ties to a group it is attempting to shut out were again brought into the spotlight this week, suggesting the government may be cutting off a serious amount of capital without really helping the locals it seeks to protect.

Wealthy foreigners pump cash into Portugal

Banco de Portugal data analyzed by RE/MAX Europe found that half of the Foreign Direct Investment (FDI) that flowed into Portugal last year came from real estate purchases, amounting to €3.9 billion ($4.2 billion).

This was undoubtedly aided by the Golden Visa, a scheme that allowed foreign nationals to take up residency and eventually citizenship in the country if they invested in property to the value of around $300,000.

This visa was largely scrapped last year as the government turned on wealthy foreign buyers who were perceived to have distorted the housing market. Foreign residents were unable to buy property in the popular, increasingly expensive hubs of Porto, Lisbon, and the Algarve.

Tension is rising in Portugal, with the country’s previously open arms policy toward wealthy foreigners through schemes like Digital Nomad visas regarded as a driver of housing unaffordability for locals on lower wages.

Research from the country’s stats body found that a growing number of working-age adults in the country were either taking on a second job or choosing to leave the country altogether as unaffordability spiked.

Christopher Willis, managing director of citizenship and residency advisor Latitude Consultancy, said the scrapping of the Golden Visa was almost certain to have an impact on last year’s headline FDI figure of $4.2 billion.

He said his clients were already starting to turn away from Portugal, which has consistently been the most popular European market for foreign investment, according to data from Hanley and Partners.

Whether it does anything to alleviate Portgual’s strained housing market, though, is another matter.

Willis says foreign buyers in Portugal were operating at a different end of the market compared with those who were struggling to afford a home.

Much of the foreign real estate investment went into development projects, Willis points out, and those buying properties certainly weren’t taking them away from lower-income locals.

“It wasn't a direct competition. It wasn't someone looking for a two up to down somewhere in Portugal,” Willis said.

“The local Portuguese, what they're buying was a different product to what the overseas buyer was interested in.”

Indeed, RE/MAX highlighted that issues in Portugal’s housing market came from low supply at the more affordable end.

“The Portuguese residential market has been affected by a lack of housing supply,” said Manuel Alvarez, Regional Owner at RE/MAX Portugal.

“The final prices of properties have been stabilising, with slight fluctuations, due to decreased market demand stemming from the chronic problem of insufficient construction, particularly for the lower-middle class.”

RE/MAX analysts said a “significant gap” between rental prices and salaries in Portugal had affected affordability and seriously limited the number of local residents who could partake in the housing market.

Data from November showed early attempts to block foreign buyers hadn’t had much of an effect on house prices in Portugal’s major hubs. In Lisbon, for example, house prices rose at 5.8%, outpacing Paris and Zurich.

Golden visa scrappage shifts behavior

Foreign nationals, Americans in particular, have had their behavior influenced by shifting government policy in the last year on both sides of the Atlantic.

Last October, the Portuguese government said it was scrapping its non-habitual resident (NHR) program, which gave those who were tax-resident in Portugal special tax breaks for a period of 10 years.

This prompted a wave of prospective immigrants to speed up their plans to move to the country before the law was changed, several immigration advisors to Portugal told Fortune.

Political developments in the U.S., meanwhile, appear to be having their own impact. More Americans are exploring the prospect of moving to European countries including Portugal in the event that Donald Trump secures a second term in the White House.

Visa companies told Fortune they had seen a spike in inquiries in the build-up to November’s presidential election.

This story was originally featured on Fortune.com