Portugal’s economy can be defined as reliable and stable. Therefore, Portugal’s real estate market has never gone through huge fluctuations. Unlike its neighbour Spain, buying property in Portugal was never a roller coaster experience. So, until very recently, Portugal’s real estate market was about the lifestyle rather than profit in general. However, it began to change in the last few years with the improving popularity of Portugal Golden Visa.
Brief Recent History of Portugal’s Real Estate Market
Property prices across Europe rose till 2007 and hit their peak there. After 2007, prices fell in coastal resorts as they did in most of Europe. Some hotspots were overheated during the peak and they tended to suffer drops up to 50 per cent. However, other areas that are not very popular in international media got hit less hard.
In 2013 and 2014, real estate market hit its lowest point and then the stabilisation began causing price rises. According to the quarterly RICS/Ci Portuguese Housing Market Survey, low quantity of properties coming onto the market underpins prices. In 2017 they projected that house prices will increase by 5% (on average) per annum. Increasing demand and mortgage availability also contribute to that end.
One Reason for the Success of Portugal’s Real Estate Market is the Growing Tech Industry
Portugal’s property market seems very much alive and it keeps growing. One of the biggest reasons that underpin this growth is the country’s emerging technology industry. Lisbon as the capital of Portugal is the main promoter city of the industry in the country. Lisbon’s technology start-up scene is helping country’s economy greatly, and as a result, Portugal’s property market is benefiting from the growth, too.
According to Made of Lisboa which is an entrepreneur community in Lisbon, the city now has more than 50 co-working spaces. Rundown buildings around the town keep getting transformed by new start-up projects and the number of technology related businesses keeps growing daily.
Portugal Golden Visa is another Important Contributor
Portugal government launched its residency by investment program in 2012, and ever since, it has been very successful. The program offers tax incentives and residency in exchange for a substantial amount of investment in diverse areas and options. One of the most popular options the program allows the investors to choose is the real estate investment option. According to Knight Frank’s report, the Portuguese government reported that as of March, they issued around 7,300 residence permits through Portugal’s Golden Visa Program since the program’s inception in 2012.
While some golden visa recipients have chosen to start businesses or transfer capital, the sweeping majority gained residency by purchasing real estate for €500,000 or more, according to Knight Frank, citing official immigration stats.
Real Estate Investment Surpassed Expectations in 2018
2018 was a year that broke records of Portugal’s real estate sector. Investment in income properties in Portugal reached to 3.5 billion euros which means an increase of 54% compared to 2017. This rate is beyond the most optimistic expectations. Also, this rate was not evident through the Continent. The fact that Portugal outperformed all the other European countries shows the country’s real estate market’s strong fundamentals.
Moreover, Portuguese banks implemented the first major real estate owned portfolios (REOs) in the market which equalled roughly to 1.3 billion euros. Additionally, there is the investment volume in assets for renovation and development land which represents around 1 billion euros. Thus, investment in non-residential real estate in Portugal in 2018 reached to a record value.
High Liquidity is Predicted to Carry on to 2019
It is foreseen that high liquidity on a global level will remain in 2019. Also, the investment volume will again be high even though it might decrease when compared to 2018. It is estimated that investment in income properties will hover around 2 and 2.5 billion euros. This value is approximately double the yearly average of the last 15 years which is 1.1 billion euros. If the predictions are accurate, this occurrence will be the fifth in the last five years which strongly represents the structural evolution of the real estate market.
Risk Acceptance in the Real Estate Sector is High
Compared to 2018, almost every sector is predicted to record decrease in terms of investments except for hotels. The hotel market of Portugal puts on a great performance, but also the investors are much more willing to share the business risk when compared to the past.
Greater risk acceptance in the Portugal real estate market lured investors to alternative target sectors like student housing, senior residences, rental housing, as well as healthcare, education and leisure facilities. In Portugal, the student housing sector is currently generating the greatest interest and is expected to attract more investment in 2019, namely in new build developments.
Supply is also expected to increase in 2019 as a result of the investment transactions made in the last few years involving different parts and portions of lands. In 2018, a record value was attained in land sales including some transactions with significant potential construction area, namely in the Lisbon, Oeiras and Porto municipalities. Also across the country, sales of various plots included in NPL (non-performing loans) and REO portfolios was observed to hit all-time great marks. It is foreseen that in 2019, the volume of land transactions for residential development will be greater.