Fueled by frenzied foreign demand and an alluring
Growing demand for residential property
Between 2009 and 2012, Portuguese residential property sales volumes slumped by some 30%. But in 2014, the trend reversed course, with a 5% uptick in sales volumes.
"In Lisbon, construction and reconstruction projects have proliferated. The whole city centre has practically been renovated,” said Nadezhda Yakimenko, Managing Partner of the Cascais Real Estate Agency.
“Buyers are scooping up Lisbon apartments in new developments before construction is finished. Among the most popular properties are investment projects, which generate guaranteed tourist rental income, with typical yields of 4% per annum,” Yakimenko said.
She added that foreigners currently account for some 90% of all property buyers in Lisbon.
British, American, Swedish and French citizens are particularly active on the Portuguese property market, according to the results of a survey conducted by British property website Rightmove. We at Tranio.com have also seen a surge in interest from Chinese buyers.
The majority (73%) of buyers in the country are over the age of 55, the Rightmove survey revealed.
Buyer nationality breakdowns vary slightly between Portugal’s most popular areas: the Lisbon Riviera and Algarve.
Brazilian, French, British and Swedish buyers tend to flock to the Lisbon Riviera, according to The New York Times. In Algarve, Brits have traditionally dominated among foreign purchasers. However, in recent years Irish, German, Dutch, Swedish and French buyers have begun snapping up properties in the popular coastal region with increasing vigor.
Irina Kipnis, a property consultant at Tranio.com partner agency KW Portugal, noted that she has observed a subtle decline in British buyers’ enthusiasm for Portuguese property since the Brexit referendum.
“UK citizens have tempered their appetites for Portuguese property to some extent since in recent months. They are still interested in Portugal, but sales volumes related to British buyers have shrunk due to Brexit and the fluctuating
Typically, residence permits are available to foreign investors who purchase properties starting at EUR 500,000. In scarcely populated regions, that threshold can be as low as EUR 350,000.
Residency permits are also available to foreigners who invest a minimum of EUR 1 million in Portuguese securities or of EUR 250,000 into preserving the country’s national heritage. However, property investors have accounted for some 90% of residency permit recipients since the introduction of the programme.
Of those who have obtained golden residency permits, some 80% are Chinese nationals, while Brazilians have accounted for 5% and Russians for 3%.
Between October 2012 and June 2016, foreign property buyers obtained over 3,400 residency permits. The total cost of the residential property acquired by these investors amounted to about €1.9 billion. The average amount each buyer invested under the programme amounted to about €580,000.
Another policy that has spurred an influx of foreign buyers is Portugal’s
“The wonderful climate, undisturbed political atmosphere, low prices, friendly people and the tax regime — all this taken together lures global investors to Portugal,” Kipnis said.
What to invest in
As far as residential properties go, flats are a clear favorite among foreign investors in Portugal. Some
“The most highly sought after properties include
“Views of or proximity to the sea are very important to buyers,” Yakimenko added, noting that high demand for such properties likely stems from the fact that Portugal’s unique topography makes
In Algarve, demand far exceeds supply, often causing
According to Kipnis, one- and
When advising her own clients, Kipnis tends to recommend that they invest in tourist properties, which boast relatively high average yield rates of
“The Portuguese economy is based on tourism, winemaking, agriculture and the sales of leather goods and marblework. It doesn’t have factories or large industrial complexes or many shopping centres due to its small population size and low turnover rates. All of this contributes to relatively low yields in Portugal as compared with other European countries and the United States,” Kipnis said.
“Tourism property is among the most interesting and popular real estate on the Portuguese market,” she added. Studio apartments in resort complexes are a popular choice, with average yield rates of 5% per annum before taxes and expenses, she said, adding: “Contracts for these apartments are typically signed for five years and can be extended. The owner usually has the right to use the apartment for any four weeks between November and February free of charge. Buyers usually aren’t responsible for condominium fees or utility bills in such complexes.”
Property prices on the up and up
Portugal’s property market fared relatively well during the global financial crisis, particularly compared to the Greek and Spanish markets, where residential property prices fell 40% in the years following the crisis.
Residential properties in Portugal fell 17% — from a peak average of EUR 1,178 per sq. m. in May 2010 to a low of EUR 981 per sq. m. during its March 2013 nadir. Price drops were more pronounced in Lisbon and Algarve than in Portugal as a whole, falling an average of 21% during the same period.
However, prices are again on the rise. Across the country, residential property prices have increased by 8.5% since March 2013, and are still 9.5% lower than in May 2010. These figures indicate that the market is about halfway through the cycle, and property values still have strong growth potential.
At present, Portugal’s most popular areas among overseas buyers include the neighborhoods of Chiado, Baixa Chiado, Lapa and the environs of Avenida da Liberdade in Lisbon, as well as the nearby resorts of Cascais, Monte Estoril and Estoril.
Apartments in Lisbon typically cost about €1,291 per sq. m., while prime properties average about €5,000 per sq. m., according to Savills.
In Algarve, the resorts of Albufeira, Vilamoura, Carvoeiro, Lagos, Olhão, Praia da Luz and Tavira are particularly popular among investors, according to the Rightmove survey.
Residential property prices in Algarve vary significantly by location.
In Lagos, according to real estate firms Knight Frank and Imovirtual, flats cost €1,950 per sq. m. on average, while homes average €2,497 per sq. m., and prime properties tend to range between €2,500 and €5,000 per sq. m.
In Tavira, flats average €1,502 per sq. m., homes average €1,901 per sq. m., and prime property tends to range between €3,000 and 4,500 per sq. m.
Quinta do Lago is reputedly one of the most expensive resorts in Algarve. According to Knight Frank, prime property prices in the area range between €8,000 and €10,000 per sq. m.
What to expect from the market going forward
Analysts are optimistic about the Portuguese property marked due to its proven record of resilience and its relatively low property prices.
Specifically, Portugal did not suffer through a housing bubble prior to the 2008 crisis, and its housing prices stayed afloat during the recession. Meanwhile, its current market boasts prices that are particularly attractive when compared to other European markets.
Prices and price dynamics in European cities Sources: Deloitte, Idealista, Numbeo, Prime Yield, Bank of Greece, National Bank of Poland, National Statistical Institute of Portugal, Czech Statistical Office, Hungarian Central Statistical Office, Central Statistics Office of Ireland
|Average price, EUR
per sq. m. (2016)
|Price difference as
compared to 2006, %
Financial database Trading Economics predicted that the prices of residential property for sale in Portugal will continue to grow steadily in the coming years, with property prices expected to increase by 4.5% by 2020. The national economy is expected to continue to grow at a level of at least 1% per annum, further shoring up housing prices.
All things considered, the Portuguese property market is ripe with excellent opportunities for investors.
Yulia Kozhevnikova, Tranio.com
Originally published on www.algarvedailynews.com