Lisbon real estate – Steady, as she grows
By Leonor Sá-Carneiro, in Invest 20-08-2021 10:15:00 0 Comments
Buy-to-let investors in Lisbon are on the rise and benefit from short-term and long-term tenant needs. Rent prices used to be set according to old laws and were notoriously low, with local families living in palatial houses and paying next to no rents.
Typically, buy-to-let investors have stuck in the larger capital cities of London, Paris, or even Madrid. With the advent of Airbnb, the arrival of thousands of resettled foreigners and developers investing in refurbishing the once-derelict buildings, not to mention the millions of tourists discovering Portugal’s capital, that reality has changed. In addition, government tax and residency levies contributed to an already attractive offer through investment incentives.
According to Rodolfo Reis from the local business newspaper Jornal Económico, sales prices for new buildings were increased by 7%. Last week, the Financial Times reported on rising property prices in many major economies, with rental prices in Lisbon increasing 2% in 2020 compared to 2019, along with Berlin and Munich, a percentage point higher than Paris and Athens. The FT reported today on the value of the industry across Europe: “The market capitalization of the listed European residential real estate sector has increased from 3.5 billion euros in 2006 to almost 85 billion euros at the end of July this year, according to European Public Real.” Lisbon, is at the center of this growth.
In Lisbon, a relatively small capital city with the most charming or historic neighborhoods in a limited space, demand continues to withdraw from supply in the prime residential real estate market, with existing properties selling well in 2020 and purchases increasing as planned. The demand for houses versus apartments increased 51% in 2021 compared to the first half of 2020.
According to the Portuguese market research firm Confidencial Imobiliário, residential projects in the pipeline increased 20% in the first six months of 2021 compared to the same period in 2020, with this week’s report showing a 25% increase in the development of houses as pre-pandemic levels in 2019, suggesting that demand for space for Covid-19 is a priority.
Developers warn market participants of rapidly rising raw material prices ranging from wood to steel and expect final prices to rise as a result. Builders therefore set their budgets to an expiration date of less than a month before new prices have to be estimated. In June Diário Imobiliário reported that construction costs for new buildings had increased by 6.5%. This underscores the need to consider developers with good track records as well as a strong track record when buying from the plan.
In addition to the consumer-oriented demand for increased sustainability in every building, pandemic or climate-conscious investors are increasingly demanding environmentally friendly practices that are finding their way into all levels of the real estate sector. Portugal is no exception. Lisbon was voted Europe’s Green Capital in 2020, and developers are responding to the call to use more sustainable materials and more energy-efficient systems.
Most Lisbon Real Estate Companies, Quintela & Penalva | Knight Frank and Remax Collection report in the Portuguese press that local investors continue to have the largest volume. However, with the expiry of the Golden Visa applications for residential purposes in January 2022 in the main cities of Lisbon and Porto, as well as along the coast, the number of nationalities applying for a permit to buy their home has increased sharply. For many real estate companies, the Brazilians and the French are still in second and third place in terms of total volume, followed by the British and Chinese.
According to JLL, the market continues to be very attractive. The YoY analysis of the investment volume in the second quarter shows an increase of more than 200% from 2020 to 2021. The latest market analysis by Cushman & Wakefield showed that institutional investments in the second quarter with 354 million increase by 66% over the previous year and thus a volume from H1 to € 556 million.
The Portuguese economy contracted 7.6% in 2020 due to the global pandemic. Portugal’s Economy Minister Pedro Siza Vieira told Reuters in May that he expects growth to exceed OECD forecast of 4% in 2021 in favor of Portugal, suggesting a period of steady and steady growth is ahead.
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The Market Pulse study for the second quarter of 2021 by the real estate company JLL Portugal shows that the price in € / m² in the best locations in Lisbon looks like this:
Chiado / Principe Real 8,500
Avenida da Liberdade 10,500
Historic zone 7,000
Lapa / Estrela 6,500
River bank 6,000
Campo d’Ourique / Amoreiras 6,500
New avenues 6,500
Estoril 8,000
Cascais 10,000