Portugal to continue to be one of the best destinations for property investment.

The real estate market in the prime segment is preparing for another very positive year. The optimism contrasts with the uncertainty that persists within an unpredictable world and the impact that the current global economic situation may have on property demand and decision-making. However, the domestic property market has already proven its resilience. It proved it during the pandemic and continues to demonstrate it in the face of a global recession.

Whilst there are already European countries that are seeing price corrections, as is the case in Finland or Sweden, this correction is not expected to take place in the Portuguese market, at least in the high-end segment, which is very much geared towards foreign buyers. Even in Lisbon’s historic centre, a market which has seen some exposure to price tempering, the latest data shows a 28% half-yearly increase in investment for the first half of 2022.

The scarcity of supply in this segment for the relocation market in the face of increased demand from clients with very demanding requirements in terms of quality means that well-located properties in Portugal, especially Lisbon, will continue to appreciate in value.

Relocation, relocation, relocation

The growth in demand for relocation purposes was, in fact, one of the major trends we saw throughout 2022, increasing the average investment ticket, which was set at around 1 million euros. In 2021 more than 100,000 foreigners relocated to Portugal and in 2022 the number of overseas citizens living in the country kept rising, registering a total of 771,000, so this is a continuance of this trend.

We believe that this type of relocation demand will continue to lead international purchase motivations in 2023. The quality of life that Portugal offers will continue to be a main driver of the national real estate market. attracting more and more families and citizens who choose the country, and especially the Lisbon region, to start a new life.

Despite the scarcity of products in the face of an ever-growing demand, it is possible to find excellent opportunities in a market that has several projects nearing completion, with more competitive prices in a scenario where the rise in construction costs can inflate prices in new launches.

To Airbnb, or not to Airbnb?

Buoyed by returning short-term tourism, where 2022 saw €22 billion in revenue compared to 2019’s €18.4 billion, and a growing populace of Portuguese and international residents looking for properties outside the country’s big city’s, property development is starting to gain ground and expand the quality offered outside the capital.

Comporta, once an ‘off the beaten path’ destination and now firmly on it, has become one of the most exclusive beach destinations within an hour’s radius from Lisbon. The resale market here is still extremely limited and whenever a new residential project is launched it sells fast off the back of much hype and buzz throughout the last few years.

Closer to the capital and complementing this market, there is the south bank of Lisbon, or to the north, the area of Ericeira, which in addition to being a surfing and nature destination, is finally seeing its own luxury segment arrive. Premium hotels and fine restaurants are upgrading this barefoot destination and are beginning to arouse the interest of both domestic and foreign property investors. Regardless of price, these coastal destinations on the outskirts of the capital offer the much sought-after quality of life combination: beach, nature, authenticity and good food.

This beach and surf-centric lifestyle will continue to attract international buyers from North America and Brazil. US buyers have also been taking advantage of the current dollar-euro parity which gives them record purchasing power in the Portuguese market. However, this situation is already changing and it is expected that they will make the most of it while it lasts.

We also foresee an increase in Brazilian buyers, due to the insecurity in their country. In addition, the political decisions of the current government will generate uncertainty and instability in businessmen, and there are already signs that they want to invest in Portugal in the commercial sector, also directing their demand towards this type of property.

The commercial sector will be, in fact, another big real estate star in 2023 and we have been advising funds and private investors to expand their portfolios, namely in the retail, logistics and hotel segments.

It is expected that 2023 will be a year with a large volume of transactions, as there will be a lot of products in the market, mainly assets that will change hands due to the fact that there are funds and private investors that are very leveraged and that, having a high debt index, will place their properties in the market.

In addition, it is also expected that there will be a correction of the upward yields. This is because, with more products, they will be transacted at a better price and, therefore, with a better return.

Therefore, real estate will continue to be the best asset to invest in, in a market that shows, once again, that it is proof against any adversity.

by David Moura-George - Managing Director of Athena Advisers Portugal