The real estate context in 2021 and forecast for 2022
Portugal has achieved something that seemed impossible to get out of the economic crisis in less than ten years and become a key destination for real estate investment. Today, it is one of the most attractive countries in the world and attracts more and more international buyers every year.
This international trend continues, and Portuguese buyers are also returning to the market. Portugal has quickly become the preferred destination for real estate investors.
In 2020, more than half of all real estate transactions in Portugal were purchased by foreigners.
The British and French are still very active in the Portuguese real estate market, but Brazilians have become the main investors.
Many other nationalities are also attracted by Portugal’s assets, namely a quality of life, a still authentic setting, a gentle way of life, a very attractive cost of living, and increasingly cosmopolitan cities. It is these strengths, driven by the strength of the real estate market, that have made Portugal the ideal place in Europe and the world to live or invest.
Real estate prices in Portugal, although constantly rising, and reaching levels never seen before in the country (10 500 euros/m2 in some high-end areas of Lisbon, for new luxury goods), remain at an acceptable price level for international buyers, compared to other European capitals or large cities.
With the COVID-19 crisis this trend is slowing down. In fact, due to the measures imposed by international governments to fight this pandemic together, the real estate market has been facing less demand, which is somewhat logical given that people are unable to move around or travel to buy property.
The trend, in our view, will first be a stagnation in the evolution of prices in the middle and low end residential property market, and within a few months a slight price decrease in 2021. For luxury properties the trend will be less striking.
Although the COVID-19 pandemic is causing an economic crisis at world level, Portugal is managing the crisis in our view far above the other European countries, so its international image has given us cause to speak. This management could have a positive impact and absorb to some extent the economic crisis that we will have to face.
For all these reasons, 2021 should be one of stagnation and then slowly increase until at least the end of the year in mid-range real estate.
We will keep an eye on evolution as no one can guess exactly how real estate will evolve within this historical period and never before experienced.
All these assets contribute to a high quality of life when considering Portugal as a permanent or holiday home location.
At a time of crisis in Portugal, is an investment really appropriate?
For example, the financial commitment required is a lot less important than for a property investment in France. In addition, a deep-rooted trend has emerged in the present economic conditions: a rise in the demand on the rental market. Because of the difficulties in financing their purchases, the Portuguese rely more and more on rented accommodations, which ensures a good rental level, both in terms of prices and the selection of candidates.
Finally, the Law on the eviction of bad paying tenants has just been updated and is now very favourable to owners, which makes rental investment safe and profitable.
Returns are good compared to some cities such as Paris or London where high square metre prices are capping the average rental returns to approximately 3%.
Lisbon can offer average returns between 5% to 10% for rental apartments for individuals.
In commercial real estate, it is not uncommon to see the return rate climb up to 12%.
Portugal therefore has strong long-term assets and you will find excellent opportunities on the market today.
The increase in house prices in Portugal in recent years has been very moderate.
Thus, between 1998 and 2011, house prices in Portugal grew very moderately, unlike other euro area economies.
As early as 2008, Spain and Ireland, frequently compared to Portugal, recorded sharp price falls in the housing market. In contrast, in Portugal, house prices remained relatively stable.
All the data analysed show that Portugal has not experienced a speculative bubble in the real estate market and value the absence of overvaluation of housing.
The real estate market is therefore quite secure: the absence of overvaluation of housing reduces any future price corrections.
The real estate sector in Portugal therefore represents a solid investment.
The current circumstances of the Portuguese economy are favourable to the development of the rental market, the rental law has been reformed making the rental market more dynamic. It has made it possible to simplify and speed up eviction procedures, among other things.
The Portuguese real estate market is characterised by a good quality of supply and relative price stability. It represents a solid investment option, particularly in the residential tourism sector.
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