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Portuguese property market in 2019: understand the valuation in the country

16 de April, 2019

Portuguese property market in 2019: understand the valuation in the country

Reading: 5 min

First it was the adventurers in cheap hostels, then the more attentive ones reformed their apartments to earn extra money with tourists. It didn’t take long for the vast majority of properties in tourist centers to be destined for hotel accommodation. Those who visited liked what they saw and, amazed by the low prices, they came home to spread the good news to friends and family. Some liked it so much that they decided to set foot in Portugal permanently. And so the Portuguese real estate market has been reborn and remains vigorous.

Property valuation in the Portuguese real estate market

A brand new property in Lisbon has shown an average appreciation of 40% since 2016, bordering the 3,800€/m2; while Porto showed an appreciation of 28% and an average price close to 1,900€/m2.

The studios and 1-bedroom apartments had the highest appreciation (24%), for the simple reason of serving tourists, while those of two bedrooms reached 20%, those of three bedrooms 15% and those of four bedrooms 18%.

Lisbon, Porto or Algarve? Know where to buy properties in Portugal.

Is it a real estate bubble?

No, it’s not a real estate bubble. The properties in Portugal only appreciate because they are generating more money. Previously the rental market was a joke, generating less than a hundred euros per month, the result of a law that did not allow readjustments.

The law was rewritten and the country changed drastically, becoming a consolidated tourist destination and a very cheap option for expatriates. With properties in tourist areas producing at least three times as much money, they could only appreciate it.

Is it true that the Portuguese are leaving the city centre?

It’s true that the Portuguese can’t buy in the centres. A couple earns an average of 2.600€ per month. With this income you can only pay for a property of up to 260,000€, enough to buy a good new apartment from a dormitory in the most noble regions of Lisbon. As families do not like to live in small apartments, they are naturally moving to cheaper locations.

That situation won’t change anytime soon. The price is raised by the tourist who has no problem paying 100€ in a daily rate and the rich expatriate who still thinks the properties are very cheap compared to any other region of Western Europe.

In relation to the danger of an overflow from excess credit, as happened in 2008-2010, the banks are much more judicious and a high proportion of acquisitions are made in cash, with no indication of excess debt.

Step by step guide to buying a property in Portugal: know all the details.

Portuguese real estate market

What are the largest Portuguese real estate markets?

There is no doubt that Lisbon stands out as the largest and most important market. It is the political capital, with 28% of the population, and economic, accounting for a third of the GDP, as a junction of Brasília and São Paulo, being alone responsible for 30% of the country’s real estate transactions in the first quarter of 2019.

To get an idea of the relevance, the entire Northern market, which includes the metropolitan region of Porto, Braga, Bragança, Vila Real and many other cities, accounts for another 30% of the market. The entire centre of the country, which includes Coimbra, Leiria, Viseu and Aveiro, accounts for another 19%.

The impact of foreigners

Tourism was largely responsible for the recovery of the Portuguese real estate market. There are more than 24 million guests annually, an astonishing growth of more than 100% in just over a decade. Foreigners account for 60% of the demand, with a strong emphasis on Europeans from the United Kingdom (21%), Germany (14%), Spain (10%), France (10%) and the Netherlands (6%). Brazil accounts for 5% of the movement.

Each tourist spends an average of 151€ daily between lodging, food, leisure and shopping, with an average daily rate of one room of 75€ and occupation of 70%. The revenue per room is 46.20 euros, a growth of 65% over the 28 euros in 2006.

In addition, between 2012 and 2017, foreigners bought more than 70,000 properties, for a total of 11.1 billion euros, representing about 11.5% of the total traded. The main nationalities are the United Kingdom (18%), France (18%) and China (13%).

Properties of more than 500.000€ are preferred, with almost 44% of purchases. The Algarve accounts for 43% of the acquisitions, followed by Lisbon and Alentejo (37%) and Norte/Centro (17%).

The total foreign population of Portugal is 416 thousand people, an expressive growth compared to 332 thousand in 2006. The majority are European (44%), Brazilian (20%) and African (20%).

Residential rental

The long-term rental property market – more than 1 year – could not be warmer. The offer is quickly absorbed and there are queues of interested parties. Rent per square metre rose constantly, reaching €4.80 per square metre in the first half of 2018, a 9% increase over the previous year.

In the big cities the demand is even stronger, having the rent per square meter reached 11.16€/m2 with a growth of 16% in Lisbon and 7.85€/m2 with 15% appreciation in Porto.

Student Rentals

There were 373,000 university students in 2018, 11,000 more than in the previous year. Since 2010, the number of mobility students – who are away from home – has doubled, with 45,000 foreign students enrolled in Portuguese universities and polytechnics. These students, who represent 11.9% of all students enrolled, come from Brazil (39%), Angola (11%), Cape Verde (9%) and France.

The average price paid in 2018 by students for a room in a shared home in Lisbon was 377€, 8.6% higher than the previous year. In Porto, the average value was 287€, 33€ more than the previous year. Coimbra is the cheapest for students, with an average value of 200€ in 2018, a figure that remained stable compared to the previous year.

What lies ahead

The fundamental conditions that made the Portuguese real estate market fly are still present. As long as the European economy is doing well, with unemployment and low interest rates, there will be money left over for holidays or weekends in Portugal, keeping the excellent flow of money in the pockets of the owners.

And as long as the cost of Portugal is lower than the rest of Europe and the quality of life is above average, it will continue to attract expatriates from other European countries to buy a house and live here.

Are you interested in buying or financing property in Portugal? We suggest that you do the whole process accompanied by a lawyer and an experienced real estate consultant. If you want to count on the advice of an Atlantic Bridge consultant, a reliable company of Euro Tips, click here to make a budget, without commitment.

Article published on the Euro Tips website: https://www.eurodicas.com.br/mercado-imobiliario-portugues/

Author: Marcio Fenelon
Real Estate Investment

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