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Europeanization of the Portuguese residential market

by Mássimo Forte

It is increasingly clear that the Portuguese residential real estate market – or rather, Lisbon, Porto, Algarve and even other district capital cities, such as Évora or Coimbra – is definitely tending towards the classic evolution that other European cities such as London, Paris or Rome, have already experienced for decades. In what way?

Well, if we compare the rise in prices per m2 in Lisbon in relation to these European cities, we can see that they have been getting closer and, at a local level, becoming more accentuated with regard to the gap between city center prices and suburbs.

Real estate market trends in Portugal

The trend observed in Portugal, more specifically in Lisbon and Porto, is largely due to three factors, namely: growing demand, the marked shortage of supply and the natural rise in prices over the last decade.

It is also due to the improvement in the supply of buildings, which was influenced by the new demand profile, with high investment capacity and the need for quality supply, with well thought out projects and guarantee of exclusivity in the area of rehabilitation and new construction.

Portugal today attracts a profile of national and international investor and buyer, with available capital and who recognizes the purchasing potential – with Portugal, for the majority of this profile, being limited to Lisbon, Porto and Algarve.

The way in which the offer is being developed and, consequently, the perception that living in the center of large cities is not now achievable for everyone, brings with it irreversible effects.

One of these effects is the movement of people to the periphery where authentic satellite cities begin to emerge again, with an excellent supply of buildings, rich in infrastructure and services that welcome their new population willingly. This situation is nothing new. We can even think that this phenomenon had already started long before subprime (1990s). However, with the drop in prices in the midst of the crisis, this trend underwent a reversal, as people who were looking for the center to live now had the possibility of purchasing.

Rising house prices in Portugal

With the rise in prices and interest rates, we are now experiencing a critical period, not only for those who want to buy, but also for those who cannot find an alternative in the rental market, which is increasingly scarce and, I would say, increasingly precarious. Just look at situations in the city of Lisbon where 4 or more people live in a T1, normally from Southwest Asia or Brazil, who have no chance of living outside of Lisbon due to the weak transport network, and who, therefore, are subject to paying high amounts of rent, which, divided between everyone, can be achievable.

I'm talking here about rental contracts at very high prices that are often not declared. The yield for the owner/landlord is well above average and, apparently, negotiation and eviction are much more agile.

Observing this scenario, we may be faced with a radical division of the target audience for large Portuguese cities: people from the upper and upper middle class, who can rent or purchase a property, even at high market values and who value the concept of proximity and exclusivity. And people from the middle, lower-middle and lower classes, who are subject to living in the center, but in houses that are undersized for their needs, or, without much of a chance, look for housing outside the major centers – and also the outskirts. closer and once achievable, are no longer a viable option for many due to rising prices and a clear lack of supply.

This creates a new characterization and enlargement of the so-called rings or circles of location in relation to the center.

The current situation and what needs to change in our country

Location, in my opinion, continues and will continue to be a critical success factor in the acquisition or rental of a residential property that will no longer be, or has ceased to be, measured in kilometers, and will tend to be measured in travel time to the city center – something that already happens in large European cities, with one difference: efficiency of the transport network, specifically, the railway network.

Case in point, Portugal seems to have really missed the train.

In addition to the lack of high-speed rail transport solutions that would reduce the distance between city centers and contribute to a more sustainable environment, it seems to me that the existing infrastructure is obsolete and scarce to keep up with this trend and housing need – just look to the long traffic queues to understand what I'm talking about.

Also, the indecision regarding a new airport to better serve Lisbon is a huge obstacle for tourism – a sector that has greatly stimulated real estate investment.

Tourism yes, but it is important to have tourism that wants to stay for more than a weekend and that values authenticity. The tourist profile also dictates the profile of the building’s offering. It is no coincidence that the historic neighborhoods of the city of Lisbon are becoming disfigured and losing their essence, see the case of Alfama.

Currently, Portugal can be considered a poor country, which produces little and considers that its only destiny is to serve tourism, which sees this country as an excellent alternative for living in safety, quality and mild weather.

Having a different vision will be necessary to better manage the accentuation of the natural tendency towards Europeanization of the Portuguese residential market.

We still have time, but the time of those who are also European, but not so much, is definitely starting to run out.

Author: Massimo Forte

Source: Imovirtual


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