Fueled by frenzied foreign demand and an alluring residency-for-investment program, the Portuguese property market has flourished in recent years. And with analysts predicting that housing prices in the country will continue to rise, many investors are scrambling for a cut of this burgeoning market.
Growing demand for residential property
Between 2009 and 2012, Portuguese residential property sales volumes slumped by some 30%. But in 2014, the trend reversed course, with a 5% uptick in sales volumes.
Since 2012, non-European investors have also been entering the Portuguese property market in increasingly large numbers due to the introduction of the Golden Residence Permit,which enables property investors to obtain residence permits.
Typically, residence permits are available to foreign investors who purchase properties starting at EUR 500,000. In scarcely populated regions, that threshold can be as low as EUR 350,000.
Residency permits are also available to foreigners who invest a minimum of EUR 1 million in Portuguese securities or of EUR 250,000 into preserving the country’s national heritage. However, property investors have accounted for some 90% of residency permit recipients since the introduction of the program.
Of those who have obtained golden residency permits, some 80% are Chinese nationals, while Brazilians have accounted for 5% and Russians for 3%.
Between October 2012 and June 2016, foreign property buyers obtained over 3,400 residency permits. The total cost of the residential property acquired by these investors amounted to about €1.9 billion. The average amount each buyer invested under the program amounted to about €580,000.
Property prices on the up and up
Portugal’s property market fared relatively well during the global financial crisis, particularly compared to the Greek and Spanish markets, where residential property prices fell 40% in the years following the crisis.
Residential properties in Portugal fell 17% – from a peak average of EUR 1,178 per sq. m. in May 2010 to a low of EUR 981 per sq. m. during its March 2013 nadir. Price drops were more pronounced in Lisbon and Algarve than in Portugal as a whole, falling an average of 21% during the same period.
However, prices are again on the rise. Across the country, residential property prices have increased by 8.5% since March 2013, and are still 9.5% lower than in May 2010. These figures indicate that the market is about halfway through the cycle, and property values still have strong growth potential.
At present, Portugal’s most popular areas among overseas buyers include the neighborhoods of Chiado, Baixa Chiado, Lapa and the environs of Avenida da Liberdade in Lisbon, as well as the nearby resorts of Cascais, Monte Estoril and Estoril.
Apartments in Lisbon typically cost about €1,291 per sq. m., while prime properties average about €5,000 per sq. m., according to Savills.
In Lagos, according to real estate firms Knight Frank and Imovirtual, flats cost €1,950 per sq. m. on average, while homes average €2,497 per sq. m., and prime properties tend to range between €2,500 and €5,000 per sq. m.
In Tavira, flats average €1,502 per sq. m., homes average €1,901 per sq. m., and prime property tends to range between €3,000 and 4,500 per sq. m.
Newly-built properties are usually several times more expensive than existing fixer-uppers, Yakimenko said: “Residential properties in need of renovations and repairs in Lisbon and Cascais tend to run from EUR 1,000 to EUR 4,000 per sq. m., depending on the location. Newly built properties in central Lisbon tend to cost anywhere from EUR 5,000 to EUR 10,000 per sq. m.”
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