Real-Estate Market: Why do so many foreigners invest in Portugal?

Purchasing a home in Portugal can grant the
status of resident in the European Union


GPW Invest – July 23, 2019

The third most peaceful country in the world, Portugal is also one of the best countries to live in.
A country whose quality of life equals its level of safety obviously had to reflect in the worldwide search of Portugal as a privileged destination and, therefore, in the real estate market.

The demand is felt both by people who choose the country to live in, and by companies that want to run their business in Portugal. One just has to look at the numbers of the residential market to understand the appreciation potential of Portuguese real estate: the price of houses for sales rose 12.8% in 2017, compared to the previous year, the largest increase in 25 years, and was the fourth country in the European Union with the highest rise in house prices.

In the Mercer’s consulting firm global study on the Cost of Living 2018, the great demand from tourists and investors took Lisbon to register the highest increase since these data began being gathered. This year, the Portuguese capital rose 44 places, moving from 137th to 93rd position, in a total of 209 cities on five continents.

This rise is due to a number of factors, such as the value of the Euro against the US Dollar and a general rise in residential prices. For reference values, the difference between the price of a 3-bedroom property in the city that ranks 1st place, Hong Kong, and Lisbon is 8150 Euros per square meter, with the price of the property costing 10,800 Euros and 2,650 Euros, respectively.

It may seem like a lot, but residential prices in the main city of the country have suffered the highest increase since July, 1992. From July 2016 to May 2018, prices registered 18 months of uninterrupted growth, with monthly increases of 2.4% and 1.6%.

How much does it cost to buy all over the country?

The data of the National Institute of Statistics (INE) are clear: it is not only Lisbon that is rising. The average price per square meter of the country in the fourth quarter of 2017 registered a rise of 7.6% over the price of the same period in 2016, that is, the average price per square meter is 932 Euros. While analysing this price, we realize:

But, where is it more expensive to buy? In Portugal there are 39 municipalities that are above the national average. Of these 39, three councils rank the top of the table as the most expensive:

And the lowest price? In the country there are 299 municipalities with prices lower than 1000 Euros per square meter, the three lowest ones being:

According to the National Statistics Institute, houses in Lisbon are being sold up to 35% above the banking assessment, with prices shooting up 12.2% in the first quarter of this year, in comparison to the previous one.

Why the rise?

The widespread rise in home prices is justified by the strong demand from foreign investors, and also by a greater demand for student accommodation or tourist rental.

Why invest?

The Portuguese market has the added value of presenting very attractive prices in the international context. The rise in the house prices shows a prosperous and confident market, in line with the strong economic growth of the country.

As far as competitiveness is concerned, Portugal stands up to its European standards, and is one of the 10 countries with better residential rental yields (5.64%) and strong capital growth. The country also has attractive transaction costs for the purchase and resale of a property and a reduced risk of devaluation of real estate assets in the medium and long term.

Where to invest?

The Algarve region continues to be one of the most attractive areas in the country for real estate investment. There is a varied offer which is combined with the strong appeal of the beaches and the fact that it is one of the best regions in the world for golf.

The archipelago of the Azores, made up of nine of the most beautiful islands in the world, is also a favourite for investors. Its proximity to the American continent is well present in this archipelago, which has always served as a bridge between Portugal and the United States. The breathtaking landscapes, coupled with the peace of their villages make this region much sought after by tourists and investors.

Lisbon, the vibrant Portuguese capital, is a non-stop attraction for tourists, who fall in love with the atmosphere of the city and do not think twice about their destination when they want to purchase a house abroad.

But, in general, investors are drawn to the potential of the country’s real estate sector, especially as it has virtually no restrictions on foreign property acquisitions. In addition, purchasing a home in Portugal can grant the status of resident in the country and, as such, in the European Union. We are talking about Golden Visas; one just has to purchase a property worth 500,000 Euros, or more, or purchase a property with more than 30 years, and rehabilitate it, for an amount equal to or greater than 350 thousand Euros.
But if the intention is not purchasing a property to live in, one can enjoy the high prices of the lease market, which rose 20% in the first quarter of this year, the highest increase in seven years. In Lisbon, rent prices have doubled since 2016, with no indication that this acceleration is coming to an end.

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