'Brazilians celebrate Euro gains from rental properties in Portugal - Investments - Estadão E-Investidor - Essential financial market news.'

The real estate market in Portugal has experienced an upswing over the past two years, and Brazilians have seen this as an opportunity to invest in rental housing. This growth can be seen in rental prices: according to data released by the Portuguese National Institute of Statistics in March 2023, residential rental prices in Portugal rose by 10.6% corresponding to 6.91 euros (US$7.49) per square meter in the last quarter of 2022 compared to the same period in 2021.

According to real estate expert Rafael Assenso, head of Portuguese real estate agency Porta da Frente, "there is a clear shortage of rental housing on the market, which has led to a significant increase in rents." If this situation did not suit the locals, it''has made investors happy. According to Assenso, rising rental costs due to a lack of supply, as well as distrust in the European financial system, has led Portuguese investors to channel most of their savings into real estate.

Investments by Brazilians

To capitalize on the surge, foreigners, including Brazilians and Americans, have followed and started to make profits in euros. Assenso said his agency sold real estate for 36 nationalities in 2022. "I believe that, judging by the numbers, this momentum will continue in 2023," he says.

According to an expert, this is precisely because of the high income that investors earn by buying real estate and renting it out. Brazilian real estate agency AXPE,''partner of Portuguese agency Porta da Frente for more than eight years, has sold more than 60 properties in Portugal to Brazilians. "We have cases of Brazilians who bought properties under construction about three years ago and are getting yields of 8-9%. For Europe, this is very high, typically rates are at 3-4%," Assenso explained. In addition, as the rental housing market is experiencing a shortage of supply, some tenants are paying rent a year in advance, making the market attractive to foreign investors, especially Brazilians.

This is a success story

This is the story of investor Marcelo M. Simoes, who is also a real estate consultant. Thanks to his knowledge of the international market''real estate, he bet on this segment. He bought an apartment in the Carcavelos neighborhood, where there is demand for rentals from New University students. "I made a down payment of 40 thousand euros and repaid the rest in payments of 469 euros per month. The total investment amounted to 133 thousand euros and this rent brings me 800 euros a month. Before this I bought a studio in Beata, a high tech development zone (the biggest co-working space in Europe). The initial amount of 30 thousand euros was deposited and I pay the balance over 30 years at an interest rate of 3.5% per annum, with payments of 432 euros per month. I have an income of 600 euros per month," he said.

The price increase

The increase in real estate prices is attractive, the expert said.''which corresponds to an increase of 20.2% and 25.3% in units and value, respectively, compared to 2021.

The benefits of the Portuguese real estate market

In addition to high yields and higher prices, investors can expect lower rental taxes. The Portuguese government has changed the taxation of rentals. Until May, the income tax was 28%. From July, the government will reduce the income tax to 20%.

The changes in the real estate market reflect security. In 2008, there was a crisis in the Portuguese real estate market due to the fact that a large part of the population was dependent on loans from banks. People's indebtedness led to a decrease in demand for real estate and consequently a slowdown in the real estate market. Back then, both developers and buyers were in mortgage-related debt. "That is not happening now. Most of the developers are international funds, not banks. There is much more flexibility if''There will be a crisis, real estate developers will not go out of their way to cut prices. That will not happen,'" Assenso explained. On the other hand, buyers are also less reliant on debt as banks have cut back on lending in recent years. According to CEIC's macroeconomic data platform, which analyzed default rates in Portugal from December 1997 to March 2023, indebtedness among the Portuguese has actually been declining in recent years. In August 2015, the data reached a high of 9.3%. And in December 2022, a low of 1.4% was recorded. This decrease in defaults, combined with the recovery of the real estate sector, according to the expert, makes the market "much safer than it was a few years ago".