Portuguese real estate: in good condition?

Portugal continues to be one of the best destinations for real estate investment. The real estate market in the premium segment is poised for another very positive year. The optimism contrasts with the uncertainty that persists in an unpredictable world and the impact of the current global economic situation on real estate demand and decision-making. However, the domestic real estate market has already demonstrated its resilience. It demonstrated this during the pandemic and continues to do so in the global recession. While price adjustments are already taking place in some European countries, as in Finland or Sweden, such an adjustment is not expected in the Portuguese market, at least in the high-end segment, which is very much oriented towards foreign buyers. Even in the historic center of Lisbon, where some price stabilization has been seen, the latest data shows a half-year investment growth of 28% in the first half of 2022.

The lack of supply in this segment for the relocation market in the face of increased demand from customers with very high quality requirements means that well-located properties in Portugal, especially in Lisbon, will continue to increase in value. The increase in demand for relocation was in fact one of the main trends we saw during 2022, increasing the average investment, which amounted to around €1 million. In 2021, more than 100,000 foreigners moved to Portugal and in 2022, the number of foreign nationals living in the country continued to grow, reaching a total of 771,000, so this is a continuation of this trend. We believe this relocation demand will continue to be the primary motivation for international purchases in 2023. The quality of life that Portugal offers will continue to be the main driver of the national real estate market, attracting more and more families and citizens who choose the country, and especially the Lisbon region, to start a new life.

Despite the scarcity of production with increasing demand, it is still possible to find excellent opportunities in a market that has several projects in the final stages of completion, with more competitive prices in a scenario where rising construction costs could lead to higher prices for new projects. In the Airbnb alternative or not? Buoyed by returning short-term tourism, with €22 billion in revenue for 2022, up from €18.4 billion in 2019, and a growing number of Portuguese and international residents looking for properties outside the country's major cities, real estate development is starting to pick up momentum and expand the quality on offer outside the capital.

Comporta, a previously unnoticed destination and now popular, has become one of the most exclusive beach destinations within an hour's drive of Lisbon.

This lifestyle, with its emphasis on the beach and surf, will continue to attract international buyers from North America and Brazil. U.S. buyers are also taking advantage of the current dollar-euro parity, giving them record buying power in the Portuguese market. However, that situation is already changing and they are expected to take advantage of that while it lasts. We also foresee an increase in Brazilian buyers due to the instability in their country. In addition, the political decisions of the current government will cause uncertainty and instability for businessmen, and there are already signs that they want to invest in Portugal in the commercial sector, also directing their demand to this type of real estate. The commercial sector will actually be another big real estate star in 2023, and we advise funds and private investors to expand their portfolios, including in the retail, logistics and hotel segments.

The expectation is that 2023 will be a year with a lot of transaction volume as there will be a lot of products in the market, mainly assets that will change hands due to the fact that there are funds and private investors who have very high levels of debt and have to put their real estate on the market. In addition, upward yields are expected to correct. This is because with more products, they will be sold at a better price and therefore a higher yield. Thus, real estate will continue to be the best asset to invest in a market that is again proving its resilience to any difficulties.