Lisbon is a top 10 target for real estate investments in 2020

At Vero Eos Et Accusamus Et Iusto Odio Dignissimos Ducimus Qui Blanditiis Praesentium Volumnptatum Deleniti.

Published on 28 November, 2019 • Last updated on 28 November, 2019

By Portugal Homes

Lisbon is a top 10 target for real estate investments in 2020

Portugal continues one of the top trends for the real estate market in 2020, despite dropping from a leading position in 2019. This year’s top of the rank is Paris, which this Emerging Trends in Real Estate Europe study, from PwC and Urban Land Institute, found out to be the most desirable market given ist ability to attract capital of all kinds from all around the world.

Europe lives a climate of change

Price Waterhouse Cooper anticipates a very active property market in 2020, which investors still consider very attractive despite some political uncertainty and the rise of construction costs in Europe. A number of real estates sectors are going through significant structural change. However, demographic trends like tourism, for instance, support investing in housing and hotels as a sound strategic move. 

The European central banks’ decision to maintain or cut interest rates is probably the biggest factor supporting the general levels of optimism among investors. In this environment, real estate investment deals in cities that offer great liquidity and mobility options will be the biggest targets.

Development costs are rising

This is a dilemma for investors, who can see that the over-supply situation that came from the financial crisis is disappearing and much stock needs to be modernised. Sourcing suitable standing core assets is as expensive as ever, so investors are aware of the inflation in labour and material costs necessary for the units’ modernization works.

Climate will impact Real Estate

Among the biggest concerns for 2020 are the Stock Availability and the Rise of Construction Costs. Also, investors are aware that climate change will have the biggest impact on Real Estate in the long term and it’s clear that some industry leaders are already rising to the challenge. The majority of investors enquired have even admitted that expect climate change to become a bigger risk over the next five years, with a general tightening of environmental, social and corporate governance requirements among institutional investors.

The Portuguese real estate scenario

As for the Portuguese capital city, Lisbon, investors realize that there are still several types of real estate investments available in sectors such as Hotels, Residential and Retail. Adding to this, we can see Lisbon’s advantage resides in the much lower occupation costs when compared with other European cities.

Investment prospects for Lisbon (2010-2020)

Lisbon, though a relatively small market, has many admirers! Despite losing the first place in trending cities for real estate, Lisbon is still very attractive to investors as it stays in the top 10. 

Competition for core offices is strong, and yields have fallen; players there have started to move up the risk curve. Plus, there is a growing interest in hotels and student housing. The high demand for office spaces from big insurance companies and german funds allied to competitive yields of about 4%, makes it hard to find good buildings to invest in the office space market, so finding stock is very challenging. Some wonder if the city’s progress towards nearly full employment will make hiring more difficult at some point for the many companies that have set up service and call centres and want to expand.

Situations like this are challenging for foreign investors that are interested in investing in the Portuguese market but lack the qualitative information to move forward. As a company which the majority of clients come from across the globe, Portugal Homes has an in-house data analyst who will give in-depth reports on each of the investment properties our clients are interested in. Through our market reports, clients are able to find all the details concerning the property in question, a full breakdown of all costs and fees associated with it, a market comparison so that they know that the product we are promoting is being sold at market price, rental yields and renovation costs estimation, resale value estimation, and most important the percentage of their return on investment.

All-property return in Lisbon (2009-2017)

It is also important to prepare and anticipate operational and strategic decisions, in order to provide additional value to the reports, Portugal Homes will also do an accurate SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. With Portugal Homes' research, our client investors have an overview of the property that’s of interest to them along with all the ins and outs of the investment. Investors that work with us, will have all the tools and information needed to make the best decision.

As we published in “The Portuguese economy in giving confidence to investors” article, retail attracts interest in this outward-facing corner of Europe. “In Portugal, retail is still going strong,” one broker says. “This year alone we have registered 400 new leases of units, a lot of it food and beverage which is also related to tourism, but fashion and other uses too. Rental growth is still there for very prime locations and prime shopping centres.”

Government approval of ‘SIGIs’, Portugal’s REITs (Real Estate Investment Trusts), and confirmation of funding to expand the city’s airport and construct a second are further pluses.

Lisbon is a top 10 target for real estate investments in 2020

The Portuguese economy is showing confidence to investors

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