​More Foreign Capital Set for Portuguese Real Estate in 2016

​More Foreign Capital Set for Portuguese Real Estate in 2016

01 March, 2016

Publico reports in Imobiliário that "More Foreign Capital should enter the Portugues Real Estate Market in 2016.

Lisbon is attractive with competitive rents and greater liquidity, both of which contribute to foreign investors' interest in buying property in Portugal's capital city. In 2015, foreigners invested close to € 3,000 million in commercial and residential real estate in Portugal.

After a record year of foreign investment in Portuguese real estate, international interest shows no signs of slowing down and more global capital will enter the market this year. A study presented this week in Lisbon, shows that international investments increased, positioning Portugal as the seventh best European city for real estate investors in 2016. Lisbon even surpasses the nearby Madrid or Irish Dublin in the ranking of 28 cities which is produced annually by the Urban Land Institute (ULI) and PwC consultant. Gilberto Jordan, Chairman of ULI Portugal comments that this classification proves "that it is attractive to invest in Portugal" and that "we have real estate with international appeal that is valued and will continue to be valued."

In commercial real estate in 2015 alone - which excludes housing, foreigners accounted for about 90% of invested capital. CBRE puts commercial real estate investment at € 2.1 billion in 2015, pointing to foreigners as generators of € 1.9 billion. This volume of foreign capital grew by 70% compared to 2014 (€ 1.1 billion), according this consultant’s calculations. Also Cushman & Wakefield (C & W) claimed that foreigners were the main force behind real estate investment in 2015 and notes that the increased diversification of investment sources is evidence of the increasing competitiveness of domestic real estate assets on a global scale.

The numbers are impressive in the Portuguese context because this level of high international investment is unprecedented in the country and this year it is set to increase futher according to experts’ predictions. In addition to international projections on the country's real estate market, factors such as increasing liquidity - much of which was diverted from the stock market and increasing capital allocation to real estate, which reinforces refuge asset status, should contribute to investment growth in 2016. C & W also point out in their latest market report that "compared to other markets, Portugal has a favourable position in terms of quality/price ratio and in terms of competition in relation to demand, which is still much lower compared to most other competitive markets." Even with minimum yields (around 5%), "Portugal has the most attractive yields in the whole investment market in western Europe”, said Cristina Arouca, Director of Research and Consulting, CBRE.

The investors source map will also likely alter this year with European and Asian positions expected to strengthen at the expense of Americans. In 2015, according to CBRE, Americans led foreign investment (58%), followed by Europe (27%), but investments also came from Latin America (1%), North Africa and Middle East (4%) and Asia (10%), with many people investing in Portugal for the first time in 2015, including large businesses.

Housing is also targeted for growth

In the housing market, foreign investment is also quite dynamic, although this segment is still dominated by domestic investors. The CPCI accounts point to €9,000 million residential real estate transactions in 2015, of which about 11% originated by foreigners, totalling about €1,000 million. attracted by foreign investment programs such as the Golden Visa and Non-Habitual Residence that have attached great importance to this dynamic in the residential, but Reis Campos, president CPCI reminds us that "many houses are purchased by international buyers who do not use these incentives. " As for those programs, the association leader notes that in addition to the funding volume they have also attracted investors previously very active in our country, as is the case of China, which has applied for the overwhelming majority of visas (about 80% of the visas assigned since the end of 2012).

The real estate industry expects that foreigners will continue to invest heavily in the country, since "Portugal relies heavily on international capital," notes Jorge Figueiredo at the presentation of the ULI / PwC study. But for this to happen it is necessary to cultivate trust in the country. "Trust is the key word," said Jorge Figueiredo, an idea that is reflected in the opinions of the professionals participating in the study, for whom "the country regained its credibility" and is "back on the radar of investors.""

Read the original article by Ana tavares in Portuguese here.