Good news for Portuguese real estate, which will continue to enjoy good (or even better) times in 2019.
Outside the top 10 in 2018, Lisbon will stand out next year as the main destination for real estate investment in Europe, overtaking cities like Berlin, Dublin or Madrid. After the heyday of mature markets, interest is now shifting to smaller but dynamic cities. In this context, the Portuguese capital is seen as the “risking star” that is worth taking the risk of betting on, from a long-term perspective.
“Relatively cheap real estate”, “extraordinary returns” and “quality of life” are the great assets that make Lisbon the “number one choice” of investors in Europe, according to the latest edition of the study “Emerging Trends in Real Estate”, carried out by PwC and the Urban Land Institute.
The top ten cities chosen by investors (Lisbon, Berlin, Dublin, Madrid, Frankfurt, Amsterdam, Hamburg, Helsinki, Vienna and Munich) are a “mix of smaller newcomers and larger tried and tested markets”, points out the report, which includes the opinions of 800 senior executives in the sector. The United Kingdom's exit from the European Union is benefiting these types of cities, which have traditionally been further from investors' sights.
London comes in at number 29, with no British city appearing in the ranking of the top 10 favorite destinations for investors - and Brexit is pointed out by the study as one of the main risks of instability for real estate in 2019.
What makes Lisbon the number one choice in Europe?
At a time when various risks are proliferating on the Old Continent, most notably international political instability - causing not only British but also Italian cities, for example, to be pushed out of sight - investors are now looking to preserve their capital, rather than achieve the high returns they were aiming for at other times.
“The search for secure returns next year will be paramount throughout the European real estate sector” and investors are currently “not looking for high returns, but for security”, as stated by the director of the European Investment Bank (EIB), quoted in the study to which idealista/news has had access.
It is within this logic that investors' radars are turning to real estate rather than other asset classes, and especially in smaller, dynamic cities like Lisbon. And although it is classified as a “small market, it is offering extraordinary returns”.
The Portuguese economy, “growing at a healthy rate” is another factor that, according to PwC, helps make “its capital an international destination for companies, investors and tourists”. As one private equity investor quoted in the study points out, “everyone is talking about Lisbon now”.
In a sort of “fish in a poke” fashion, the demand from international companies to set up in the Portuguese capital has helped to further boost the country's reputation. "Portugal has become a popular place to set up service centers. It's a combination of a relatively cheap workforce and real estate with an excellent quality of life," says an expert in the survey, explaining that nowadays tenants even have to compete for property in a market where supply is increasingly tight.
And all this is resulting in a diversification of investor profiles. If, “at the previous peak, the [Portuguese] market was mainly made up of national and German real estate funds that were essentially looking for the same type of product,” today, “there is quite a diversity of capital: in terms of origin, risk profile and asset class,” analyzes an expert quoted in the document.
Could the risk of a bubble jeopardize the future?
Regarding the boom in Lisbon's real estate market, respondents are calm about the evolution of the residential rental market, but are concerned about the office sector. “There will certainly be a shortage of supply over the next two or three years,” warns a national expert quoted in the study, and speculation is expected to arise.
As for the retail business, expectations are generally positive. “Portugal has low internet penetration, successful tourism and a population that likes to shop,” concludes PwC.
Source: idealista news