Sunday, January 16, 2022

The Portuguese Real Estate Market in July

Portugal Porto
Porto, Portugal

Talk turned rather quickly last month from hopes of a re-emerging European economy to fears of a second wave or, somewhat more depressingly, whether we are still in the first. Governments are imposing localized lockdowns, imposing quarantines on travellers once again, and planning for what might be difficult autumn.

Corporate transactional activity in Portugal’s real estate market remained quite subdued, with just one significant transaction announced.  According to a report by the INE, the torrid pace of growth of the country’s residential real estate market had already begun to moderate before the pandemic hit. While total housing transactions reached €25.6 billion last year, a growth of 6.3%, that figure marked a significant reduction from 2018, when growth hit 24.4%.

As a direct result of the pandemic, rental housing costs in Lisbon experienced the most significant drop in a decade between April and June. During that period, rents in the capital fell 6.9% q-o-q and by 8.7% y-o-y, according to Confidencial Imobiliário’s Residential Rents Index (IRR). Nationally, rents also fell during the second quarter, dropping by 2.8%, again, the most substantial contraction of the last ten years. Even so, rents in mainland Portugal remain 2.4% above the same period in 2019.

In some positive news, several Portuguese banks, including Novo Banco, announced that they would sell a portfolio with 4,435 homes, worth a total of 360 million euros. The dwellings, most of which are currently leased to tenants, are primarily located in the city centres of Porto, Setúbal and Lisbon and are part of a set of real estate investment funds (FIIAH) managed by Norfin. The funds are owned by the leading Portuguese banks, including Novo Banco, Caixa Geral de Depósitos (CGD), Montepio, BCP and Santander Totta. In order to address a lack of supply of affordable housing, the Portuguese government led an initiative to allocate hundreds of properties in the social housing rental funds. In exchange for the properties, the banks received shares in the funds.

Hospitality

In mid-month, Mondego Capital Partners announced that it had acquired two buildings in Baixa, in the upscale neighbourhood of Chiado, Lisbon. The firm plans to spend a total of 20 million euros over the next two years on a new development aimed at the hospitality sector. The two properties have a total constructed surface area of 4,500-m2 and are expected to open in 2022. Mondego had previously announced that it would invest more than 100 million euros in real estate projects in Lisbon and Porto.

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