Investors are eyeing Portugal as an ideal country to invest in thanks to a relatively weak Euro against other currencies.
The Euro is currently worth 1.15 against the Pound, which represents an improvement over the 1.12 recorded in April, though it’s still well below the last high point of 1.21 in April 2022.
In the USA the Federal Reserve has aggressively raised interest rates to 5% to 5.25%, compared to interest rates in the European Central Bank, which are 3.75%, 4.00% and 3.25% (for the main refinancing operations, the marginal lending facility and the deposit facility).
Hugo Branco of Adapters, an Independent Portuguese valuer, said: “There is a distinct lack of middle-class properties available at prices that most Portuguese can afford as the
“Portuguese internal market does not have the purchasing power for luxury at these higher prices.
“Expats and those able to take advantage of the real estate sector and the Euro parity with the dollar are the primary consumers”.
“The Euro weakness is reshaping the investment profile and debt in Portugal, as it’s triggering a change in the usual type of investors looking for the country to invest in.
“A weak Euro makes exports less expensive, which can boost Portugal’s economy and attract more foreign investments, making it cheaper for foreign investors to purchase properties in Portugal as they get more value for their home currency.”
House prices for existing properties as well as new builds in Lisbon and Porto especially, have been skyrocketing in recent years.
Another phenomenon occurring in Portugal is the purchase of high-end housing units as non-liquid assets to hold, for investment. These units are not rented (or are only short-term
rented) as a safe haven for capital, taking advantage of steady, continuous price rises.
This is true for luxury housing units in paradigmatic developments, such as those in Lisbon city. The “lack of homes while many homes remain empty ” is a social phenomenon happening right now in Portugal.
John Macdonald, chief executive of US real estate software Recognyte, said: “this is a risk to consider as the government may choose to take action to address this lack of occupancy, but we do not believe that a “Canadian style” ban on real estate purchase by foreigners will take place in Portugal.
He added: “Despite today’s wider economic conditions and uncertainty that continue to threaten to disrupt the property market, there are some unexpected opportunities for investors who can still find ways to minimize risk and maximize returns, if they know their markets well.”
Francisco Tristao, vice president and country head of Resolute Asset Management, said: “We may see a shift from institutional investors that are more cautious and investing longer term, with expectations for higher returns.
“These investors saw rising interest rates make their financing needs more expensive vs that of retail investors who are less sophisticated.
“The retail investors are more focused on the combination of yield and return plus the climate, lifestyle, and safety within the environment for what Portugal is well known for.
“The retail investors are also eyeing the right fundamentals and returns for a safe investment as a “hot spot” for their capital.”
