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Developers are Returning to Large-Scale Projects

24 November 2017

Real estate development projects have come back to Portugal. Now that the financial crisis has passed, several developers are taking up projects that had been shelved during the downturn and are once again beginning to build.

An example of this trend is RAR Imobiliária, which has decided to move forward with some of its pipeline, the first of which is located in Lisbon. Quinta do Paço, in Lumiar, was designed by the architect Eduardo Souto de Moura and one year after its launch, José António Teixeira, CEO of RAR Imobiliária reveals that the project is already 40% sold. That is seven houses out of a total of seventeen, at a stage in which construction has yet to begin.

The executive ensures that it is a unique project because within the city of Lisbon there are practically no housing condos. In the case of the Quinta, all the homes have private swimming pools and interior patios in a design that is typical of its architect, Mr Souto de Moura.

José António Teixeira is confident in the state of the current real estate market, given the improvements in the most relevant indices, and that “demand continues to exceed supply. The growth in housing prices has accelerated again, and there has been an exponential increase in available housing credit. The family confidence index has reached a fifteen-year high and a highly favourable macroeconomic scenario with GDP increasing over fourteen successive quarters. Portugal’s economy has also continued its growth this year, the highest since 2007.”

The CEO of RAR believes that it is time for developers to take up new projects or return to others that had been previously shelved. He revealed that RAR Imobiliária had adopted a strategy in 2008 of holding off on any of the projects it had “in its pipeline” and limiting its marketing to those that were already completed, or near completion.

“We took measures that turned out to be strategically prescient, as we were the first real estate developers to work with the possibility of leasing with option to buy and despite the conditions at the time, we still managed to increase our price list in 2012, which ended up giving a feeling of security in the investment to people who were interested in acquiring a home. In addition, we began to work with yields on contracted leases as a safer and more profitable alternative for capital investment by, in large part, private investors,” the executive stated. Mr Teixeira added that evidence of the success of the strategy could be seen in the company’s results, which, even throughout the crisis presented a positive, multi-million-euro, Ebitda on an annual basis. “With the resumption of growth in the economy and the positive trends seen in the Portuguese real estate sector, we decided two years ago to move forward with the projects we had previously approved,” he stated.

At this moment, several of RAR’s other projects, such as Algés or the second phase of the Edifício do Parque in Matosinhos, are under analysis for subsequent start-up and development.

The difference between Lisbon and Porto is one of dimension

José António Teixeira sees the difference between the Lisbon and Porto markets as being one of scale/size.

“It is clear that Lisbon has a resident and floating population that is much higher than that of Porto’s, besides being the capital of the country This leads to much more significant demand and consequently to a relevant price increase in comparative terms.

On the other hand, in sociological terms, the resident population of Lisbon traditionally lived in a manner that was almost always focused on the centre of the city, whereas in Porto this movement only began in the last years and had been principally directed towards local tourist accommodations,” the executive stated.

As for the future of the real estate market, Mr Teixeira believes that the good times will last for a long time, “not least because we can’t forget real estate’s contribution to Portugal’s GDP and the employment rate. Of course, the tendency will be in the medium term for a price deceleration as a consequence of a balance between supply and demand, which will undoubtedly contribute to a consolidation of the market,” RAR’s CEO concluded.

Original Story: Diário Imobiliário / Jornal Econômico

Translation: Richard Turner