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More and More Houses Are Being Sold While Still on Paper

11 December 2017

The “fashion” of selling homes before construction has even begun seems to have fallen out of favour in recent years, but the practice is gaining new strength. Manuel Reis Campos, president of the Portuguese Confederation of Construction and Real Estate (CPCI), believes that the phenomenon is still very limited to the centres of the cities of Lisbon and Porto and some areas of the Algarve. That is to say, places where the supply of real estate cannot keep up with existing demand.

“During the crisis, sales fell across the board, buildings were erected and put on sale, and nobody was buying. Now there are people who, to guarantee a purchase, buy a property before construction has even begun, including both new construction and renovations,” the official stated, quoted by Expresso.

According to Mr Reis Campos, demand will continue, and there will be larger investments in new construction in the coming times – data from the CPCI confirm that it registered a growth of 24.7% in the first nine months of this year in relation to the same period, totalling 10,437 new dwellings.

One of the examples mentioned by the publication is the Troiaresort, part of the Sonae group, which has about 400 apartments already built (slightly less than 90% have already been sold) and 96 lots for housing construction, of which 62 have already been sold since the start of the project in 2006. With these lots, which have prices ranging from €400,000 to €769,000, the construction is left to the buyer. 27, or about 43%, have been sold in the last three years.

According to Luís Lima, president of the Portuguese Association of Realtors and Real Estate Agents (APEMIP), some care must be taken in the purchase of houses that are still just on paper, a trend that is being seen especially “in areas where few assets are available. ” “Up until 2001, most sales were made in this way, but it can be risky. Just look at what happened at that time, when many people lost any deposits they had made in projects that ended up not going forward,” he said, noting that “one must evaluate the risk that the project fails to go forward, whether through some problem with the developer or a possible market disturbance.”

Patrícia Barão, director of the residential area of JLL, also believes that “this modality of purchase is back”, and it should continue. “Trust and credibility have returned to the Portuguese market, and both domestic and international clients are buying in this manner, confident that their investments are safe,” Ms Barão stated, quoted by the weekly.

Original Story: Idealista

Translation: Richard Turner