Housing Construction Takes Off Outside of Central Lisbon

15 July 2018

Hundreds of homes are being built From Ginjal to Ameixoeira. Foreign real estate companies have discovered a new market: the Portuguese middle class.

Lisbon is often referred to by the locals as a young girl, and it is going through a growth spurt. After spreading out to the east, the city of the seven hills is now heading to the north. Housing is now being built in Alto do Lumiar, with more than 700 flats planned over the next few years. Developers guarantee that most will be aimed at the middle class.

In the 1980s, this area was already seen as the future of the capital. It is made up of an area that is the equivalent of 379 football fields in size that is expected to become a home for 60,000 people by 2030. So far, however, only a small area has been developed. After the financial crisis, the company that owns the land, the Alta de Lisboa Management Company (SGAL), says it is speeding up construction by selling space to private developers.

“We have a very large portfolio. We have sold around 10% of it, which, considering the size of SGAL, is huge. Just that 10% represents over 400 flats,” says Miguel Lobo, SGAL’s commercial director.

The new developments will include 322 new houses, called the Condominium of Lake (in English), construction on which began last year. It will be the twelfth development built by SGAL itself.

The base price for middle-class homes in the Alta area is expected to hover around 280,000 euros for one hundred square meters (m2). “It will be very hard to go below that,” Mr Lobo stated. That figure compares favourably with more than 421,000 euros per 100 m2 that is the current average price of property in Lisbon during the first quarter of the year.

Foreign developers have also found their way to the 2nd Circular area, accounting for 70% of the investment in new construction.

Hugo Santos Ferreira, the vice-president of the Portuguese Association of Real Estate Developers and Investors (APPII), confirmed that foreign investors are no longer limiting themselves to the city’s historic centre.

“It has become common in recent months to see both local and international developers demonstrating an interest in secondary areas of the city.” Mr Ferreira pointed to the neighbourhoods of Benfica, Telheiras and Lumiar, where hundreds of homes are being built, as an example.

At APPII, which represents the larger developers, 30% of the members are now foreign: coming from the United States, the United Kingdom and the Middle East. Since the end of last year, and especially this year, these investors, who came to invest in rehabilitating the downtown area, have realised that the peripheries also offer opportunities.

Mr Ferreira believes that this year “will be marked by a return to building projects outside of the premium segment, aiming to cater to a wider audience.”

The expression “houses for the Portuguese” is becoming a part of investors’ vocabulary. Earlier this month, the Spanish developer Kronos Homes announced that it plans to invest 100 million euros in the construction of housing for the middle class in Lisbon and Porto by the end of the year.

Rui Meneses Ferreira, a partner at the developer, says that Kronos is not interested in investing in the historic centres: “It is not worth investing in a plot of land with space for less than 50 houses.”

In a first phase, the real estate company will be finalising “two or three” deals in Porto and Lisbon, while promising that it is planning to more “more affordable” prices than are currently offered in the two cities. The value of homes should start at 250,000 euros and have an average price of around 400,000 euros. “We can’t forget that we are in Lisbon and Porto.”

The latest data on Portugal’s municipalities, as published by the INE (2016), revealed that in that year the construction of 150 homes was licensed in Lisbon; in 2008, more than a thousand had been approved. The market saw a similar downturn in Porto over the last decade. The number of licenses fell from 814 to just 370.

Confidencial Imobiliário studied the housing licensing applications submitted in 2017. 3,330 were submitted, 70% of which were for new construction. Among the areas that attracted the most attention from investors were Santa Clara, Olivais and Marvila.

It’s in one of these areas of the capital that one of the most well-known developments is being constructed. 499 new houses will be built in Braço de Prata by 2027, providing homes for more than 2,500 people. The new neighbourhood will connect the Parque das Nações and the city centre and will have bespoke architectural designs and above-average prices. The homes will cost between 400,000 and 2.7 million euros. Of the 28 flats that are already finished, 22 already have been bought. Among the buyers, half are foreigners.

New housing under development also includes some projects in the city centre. In Entrecampos, on the grounds of the former Flea Market (Feira Popular), 970 new homes are being built. Of these, 700 will be allocated to the rental market at prices controlled by the municipality and the Santa Casa da Misericórdia de Lisboa. The rest will be marketed directly by the developers.

There is also a new development under construction in Carnaxide called Sky City which promises 370 homes priced between 135,000 and 500,000 euros.

The expansion of Lisbon’s housing market is also beginning to reach across the Tagus river. At least 330 new homes are being planned in Ginjal.

The supply of new homes in the capital is still far from what developers say is needed to stabilise a market which finds itself at a fever pitch. The industry estimates that just 70,000 new homes – 35,000 of them in Lisbon and Porto – would be needed to normalise prices, but predictions point to much lower numbers.

“If we keep this pace, we will end the year with 17-20,000 new homes, which is significant compared to the recent past but still pales before the more than 114,000 new homes that were licensed in 2001,” says Manuel Reis Campos, the president of the Association of Civil Construction and Public Works Industries.

The country is also far from the numbers registered in 2005, the last year in which more than 70,000 houses were built in Portugal. Nevertheless, the industry is seeing signs of a recovery.

Joaquim Montezuma, a consultant at ImoEconometrics, notes that there has been “a rise in national demand, with growth in Portuguese families’ disposable income, employment growth, better financing conditions and reduced attractiveness of traditional savings instruments.”

Mr Montezuma stated that “the most effective way to create affordable housing in Lisbon and Porto is to increase supply,” at prices that the Portuguese can afford.

Original Story: Dinheiro Vivo – Ana Sanlez / Maria Caetano

Photo: Gustavo Bom / Global Imagens

Translation: Richard Turner