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Licenses for New Homes Increase by 25%

9 June 2018

Real estate investment reached €22 billion in 2017.

The number of licenses to build new homes in Portugal is growing at a rapid clip. According to data from the Association of Civil Construction and Public Works Industries (AICCOPN), 1,734 licenses were awarded in the first two months of the year for new builds all over Portugal, an increase of 24.7% compared to the same period in 2017.

“We are seeing increased dynamism in the new construction sector, which is translating into an increase in new projects,” the president of the association, Manuel Reis Campos, said, adding that the growth had already begun to be felt in the last years.

In fact, a total of 17,264 licenses for new homes were granted in 2017, “a growth of 107.7% compared to 2014 – when 8,317 new licenses were granted, a historic low. In three years, the number of new housing licenses has more than doubled,” Mr Campos added.

“This phenomenon and the generalised growth is taking place in global terms [i.e. also in rehabilitation and not limited to Lisbon and Porto], and is due to the fact that, undoubtedly, we are experiencing a favourable moment in the real estate market, due to low-interest rates and the consequent lack of attractiveness of the products offered by the banking sector, accompanied by positive momentum in the tourism sector and also, foreign investment. In 2017, real estate investment grew by 21%, reaching 22 billion euros, of which 4.7 billion correspond to foreign investment,” he explained.

However, not only is it still not enough to meet the existing demand, especially for more affordable homes, it is still far short of the requests made by local authorities in 2008, the year in which the financial crisis began, after the fall of the Lehman Brothers bank in the USA.

“Ten years ago, 45,915 licenses for new homes were granted, so despite the significant increases of the last few years, the level of production is still much lower than even in the recent past,” Mr Campos reasoned. It remains to be seen whether we will ever reach these levels ​​again, even if there is a need for more homes.

Over the last three years, there has been a considerable increase in rehabilitation, and this year is no different. In the first two months of 2018 a total of “550 rehabilitation projects for residential buildings were licensed by the city councils, an increase of 8.5% in year-on-year terms,” ​​Reis Campos stated.

However, he noted, this figure is far from representative of what is genuinely happening in the market.

Rehabilitation goes largely unaccounted

“We cannot ignore that the overwhelming majority of rehabilitations do not require municipal licensing. This reality has no relevant statistical framework and, despite the evident dynamics we are witnessing, poses greater challenges regarding market regulation and control of informality and the black market. The municipal councils and the IMPIC (Regulatory Institute) have a central role to play in this matter,” he warned.

That is likely the reason why the number of licenses issued for rehabilitation was always inferior to those issued for new construction, even during the crisis, when very little construction of any kind was undertaken.

“Since 1995, the year in which the National Statistics Institute’s (INE) series on permits issued by the City Councils for residential buildings began, the weight of new construction has always been higher than that of rehabilitation,” says Reis Campos, a situation that is “common to all regions of the country.”

“Urban rehabilitation, despite the large increase in the urban centres of the main cities of the country seen in recent years, still has a relatively small weight in the national analysis and comparison with other European countries,” he concludes.

Original Story: Expresso – Ana Baptista

Photo: Nuno Botelho

Translation: Richard Turner