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Real Estate Sales in the Billions. Developers Say 2018 Was the “Best in Memory”

27 January 2019

Real estate experts enthuse that 2018 was a “record year,” “exceptional” and “best in memory.” They believe that 2019 will also see strong sales.

It was the best year for the real estate sector since the financial crisis. Real estate sales soared together with prices. In the first nine months of 2018, more than 130,000 houses were sold, 19% more than in the same period of 2017. Sales were similarly robust in the office and shopping centre market, with increases of around 50%.

Industry experts saw 2018 as a “record year” and one that exceeded all expectations. Though they believe that sales will stay strong in 2019, they warn that the middle class will encounter ever greater difficulties in finding adequate housing.

“This was a record year for real estate in many respects,” according to Eric Van Leuven, the head of Cushman & Wakefield (C&W) in Portugal. Mr Van Leuven backed up this assertion citing sales figures for the commercial sector: €3 billion euros in sales, including 21 office buildings, 19 shopping centres and 50 new hotels around the country, among others. Compared with 2007, which the executive named as the “previous peak,” the new peak was well above €2.1 billion in sales at the time.

For CBRE, 2018 was “an exceptional year for the real estate market, the best in memory.” “We are seeing an unusual level of dynamism in every sector, mostly the result of investments by companies which have discovered our country’s potential,” Francisco Horta e Costa, the firm’s managing director, explained to ECO. The executive believes that “the country is increasingly on the radar of multinational companies, developers and investors who see our country as a market where there is still a lot to do.” CBRE also believes that total sales in the commercial sector reached the €3-billion mark, up by 50% compared to 2017. Sales including Fidelidade’s portfolio (425 million euros), Almada Fórum (€407 million) and Lagoas Park (€375 million) heavily influenced these figures.

“Foreigners may play an important role” providing affordable rental homes

Ricardo Sousa, the CEO of Century 21 Portugal, also states that 2018 was “a very intense year.” To date, the company was responsible for more than 132,000 transactions worth €1.567 billion. Mr Sousa told ECO that student and senior residences were the most sought-after assets by investors, along with offices. “The office market is very strong, after having been moribund. By 2018, the available supply was very limited, especially for companies wanting larger spaces.” However, the executive highlighted several developments that set the tone for the residential sector, including regulatory changes and new measures aimed at the housing market.

Above all, the gap between supply and demand and the difficulties that the middle class encountered finding adequate housing because the incomes of the Portuguese have failed to keep up with rents, defined much of the year, Mr Sousa argued.

According to data from the National Statistical Institute (INE), 132,000 houses were bought and sold in the first nine months of 2018, 21,000 more than in the same period of 2017. The value of those sales reached 17.8 million euros, an increase of four million euros over the same period last year. The price increases, however, have been slowing for two consecutive quarters. The president of the Portuguese Association of Realtors and Real Estate Agents (APEMIP) also believes that the residential market was the most important sector in 2018. “This market undoubtedly made all the difference” because, “in addition to bringing more tourism to the country, it captured the attention of international investors, bringing in new business.”

However, Luis Lima also acknowledged the problems that the Portuguese middle class is experiencing. “For two years now, we have had a housing problem for the young and the middle-class. These days, we almost need subsidised housing for the middle class. We have to accept that we have a housing problem in the country and do something about it. However, action must come on the supply side, not by limiting investors.”

“Prospects are for another strong year for the real estate sector.”

This year, Eric Van Leuven believes that “much will still happen” but also referred to the need “to create conditions for the development of housing for the middle class and students.” The executive predicted a “slowing of the growth of the number of transactions and further price increases in peripheral markets.”

To solve this problem, APEMIP’s president argues that the measures proposed by the Government should focus on helping the poor rather than penalising the wealthy. “I am somewhat cautious because this is an election year. The Government thinks that by not letting the foreigners buy, there will be more for the Portuguese, but we would end up losing it all,” he told ECO. “Measures should lead to further investment” and “create a climate of confidence.”

CBRE’s Francisco Horta e Costa has “very positive expectations.” Although there no way to accurately foresee how much longer the current dynamism will continue, the truth is that we expect another strong year for the real estate market, he says. The CEO of Century 21 sees two potential challenges this year: “Protect tourism, which has been so important for [Portugal’s] different regions” and, above all, to have a “policy based on attracting companies in which we attract more people and thus more jobs.”

Original Story: Economia Online – Rita Neto

Translation and editing: Richard Turner