Hand-picking deals in Portugal…from North to South

The Covid-19 pandemic has meant that accessing real estate deals, and doing in-situ due diligence on opportunities, is no longer as easy as hopping on a plane to check them out. The importance of having a reliable local partner, agent or friend is now key to reducing risk based on incomplete information, or taking the wrong decision. As not everyone has a friend in their preferred retirement or investment destination, choosing the right partner is critical.

The right partner not only understands the local market but has a business model that makes it easy to collaborate at a distance. A combination of personal, telephonic or video conferencing communication, combined with e-mail and information sharing tools, is very important to ensure that clients have enough information on which to base a decision.

Often, the first question on people’s lips in a Covod-19 era is whether prices in Portugal have started to fall. Disappointingly for many, especially those who have seen the value of the US and Canadian dollar fall against the Euro, this is not the case. Although prices of long-term rentals in large cities have adjusted downwards a bit, generally demand outstrips supply and real estate prices have shown a small growth, despite Coronavirus.

An experienced and knowledgeable local team will be able to find well-priced options, whether rental or purchase, and also manage expectations by explaining the local context.

Since the beginning of the year, there has been an increase in real estate transactions, after a multi-month lull caused by Covid-19. Golden Visa (GV) applications were up hugely after a drop in previous months, although they have since come down again. This temporary spike in pent-up demand shows that GV investors are still cautious. This is reinforced by our own observation of an increase in GV clients looking for the €280K, €350K and even €400K Golden Visa, as opposed to the €500K GV. GV applicants are now looking for better value for money and are questioning the high price per square metre (or square foot) often associated with new-build or refurbished inventory in the larger cities of Lisbon and Porto.

Finding great deals from overseas – instant equity in the North/Porto

Take the example of Emma, who decided to purchase an investment property in Portugal, but could not physically visit the country due to travel restrictions. Emma had chosen Porto, a city she had visited and loved, as the place where she wanted to buy. Using www.propertyfinderportugal.com as a finder agent, the company dealt with every step of the process, including recommending a lawyer and making introductions to an experienced mortgage broker. Because Emma had someone on her side, she was presented with options from owners, real estate agents and listings on both English and Portuguese sites. A multilingual team meant Emma could access the entire market, with no language barriers.

After a process of around 6 weeks involving long-lists and short-lists, virtual tours and video-visits, Emma selected a totally modernised and refurbished 3-bedroom apartment in the heart of Porto, with the benefit of a massive outside terrace and walking distance to Boavista and Porto’s famous Crystal Palace gardens, as well as an easy downhill stroll to the river Douro. With the team negotiating on her behalf, the price was agreed at €265,000. When Emma received news of approval from the bank, she informed the team: “You had better sit down, the bank valued it at €343,000….I had them confirm it twice as I thought they had the incorrect property!” When Emma completed on her purchase, she had earned instant equity of €78K or an almost 30%! And all this during the Covid-19 crisis.

Close to schools, amenities and shopping, as well as public transport links, the property is now ready for occupation by a local family or an expat who may wish to bring their furniture, and marketing has begun.

Investing based on numbers – a “direct from owner” deal

The Algarve is Portugal’s top tourism, retirement, golfing, marina, and beach destination. By far the most popular destination to both Portuguese and foreign visitors, It is also the base of one of Southern Europe’s top 3 destination airports (the other two being in Spain). It is the one of the easiest places for the world’s largest tourist and retirement market – Europe – to access. Long gone are the days of “cheap” deals and most agents get quite irritated, and rightly so, when clients lead with a question about buying cheap. Value for money is different, but cheap gets a cold shoulder. After all, the world’s 17th most visited destination should be compared to the remaining Top 20.

Those familiar with the region know that the village of Praia da Luz is upmarket. While not as exclusive as the Golden Triangle’s Quinta do Lago or Vale do Lobo, it has managed to retain a combination of originality and charm while broadening its appeal to a vast range of expat nationalities. Property prices have increased significantly over the last five years and due to the town’s small urban area, new build development is practically non-existent. Potential for capital growth is therefore excellent. Many properties have a sea view due to the topology of the place.

Near the centre and the beach, sea views are more difficult as height restrictions imposed in the last two decades mean that some properties are the same height as their neighbours in front. Properties with sea views located in the centre of the village tend to currently sell for between €200,000 and €350,000, depending on the quality of the view and the age of the property.

One exception to the planning restriction exists, a large bulky (and, in fairness, unattractive) building built before planning restrictions were as strict. It is in this building that an interest opportunity has arisen. A two bedrooms duplex apartment, priced at €165,000. With the stand-out feature being the magnificent sea views, and in walking distance of all the town’s amenities and a 5-minute stroll to the blue-flag beach, potential buyers are likely to overlook the less than elegant building and the fact internal stairs are an integral part of the package. Reasonable furnished and in with a history of successful holiday lettings in the same building, a two bedroom at this price does not tend to come around often. With 23 viewings scheduled to take place over 3 days, this is a property that is unlikely to remain on the market for long.

Despite the global pandemic and many lockdowns, Portugal is as open for investment business as it ever was. The ability to access this market will depend on having the right partner and contacts on the ground, and the broader the footprint of geographic coverage, the more likely that an interesting investment opportunity will arise.

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