The trends in Portugal’s booming property market in 2024

 In HNWIs, House prices, Housing, Housing market, News, Property

Portugal has become a haven for affluent international investors and expats due to its favourable climate, low cost of living, stable economy, safety, and attractive residency options.

The country boasts several thriving real estate hotspots, including Lisbon, Porto, the Algarve region, and the Silver Coast, offering a diverse range of high-end properties to choose from.

Portugal also offers a host of financial advantages, making it an attractive investment destination. In 2024, the Portuguese government will introduce a new Incentivised Tax Scheme (ITS) to replace the Non-Habitual Residency (NHR) tax scheme, complementing the existing D7, D2, D8, and Golden Visa programs.

The intricacies of Portugal’s property market were discussed by four expert panellists Anne Brightman, Founder and CEO of Brightman Group Real Estate, Chris Marson, Director of RTi Family Office, and Hakan Kodal, Chairman of OptylonKrea, Krea Real Estate and Ando Living at a recent webinar organised by Portugal Pathways, and hosted by Steve Philp, Partnership Director of Portugal Pathways.

An upward trajectory

According to a recent report by Property Market Index, the Portuguese real estate market is expected to continue its upward trajectory in the coming years, with demand for high-end properties remaining particularly strong.

Data from the Portuguese National Statistics Institute (INE) reveals an impressive 12.8% increase in the average house price in Portugal so far in 2023, marking the fastest rate of growth since 2010.

The Algarve region has witnessed the most significant price growth, with house prices soaring by 18.3% in 2023.

Several factors contribute to this robust growth, including a strong economy, escalating demand, and Portugal’s growing appeal as a world-leading relocation destination for the wealthy, renowned individuals, affluent expats, and professionals.

Portugal’s strong economic outlook, coupled with its growing popularity as a relocation destination, is poised to sustain the real estate market’s upward momentum.

Demand outstripping supply

Steve Philp (Portugal Pathways) pointed out that 2023 had been an excellent year with strong demand and weak supply continuing to drive Portugal’s real estate market.

A report from the Property Market Index – an international research platform — compared Portugal’s property market performance with other markets shows that interest in Portugal among investors and relocaters has been increasing despite recent changes to the Golden Visa and NHR tax regimes.

According to the index, Portugal has seen a 12.8 growth in property sales in 2023, property prices going up 18% in prime Algarve locations, overall values surging in Lisbon, Cascais, Comporta, Estoril, Sintra, Silver Coast, and Porto over the past 12 months.

Ten houses are sold for every one house built and this has also driven high demand for new developments, while property hotspots are predicted to climb 8.7% in 2024.

With 7% of Portugal’s population now made up of foreign residents, why is Portugal continuing to be an interesting and attractive place to live despite current tax changes?

Anne Brightman, Founder and CEO of Brightman Group Real Estate, a boutique realtor in Estoril, near Lisbon, said that some of the main reasons that more used properties were currently being sold than new build was rising construction costs, costs of materials, and transportation. “Everything is going up”.

“Developers usually don’t respond for the demand for housing for lower income households. This is true for everywhere: the US, Europe, and not just Portugal. As for building materials, these have almost doubled over the past three years”, Anne explained.

This means developers are catering to the HNW market where they can get a decent ROI. On the other hand, they are offering more superior and sustainable construction, excellent finish outs, and lots of amenities that were not previously common in Portugal such as 24 h concierge service, private gyms, spas, private pools, gourmet kitchens, and extensive outdoor living.

Inflation squeezing margins

Developer Hakan Kodal, Chairman of OptylonKrea, Krea Real Estate and Ando Living, said construction costs had risen by 50%, while the cost of constructing buildings, and the length of time it takes to get planning permits, is longer in Portugal compared to some other countries; all of which makes it “much more difficult to find the right development projects to pursue” which is a factor between the gap in demand and supply.

“We are seeing a higher demand for quality property with amenities, especially in prime locations. The good news is that we have international demand from the US, Hong Kong, South Africa and the UK, and I think there is still room for Portugal to grow, not only as an investment market, but as a place to relocate and retire,” he said.

Steve Philp pointed out that there seemed to be plenty of plots available and Hakan Kodal added that the price of building plots have gone up, and all of the inflation around land, materials and construction costs in general has squeezed margins.

“We need more land assets available in the market to be able to do more developments” said the developer who is active in both Lisbon and Porto and plans to eventually develop in the Algarve when the “costs stabilise and the margins improve.”

Regeneration projects

Anne Brightman explained how the new Lisbon international airport project, which is still under debate, and will likely be located on the South bank of Lisbon’s Tagus river, had spurred some new and innovative developments in that area with a focus on quality of life, space, wellness and longevity.

Brightman Group is currently representing a development in a town close to Lisbon (20 minutes) called Palmela and built within a nature reserve, with the anchor of the project being a Swiss wellness project.

“It would be wrong to say that this is directed only to Swiss retirees, but rather is catering to a segment we didn’t see much of prior to the pandemic, and which is the multi-generational community with grandparents, parents and children all living in the same community with activities for each one.”

The pandemic, she says, did influence global values, which is being reflected in the new developments now.

“There are all sorts of sports activities integrated into these projects: tennis, padel, golf, yoga, swimming, and even childcare”, she added.

Communities are developing to cater for HNWs moving to Portugal providing leisure activities, high-quality supermarkets, international schools, and special services which are helping to rejuvenate local economies and provide jobs in such micro-areas.

Developer Hakan Kodal said that most regeneration projects were going “very slow” while the new airport would take a minimum of five, but as long as 10 years to be built and operational, so the impact would be slow.

“For us there were two alternatives; second homes in secondary locations, and retirement destinations; or being in central locations with higher demand for touristic apartments, investment properties, and partial living with overseas citizens spending two to up to six months living in or near Lisbon which is why we prefer to go into prime city centre locations.”

Kodal also referred to Lisbon developments at Alto de Lisboa, with buoyant projected demand from an increasing number of tech professionals moving to the area; and new luxury waterfront developments such as Alcântara and Marvila.

International buyer habits

Hakan Kodal explained that consumer habits have changed over the past 5 years. Before Covid-19 people were looking for quick to occupy apartments in which to live or rent out long term. However, people are now looking for partial living and serviced apartments with amenities, and for the rest of the time rent it out to generate an income, and have a company to manage the property.

“We’re trying to develop an international products whereby HNWs can move from country to country at specific times of the year, but still remain within the same branded residential community”, he said providing the example of Ando Living in Lisbon which aims to make nomadic living effortless, seamless, and pleasurable through these lifestyle serviced apartments.

Chris Marson, Director of RTI Family Office revealed what international buyers look for today. “What we’re seeing from our HNWIs is that they have a multi-jurisdiction lifestyle. Portugal will not be their only base, and they will tend to be looking for safety, security, sunshine, hospitality, confidentiality and when making choices about where to be, they spread their bets and buy in places with a potential for growth and to get a return on their investment.”

Property Hotspots

As to the areas of Portugal enjoying significant growth for 2023-2025, Lisbon is attracting tech and science-based individuals; the Algarve continuing to attract many wealthy families and retirees.

Anne Brightman pointed out that premium locations in the Algarve such as Vale do Lobo and Quinta do Lago were “booming” and attracting high prices paid by “an infiltration of global citizens” who are changing the traditional British-led second home and retirement profile of the region.

The US entrepreneur said that there was also an interesting migration to the north of Portugal, particularly Porto and Braga which are “driving investments to grow in that area”.

Hakan Kodal, whose development company has seven projects in the marketing phase up and down the country, said his only reservation was from secondary market competition, but when and if the price goes down it could be by quite an amount due to the high amount of product, although demand continues strong for now.

Chris Marson discussed some of the emerging areas in Portugal that are becoming en vogue with families widening their nets into other more diverse areas — since existing areas are UK and Irish ex-pat led — these relocations to emerging areas are often driven by greater opportunity such as jobs.

“If you are looking to move to Portugal, do so because of the security and lifestyle reasons because the tax benefits will come ”, he concluded.

Hear the complete webinar here: