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Portugal Property Outlook for the 2nd Half of 2023

Javier Valdez — Mon, 09 Oct 2023 02:56:31 +0000

Rentals, logistics, and offices are the most affected, but the outlook is still encouraging. Healthcare and residential remain the pillars and investors will now need to pay attention to several factors. These are the conclusions of BNP Paribas REIM‘s analysis of the real estate sector in the second half of 2023 as reported by idealista.pt.

Access to more expensive and difficult credit

Despite the general improvement in growth in the Eurozone, European real estate markets continue to adapt to the new economic environment, characterised above all by access to credit that is much more expensive than in the past. Furthermore, the price adjustment phase starting in the third quarter of 2022 still limits the expansion of the sector, as it leads many investors to take a wait-and-see attitude: buyers hope to have a clear idea of how the financing costs segment will evolve (waiting for better conditions to arrive), while sellers try to have a less cloudy pricing environment.

All of this caused a widespread drop in investment, which began in mid-2022, reaching 29 billion euros in the first half of this year, the lowest level since 2012, with data on agreements not yet concluded that do not seem to suggest a recovery at all short term.

The most difficult real estate sectors

The correlation between general economic conditions and the real estate market can be explained by the specific difficulties that the latter is facing. In particular, no asset in this sector appears to be immune from ongoing repricing due to global and local uncertainties.

Logistics, in particular, is the segment that suffered the fastest and most abrupt adjustment in income (+80 basis points compared to the fourth half of 2021). Despite this, investors remain on the sidelines, discouraged by the slowdown in international trade, which, in turn, is holding back demand. Rents are also suffering a contraction, with tenants taking time to evaluate their options, looking for better prices and/or conditions.
As for the office segment, the uncertainties surrounding it during the COVID-19 pandemic are more present than ever. The contraction that began in the United States has also spread to Europe, with investors trying to deduce the future through corporate strategies. Furthermore, increasing pressure to curb the lack of use of buildings and their faster depreciation could also push down the value of these assets.

Short and long-term forecasts for the real estate sector

Although the above seems to paint a less-than-encouraging picture, we must consider that this is the short-term perspective. As for the long term, however, the outlook is and remains more positive, so much so that BNP experts believe that logistics will be one of the best-performing asset classes over the next 5 years. In fact, the growth of new occupiers, from a very wide range, is expected to continue in 2024, supporting demand, and as long as it is possible to attract a substantial workforce, which does not cause widespread disposal of buildings, rents will also remain high, with positive consequences for revenues.

As for offices, the latest office data indicates that not only has telecommuting not been adopted on as large a scale as previously thought, but assets in major business districts have proven to be very resilient over the long term, attracting sustained tenant demand. Leases are also expected to grow at around 2% per year, generating good levels of return for main investors.

The retail sector is still adapting to the e-commerce boom and, in general, to the population’s new consumption habits. Although the business units in large centres have already been revalued, the prospects for value creation remain uncertain. In fact, the rate of disuse of these assets is still high and many of them have to review their positioning, with the rise in prices and their impact on disposable income, with the pace of sales expected to slow down in the coming months. On the other hand, there are still healthy retailers and prime leases continue to be successful. Furthermore, the strong recovery in tourism should support consumption and the high street sector in prime resorts.

Finally, sectors such as healthcare and residential are also affected by price and profitability adjustments, mainly due to exogenous macroeconomic factors. However, unlike those presented above, these two segments can count on the support of long-term trends that will not be as affected by economic crises, such as the growing average age of the population, urbanisation, and the reduction of household members. “For this reason, we expect healthcare to be the best-performing area over the next 5 years, while residential will have to settle for lower yields over the same period due to slower readjustments and lower capital growth.” Despite this, this segment will still be the second best performing segment after healthcare, on a risk-adjusted basis.

Source : ThePortugalNews

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The Algarve’s Real Estate Remains a Hot Commodity for Investors and Lifestyle Buyers

Billy Day — Wed, 04 Oct 2023 02:12:29 +0000

International real estate is a frequently chosen vehicle to diversify an investment portfolio, and demand for residential properties doesn’t appear to be easing. According to Knight Frank’s “The Wealth Report 2023”, a third of investors are turning to property investments to provide an inflation hedge and diversification. In the year ahead, 19 percent of UHNWIs (ultra-high-net-worth individuals) intend to invest directly in income-producing real estate, with 13 percent planning to take the indirect route.

Global UHNWIs consider residential real estate the safest asset class, with 45 percent of Knight Frank’s survey respondents favouring this type of investment vehicle over gold, bonds or commercial real estate. UHNWIs’ share of residential real estate owned outside of their countries of residence currently stands at 28 percent.

One of the top destinations for investors and lifestyle buyers is Portugal—particularly the Algarve, which still promises property-price growth and guaranteed rental returns.

As a result, our team at Ombria, the sustainable lifestyle resort in the Central Algarve, has seen continuous demand from international buyers from the United Kingdom, the Netherlands, France and the United States.

Ombria Golf Course

What makes the Algarve an attractive choice for investors?

Three hundred days of sunshine per year, regular flight connections from Faro International Airport, arts, culture and an abundance of activities to experience have all established the Algarve as a tourism hotspot. Inevitably, this has driven demand for holiday homes, with real-estate values and rental returns growing over the past few years.

In the 12 months to September 2022 alone, real-estate prices in the golden triangle of the Central Algarve increased by 15 percent, making it the second-highest performing European real-estate market.

Supply and demand

As we know, property prices are very much dictated by supply and demand. The Algarve is no exception, and findings from the Portuguese National Institute of Statistics (Instituto Nacional de Estatística, or INE) reveal that over the past 10 years, for every house completed in the Algarve, seven houses were sold. That’s an annual average of 1,500 completed properties out of 10,300 sold.

Looking ahead, there are no signs of the demand for quality real estate slowing down. Residential sales in the Central Algarve region have remained robust, as transactions increased by 21 percent over the year to the second quarter of 2022. Based on this and the steady number of buyer enquiries we witness at Ombria, we foresee that investors can expect their property values to continue to appreciate.

The Spa

Rental returns

Bearing in mind that the majority of investors are seeking income-producing properties, one must factor in the impacts of the tourism industry. The general rule is: The stronger a destination’s tourism market, the stronger the chances are for a property to deliver a steady rental income.

In 2022, Portugal’s tourism sector enjoyed a return, including revenue from tourist accommodations, exceeding €5 billion. With 19.1 million overnight stays, the Algarve was the most popular area, welcoming more than 4.8 million visitors from all over the world.

Branded residences

Branded residences are not a new concept, yet buyers still favour an investment linked to a household hotel brand name with a trustworthy team to manage their homes. Ombria has seen strong buyer interest in its branded residences: Viceroy Residences. More than 80 percent of the 65 one- and two-bedroom apartments, integrated within the five-star Viceroy at Ombria Algarve resort (opening in the fall of 2023), are now sold or reserved, leaving only 12 units remaining.

Due to be completed this year, Viceroy Residences are fully furnished and offer a guaranteed 5-percent net rental return per year for the first five years. Owners can be confident that the renowned Viceroy Hotels & Resorts will manage their properties perfectly.

Viceroy Residences

The owner of a Viceroy Residence will have access to the hotel’s facilities and Ombria’s 18-hole golf course, eight onsite restaurants and bars, several heated pools, a spa, a kids’ club, a fitness centre, a clubhouse and a conference centre, as well as services such as the concierge, cleaning, room service and maintenance.

Last but not least, owners will benefit from various advantages and discounts on golf as well as at hotel facilities—including all of Viceroy Hotels & Resorts’ 10 locations, such as those in the US, the Caribbean, Central America and Europe.

Buyers can also discover Ombria’s latest phase, called Oriole Village—a collection of 83 one- to four-bedroom apartments, townhouses, semi-detached villas and detached villas, which Viceroy Hotel Group will also manage.

Oriole Village, Ombria

Shift to sustainability

The world has been moving toward sustainability, impacting consumer and investor behaviours. Knight Frank’s wealth report reveals that energy sources (57 percent), opportunities for green refurbishments (33 percent) and materials/embodied carbon (30 percent) are increasingly being factored into investors’ decision-making processes.

Here at Ombria, we have seen a clear shift in buyer priorities, with the need for sustainable features becoming increasingly important to many house hunters. Today’s buyers seek not only a property with attractive onsite amenities but also a development that moves with the times and acknowledges the need for sustainability.

Ombria prides itself on being a sustainable lifestyle resort, and our properties and communal areas feature an abundance of sustainable features. Buildings will occupy less than a quarter of the development’s total area. Bioclimatic architecture will allow energy to be conserved wherever possible, using locally sourced materials perfectly adapted to the local climate.

Golden Visa

The Portuguese government plans to end the Golden Visa programme, hoping that this will reduce foreign real-estate investment and, as a result, help ease pressures on increasing property prices. However, it is unlikely that the end of the programme will have this impact as the number of property transactions with the objective of obtaining Golden Visas represents an insignificant fraction of the total real-estate transactions in Portugal (about 1 percent), thus having a negligible influence on prices.

Portugal is an attractive country for several reasons—namely, safety and quality of life, political and social stability, the quality of its infrastructures, a pleasant climate and low living costs. This has led to an increase in the number of people choosing Portugal to spend their holidays, buy holiday homes or live permanently. The most likely reason for the increase in property prices in recent years goes back to the topic of supply and demand, as the uplift in buyer demand has not been accompanied by an increase in the supply of properties.

Therefore, we would like to see the government implement measures such as reducing the tax burden and VAT (value-added tax) on construction, as well as reducing bureaucracy in licencing processes. These measures are essential for reducing construction costs and increasing supply, thereby decreasing real-estate speculation.

The ending of the Portuguese Golden Visa programme is unlikely to affect demand significantly, whether from the UK or other countries, as Portugal will maintain its attractiveness factors. It is also worth mentioning that any visa-driven investors are already deciding to apply for the D7 Visa (Retirement Visa or Passive Income Visa) instead.

Tax benefits

Individuals of any nationality (European Union [EU] and non-EU citizens) can take advantage of attractive tax benefits via the Portuguese Non-Habitual Resident (NHR) programme. The NHR is not a visa such as the D7 Visa or a residency-by-investment programme such as the Golden Visa. It is a special tax regime for residents in Portugal, enabling qualifying entrepreneurs, professionals, retirees and HNWIs to enjoy reduced tax rates on Portuguese-source income (most foreign-source income is exempt from Portuguese taxation) for 10 years.

In addition to the financial, sustainability and lifestyle aspects discussed in this article, it might also be worth noting that the Algarve is home to the majority of Portugal’s golf courses, with Ombria benefiting from its own 18-hole course. With many business deals being completed on the green, the high number of golf courses in the Algarve may just be another contributing factor to the region being so popular among investors.

Source : InternationalBanker

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Tivoli Hotels Opens its First All-Inclusive Property

Rick Casey — Thu, 29 Jun 2023 04:08:40 +0000

Tivoli Hotels & Resorts opened its first all-inclusive property, Tivoli Alvor Algarve Resort in Portugal, its fifth resort in the Algarve region.

Situated next to the village of Alvor and close to the city of Portimao, the resort features 491 guestrooms spread over 27.5 acres, including 56 two-bedroom Premium Family Rooms and four Premium Suites.

Amenities include five outdoor pools — one adults-only, three for families and one for children — four restaurants and two bars. It also has a gym and a Wellness Center with an indoor lap pool, hammam, saunas and spa treatment facilities.

The Pluma Junior Club, designed for kids ages 4 to 12, features a swimming pool with slides, a game room, playground, miniature golf and supervised entertainment.

The Essenze restaurant serves breakfast, lunch and dinner daily. Photo Credit: Tivoli Hotels & Resorts

Tivoli all-inclusive options

There are two all-inclusive options, both of which include access to a choice of theme parks and dinner at a selection of restaurants.

The premium all-inclusive rates also include VIP check-in and checkout, minibar upgrade, breakfast in a dedicated area and a free 30-minute massage per adult.

On-property dining includes Essenze restaurant for breakfast, lunch and dinner; and, for dinner, Carosello with Italian-inspired fare; Roastic steakhouse; and Mad Med, for Mediterranean cuisine. The Salty Bar serves poolside snacks and drinks and the Shore! Bar offers evening entertainment and cocktails.

The resort also offers regular complimentary miniature train transfers to local beaches and to Alvor village.

Source: Travel Weekly

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