Simply put, Portugal is experiencing real estate
trends recently observed in the United Kingdom, and lenders are keen to take
Most noticeable is the structural undersupply of new-build
residential properties. JLL report that over the latest ten-year period,
housing stock has only increased by 1.9%. This is low, even by the UK’s own
poor standards who consistently fail to meet their own construction targets. The knock-on effect is sustained high
prices for local people, and a desirable form of collateral for bank loans.
In Portugal, like in Britain, the population is
traditionally used to the idea of homeownership. However, the high prices and
restricted access to mortgages – which will sound very familiar to Britain’s
“generation rent” – has increasingly meant young people stay in rented
accommodation for longer proportions of their lives. Whilst growth in property
prices continues to outstrip local wage growth, the need for new rental
accommodation will continue.
The largest benefactors have been local and
international Build-to-Rent (BTR) developers able to provide homes, normally
single-family units rather than blocks of apartments, to local people. Savills estimate a construction pipeline of 10,000 BTR units
in Lisbon alone and expect the trend set to continue. British lenders, now
fully bought into the BTR concept having seen sustained growth in the UK, and with
access to global funding lines, are keen to support.
Likewise, in the “alternative” sectors, JLL reports an
undersupply in the region of 20,000 student beds in major university towns, the
need for 17,000 additional retirement units across the country and an industrial and logistics sector
that requires significant repositioning to meet surging e-commerce demand and
changing consumer patterns. To London-based lenders, all of this sounds like the
commentary directed towards England’s urban centres five years ago at the start
of a sustained period of growth.
Meanwhile, Portugal continues to look like a safer economic
bet than much of the rest of Europe.
Portugal already imported less than 5% of its fuel
from Russia before the war in Ukraine and has established relationships with
energy producers in North and West Africa. Now it also looks to benefit further
from the energy disruption as the EU mulls building a massive LNG terminal on
Alongside that, Portugal’s Golden Visa scheme
continues to attract the continents’ wealthy and entrepreneurial classes, who
are supported by a growing pool of domestic talent graduating from universities
in Lisbon and Porto. Whilst the rest of the continent is faced with recession,
Portugal could be well placed to grow again, after impressive 5% GDP growth in
2021 and another 6% predicted in 2022 by the IMF. The strong local economy is
reflected in the 204% growth of office take up in Lisbon in 2022 reported by Cushman Wakefield.
This means the opportunities for Portuguese real
estate players are not only underpinned by sound economics and structural
demand, but they’re also a story that the UK banks are familiar with. Whilst
yields on British assets in logistics, industrial and student sectors seem to
be bottoming out, there’s much scope for them to compress in Portugal, giving
lenders more optimism in the medium to long term.
As real estate capital advisors, LEXI
Finance are tapped
into Europe’s highly diverse array of funding options. Never before have we
seen Britain’s lenders more actively seeking opportunities in Portugal. If
Portuguese real estate players are looking towards London, the heart of
European finance is looking back.
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