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Lisbon Real Estate Market Snapshot 2017

Lisbon, the perfect city to live

Urban rehabilitation in Lisbon

Lisbon is probably one of the best cities in the world for a global citizen establishing your base strong>, one who makes the world his home, constantly traveling from country to country, whether for business or pleasure. Examples of global citizens who chose to establish their base in Lisbon are Alicia Vikander and Michael FassbenderMadonna, Eric Cantona, Monica Belluci, among others.

But apart from the famous, there are many other profiles who choose Lisbon to live for various reasons:

  • Business men and women who choose Lisbon thanks to fast connections to central Europe, the USA, Africa and Brazil. After all, Portugal assumes a central position between Europe and America;
  • Couples with children who choose to move to Lisbon because of the quality of life, the education and for safety. Lisbon has a wide range of international schools for all levels, and is the 5th European country with the most schools in the Financial Times Top 100 Business Schools. Portugal is the 3rd safest country in the world;
  • Entrepreneurs who choose Lisbon because it is one of the hubs of fastest growing startups in Europe, because they find IT resources at lower prices than in Northern Europe, as it is the home of the Web Summit, the biggest event for startups in the world; span>
  • Retirees moving to Lisbon due to the mild climate, a top cultural offering ( it is possible to attend some of the best interpreters of classical music at the Gulbenkian Foundation, at 50% lower prices than in central Europe, exhibitions by the best artists), because the Portuguese like to welcome foreigners, for the gastronomy, and in a advanced on the visa, as they have health care at moderate prices, public and especially private hospitals with a very good offer. Lisbon has one of the most advanced cancer treatment and research centers – the Champalimaud Institute, there has been a big focus on long-term care and nursing homes.

Why are prices going up in Lisbon?

This report focuses on Lisbon’s Urban Rehabilitation Areas (ARU), which can be seen as the city center in a broader sense. It is in these areas that most of the activity in terms of urban rehabilitation has been concentrated, which is allowing the city to be renewed, through magnificent architectural projects that preserve the fascinating old design in buildings equipped with modern amenities.

One of the most discussed issues currently is about the possibility of a bubble forming in real estate in Lisbon. In our opinion, the factors that explain the price increase are:

  • Increase in the quality of the offer (“quality delta”): the new rehabilitation projects exponentially increased the average quality of the offer. 5-6 years ago, the average quality of construction in the ARU was very low, there were many buildings in very poor condition, as a result of a rent law that did not encourage owners to do works. With the revision of the rent law of 2012, the rehabilitation gained a strong impetus, new developments began to emerge, and where there used to be degraded apartments, there are apartments that have preserved their historic character, but with premium. This is the main factor for the increase in the average price: degraded apartments replaced by quality offers.
  • Increase in Tourism: the opening of Lisbon airport to operators low-cost has increased the number of flights to Lisbon, targeted at city break. This significantly increased the number of tourists in Lisbon, at an early stage, tourism budget that sought alternatives to the traditional hotel offer, particularly in Lisbon’s historic districts, where the offer was limited (Alfama, Castle, Grace, etc…). This sparked interest in Local Accommodation, which led to the complete transformation of Lisbon’s historic areas, probably in an exaggerated way, which could jeopardize its future identity (but this is the subject of another discussion). This increase in Tourism had a direct and indirect contagion effect in terms of commerce, the offer of restaurants, leisure activities, the offer of tourist tours and mobility (eg Tuk-Tuk, HypoTrip), the cultural offer, among others. The city has modernized, it has become more attractive for tourists who visit us and also for locals.
  • Increase in International Demand: With the 2011 crisis, and the rescue of the country by the Troika, several measures were implemented that made the country more attractive for investment, in the eyes of international investors: the revision of the law of the rents that unlocked the rehabilitation of buildings in the historic center of the city, the Residence Permit for Investment Activities (aka Golden Visa), which allowed, in an initial phase, to attract investment from citizens outside the European area who were seeking access to the Schengen Area for and direct family members, the Non-Habitual Residents program that attracted many European citizens to Portugal (at the end of 2016 there were 10,684 foreigners under this program), in particular retired people, who invested in real estate (purchase or lease) in exchange for a reduction or income tax exemption. Currently, demand has more to do with intrinsic factors of the country’s quality, as mentioned above;
  • Favourable International Environment: We live in a time when there is more liquidity than investment opportunities with good rates of return. Interest rates are at historic lows, financial markets are beginning to show signs of saturation, and real estate turns out to be one of the asset classes with the most interesting returns;
  • Long-Term Investment: Initially, the focus was on cities Tier 1 (such as New York, London, Hong Kong), but currently, with the increase in supply, yields provided in these cities were no longer attractive, and investors began to turn to other geographies, and realized that in Lisbon they were able to have yields of 6%-7% and capital gains above 10%/year, so they quickly started putting Lisbon, and later Porto, on the investment map.
  • Speculative Investment and Opportunistic Owners: a significant part of the investment was made through investment funds. The main problem of the Portuguese market is the lack of liquidity. In the event of a reversal of the cycle, there will be some institutional investors who will seek to quickly get rid of some assets, putting pressure on the market. On the other hand, there are owners who are taking advantage of the current moment to speculate on the sale price of their assets. Without making any intervention to enhance their assets, they are asking for 30% more, sometimes 50% and even 100% of the price they asked 2 or 3 years ago. This effect is also evident in Porto. And this, of course, is worrying.

Future Perspectives and Opportunities

Having said that, what are our perspectives for the coming years? We believe that the current expansionary cycle can be maintained for another 2 to 3 years. It is natural that there is some slowdown in terms of capital gains, because the quality “delta” is already less noticeable. From now on, it is necessary to be aware of the speculative effects on the supply of medium and lower quality (where this effect is more noticeable).

The stock markets have already started to show signs of saturation and, typically, the real estate cycle reverses 2 years after the end of the stock market cycle.

What will happen to those who buy now? From our perspective, Lisbon continues to be very attractive for:

  • Buy premium real estate to live in: buy a house to establish your base, because prices in the premium segment continue to be more interesting than in other European cities (quality/price ratio) ;
  • Investing for long-term lease: buy-to-let (buy-to-let), in particular long-term lease. The long-term lease offer is extremely scarce, and the yields are very interesting (5% to 7%). For a foreign investor, it is important that this investment has little leverage (low exposure to credit), in order to reduce exposure risks in a reversal of the cycle scenario. It is particularly important to buy well, at fair prices, in order to maximize yields;
  • Senior Residences: there is a lack of residences for retired citizens and the yields are very interesting, the European population is aging, and more and more people are looking for the southern countries to live their retirement;
  • Student Residences: as an example, the new campus of the Nova Business School of Economics will open, for up to 5,000 students in Carcavelos/Oeiras-Cascais, and there is a significant lack of accommodation for students only in that area, not to mention the biggest universities in Lisbon. Lisbon continues to attract more and more international students, a trend that should remain on the rise in the coming years, and it is necessary to reinforce this offer, and in particular at the level of superior quality.
  • Boutique Hotels Lifestyle: Lisbon is increasingly attracting sophisticated tourism, demanding accommodation, looking for charming hotels in historic areas that offer personalized service, integrated with the cultural offer of the city, where they feel at home. And the existing offer is clearly insufficient, both in Lisbon and Porto.

We hope this analysis can be useful to support your decision process, and we are available to delve deeper into any subject and advise on your investments.


On average, in Lisbon’s Urban Rehabilitation Area (ARU) (covers 11 out of 24 parishes in Lisbon), prices have increased by 14, 1% on a quarterly basis (between the 3rd and 4th quarter of 2017) and 26.8% on an annual basis (between the 4th quarters of 2016 and 2017). In other words, these are very significant increases that show the strong momentum of the real estate market.

Lisbon parishes with the best quarterly performances were: Belém (+37.9%), Arroios (+23.9%) and Santo António (+20.4%).

In terms of annual variation (2016-2017), the parishes with the best performance were the same, with only one change in the first 2 positions: Arroios (+36.7%), Belém (+35.7%) and Santo António (+33.6%).

The average price at ARU was €4,392 on a quarterly basis and €3,910 on an annual basis. Note that this difference is due to the effect of considering only the quarterly average on a quarterly basis, and the annual average on an annual basis. The fact that the highest value is the quarterly is due to the prices having increased throughout the year.

The parishes with the highest prices per m2 are: 1) Santo António (€5,853), 2) Santa Maria Maior (€5,037) and 3) Mercy (€4,852).

The average premium segment price for the ARU is €7,446, ranging from €4,329 for Ajuda to €9,255 for St. Antonio.

If we divide the ARU into 3 tiers, we can summarize our findings for the 2-segment medium and premium quality in the following table:

Tier Middle Segment Premium Segment
Tier 1 – Sto. Antonio, Sta Maria Maior and Sto Antonio 4,800 – 5,500 8,100 – 9,300
Tier 2 – Arroios, Avenidas Novas, Campo de Ourique, Estrela 3,100 – 3,800 5,300 – 6,500
Tier 3 – Ajuda, Alcântara, Belém, S. Vicente 2,500 – 3,500 4,300 – 5,800
Prices per sqm in Lisbon 2017

Since the lowest point, during the 2012 crisis, prices in Lisbon grew 81% in the real estate segment premium and 71% in overall average, which means that the premium segment grew faster than the average, which supports the conclusions we shared in the previous chapter, in our perspective on the real estate market.

When we extend the analysis to other municipalities in the district of Lisbon, with greater international demand, Oeiras, Cascais and Sintra, it is concluded that the price increase was more relevant in Lisbon, for the reasons explained in the previous chapter.

Investors should regard prices per square meter as merely indicative, as they do not fully reflect what is happening on the ground, particularly for new developments that are about to be launched and that will influence price dynamics. We advise you to consult us to discuss these aspects.

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