Real Estate Market Snapshot Lisbon 2019
Back to healthy growth, but there’s still room for more
In 2019, the volume of residential real estate transactions was €25 billion and commercial real estate transactions amounted to €3.2 billion (40% in retail, 27% in offices and 10% in hotels). The Golden Visa program contributed 625 million euros, representing 2.5% of the total investment.
In Lisbon, residential property prices grew by 8%, below the two previous years (19% in 2018 and 26% in 2017), but still a very significant growth, which leads us to believe that we are entering the phase of market consolidation. Purchases were made by citizens of more than 80 different nationalities, who contributed more than 30% of the sales volume. This shows how Lisbon is today a globalized city, this diversification helps to reduce the risk of exposure concentrated in certain geographies.
Recently, the Portuguese Government approved the budget for 2020, which contains an authorization by the Assembly of the Republic for the suspension of the Golden Visa program in the metropolitan areas of Lisbon and Porto, keeping it only in activity in the rest of the territory. This measure has caused great concern among market agents, as it signals the desire to gradually withdraw from previous stimulus programs, in line with what happened in 2018, with the suspension of the authorization of local accommodation (short-term lease) in the historic center. of the city.
Interest rates have remained historically low, contrary to what the ECB signaled at the end of 2018, maintaining the trend of cheap and abundant capital, benefiting real estate as a very attractive alternative asset. Rental income has declined slightly, currently standing at 4.4%, as a result of the increase in property prices above the increase in rental prices. In the historic areas of the city, they are already below 4%, on average.
On average, in the Lisbon Urban Rehabilitation Area (ARU) (covers 11 out of 24 parishes in Lisbon), prices increased by 4.1% on a quarterly basis (between the 3rd and 4th quarter of 2019) and 8.5% on a annual basis (between the 4th quarter of 2018 and 2019). These values compare with 6.6% and 23.5%, respectively, in the 2018 Market Snapshot (referring to the 1st half of 2018).
The parishes of Lisbon with the best quarterly performances were: Santa Maria Maior (+36.9%), Santo António (+32.8%) and Areeiro (+8.4%).
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: Campolide (+54.7%), Santa Maria Maior (+44.0%) and Santo Antonio (+25.0%).
The average price on the ARU was €4,244 on a quarterly basis and €3,967 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) Santa Maria Maior (€6,370), 2) Santo António (€6,274) and 3) Misericórdia (€5,372). Compared to the previous Market Snapshot, Santo António recovered from 5th to 2nd place in the ranking of the highest price per m2.
The average price of the premium segment for the ARU is €9,375 (+22.6%), ranging from €3,288 in Beato to €10,024 in Santa Maria Maior.
If we divide the ARU into 3 tiers, we can summarize the results for the 2-segment medium and premium quality in the following table:
|Tier||Segmento Médio||Segmento Prime|
|Tier 1 – Estrela, Campo Ourique, Misericórdia, Sta. Maria Maior, Sto António||4.200 – 6.500||6.500 – 10.000|
|Tier 2 – Alcântara, Campolide, Avenidas Novas, Arroios, S. Vicente||3.000 – 4.300||5.000 – 7.000|
|Tier 3 – Belém, Ajuda, Alvalade, Areeiro, Penha de França, Beato, Marvila||2.100 – 3.600||3.500 – 5.500|
From the lowest point, during the 2012 crisis, until the 2nd Quarter of 2018, prices in Lisbon grew 117.2% in the prime real estate segment and 116.2% on average. Last year, the medium segment grew faster than the prime.
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.
For 2020, we expect prices to rise between 4% to 6% and yields to be in the 4.3% to 4.5% range, on average. On the outskirts of the city, we expect double-digit price growth.
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