It is a case of David and Goliath: the Portuguese real estate market cannot be compared to the Spanish one in terms of size, but it is picking up strength very rapidly with a little help from the Chinese, delegates heard at the PropertyEU Southern Europe Investment Briefing, which was held in London this week.

It is a case of David and Goliath: the Portuguese real estate market cannot be compared to the Spanish one in terms of size, but it is picking up strength very rapidly with a little help from the Chinese, delegates heard at the PropertyEU Southern Europe Investment Briefing, which was held in London this week.

‘A year ago there was no market in Portugal,’ said Nuno Nunes, head of capital markets, Portugal at CBRE. ‘Now we have a dynamic investment market driven by foreign interest. Every day we have someone knocking on our door looking for something to buy, and every square metre that comes to the market is quickly snapped up.’

The market has improved since international capital has moved in demanding more transparency, said Manuel Alvares de Calvao, head of investment at Fidelidade Property: ‘The biggest problem is a lack of quality product, as 95% of the stock is obsolete and needs redevelopment.’

Chinese
Chinese investors have driven the market and established a strong presence. ‘If you fly to Lisbon airport all the signs are in Chinese,’ says Alvares de Calvao, whose Fidelidade Property business was taken over by China’s Fosun Group last year.

The Portuguese government’s ‘golden visa’ incentive scheme to foreigners who invest €500,000 in real estate has been very successful, leading to new investors buying €1.5 bn of office buildings, hotels and shopping centres. Some 80% of golden visas issued have been awarded to Chinese investors.

There is no doubt, the briefing heard however, that Spain remains the Iberian giant, not just because of its size but also because of its stronger economic fundamentals, with GDP growth forecast to rise by over 2.5% per annum over the next three years.

Spanish growth
‘Spanish growth is very encouraging,’ said Gregg Gilbert, head of Iberia at Benson Elliot Capital Management. ‘We are a value-add opportunistic investor, have been in Spain for 10 years now but still see great opportunities.’

Mikel Marco-Gardoqui, head of capital markets, Spain at CBRE, dismissed the notion that prices have become too high: ‘Two years ago it was said the market was overheating, yet prices have kept on growing. Core product is difficult to find, so secondary areas are now being redeveloped. Both the core and the value-add markets are interesting and they are attracting different kinds of capital.’

Market experts agreed that foreign interest is still focused on the big cities like Madrid and Barcelona.

As for sectors to watch, ‘we believe there will be rental growth in the office sector in Madrid, Barcelona and other main cities. Increases have already started for very high quality assets and they will filter through,’ said Gilbert. ‘We are more cautious on the retail sector, because Spain is over-retailed and rents tend to go down a lot faster than they go up. As for residential, the decline in house prices creates opportunities but you have to be very selective and knowledgeable.’