The residential market has been resilient, highlighting the ongoing shortage of new housing
Paulo Loureiro, CEO of Bondstone, states that one of the main challenges for the sector will be to convince international investors to choose Portugal over other countries. For Loureiro, the CEO of Bondstone—a Portuguese investment firm focused on real estate with plans to invest a total of €400 million by the end of 2021—the evolution of the pandemic in the coming months will be crucial in shaping the market for the coming years.
What can we expect from the real estate market in the second half of the year?
September and October are traditionally busy months in real estate, with the launch of new projects, major transactions, and strong sales indicators. This year will be slightly different, as most players are still cautiously observing market reactions across various segments before launching new projects or closing deals. The evolution of the pandemic over the next few months will be decisive in understanding the market ahead. Nevertheless, the resilience of the residential market aimed at Portuguese families is notable, with sales continuing at a good pace given the current circumstances, underscoring the shortage of new housing. In the commercial segments, particularly offices and retail, activity and liquidity levels remain too low to draw conclusions. We do not expect significant changes until the moratoriums on rents and debt expire.
What are the challenges facing the sector?
The constraints caused by the pandemic will undoubtedly impact real estate, particularly in demand for segments reliant on the international market—such as high-end residential—or on economic activity, like offices and retail. We also anticipate significant changes in project financing, whether from international investors (equity) or the Portuguese banking system (debt). One of the key challenges will be to convince international investors to favor Portugal over other countries, which can only happen if we remain competitive, particularly in terms of risk-adjusted returns, investment incentives, legal certainty in licensing, tax stability, and market transparency. However, the current situation could also create interesting opportunities. For instance, the expected reduction in investment levels, a probable rise in unemployment, and potential public sector support (through streamlined licensing processes and tax incentives) could reduce the cost pressures that have sharply increased in recent years. This adjustment could finally make middle-class housing projects (for sale and rent) feasible, addressing a long-standing market shortfall.
What are the forecasts for the market by the end of the year?
We expect the residential market targeting local buyers to continue at a strong sales pace, considering the current context, with minimal price adjustments (if any, likely to affect the second-hand housing market). Meanwhile, the pandemic is also likely to cause structural shifts in consumption patterns and corporate structures, creating opportunities in less prominent segments, such as last-mile logistics, which will likely grow alongside the development of e-commerce and the need to strengthen supply chains around major cities. In the commercial segments most dependent on economic activity, like offices and retail, we do not foresee an increase in liquidity and activity before the end of the year, as moratoriums will remain in place at least until March 2021, delaying decision-making for both owners and tenants. We are waiting to see how the market responds when these regimes come to an end.
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