JUNE 2013
What is the market doing?
THE BANKS SELLING OFF STOCK OF REPOSSESSED PROPERTIES
Portuguese lenders are offering thousands of repossessed homes at reduced prices after investment in real estate fell to the lowest in a decade. Banco Comercial Portugues SA (BCP) is offering discounts of as much as 12%.
Other banks are also actively trying to offload their supply of repossessed properties and creeper discounts seem likely.
“Banks need to get rid of their real estate assets and to do this, they need to create demand,” said Walter Fabrega, broker Jones Lang LaSalle Inc.’s (JLL) head of capital markets in Portugal. “Demand has to be created through big discounts.”
The latest discounts are expected to attract new investors, helping the market to recover, brokers said. “After a long waiting period, we
have finally started to clearly identify demand for value-added and distressed assets from funds with opportunistic money,” Jones Lang said in a report last month. “This tendency will increase during 2013.” Investment in Portuguese real estate declined 38% in 2012 from the previous year to EUR 125 million, the lowest in the last decade, according to Jones Lang. Prices declined for a second straight year in 2012, losing 2.2%, according to Confidencial Imobiliario, which collects data on the Portuguese property market.
Portuguese banks are expected to sell about 10,000 houses and apartments this year, or 22%t of total sales, compared with about 6,000 homes last year, said Manuel Alvarez, regional director of broker Re/Max Portugal.
RICS/CONFIDENCIAL IMOBILIARIO SURVEY APRIL 2013
The monthly RICS/Ci Portuguese Housing Market Survey (PHMS) provides a qualitative monthly assessment of the sales and lettings sectors based on around 100 regular responses.
This report has, for OPP’s point of view, consistently offered the most reliable picture of what is happening in Lisbon, Porto and the Algarve. It does not cover the other areas of Portugal.
The April 2013 PHMS results indicate that activity is stabilising in the sales market but is running out of steam in the lettings sector. Sales expectations turned positive
for the first time since Sept 2010 and new instructions turned positive for the first time since Oct 2010. Nevertheless, we would caution against concluding, at least at this stage, that the sales market has turned a corner. Indeed, prices continue to decline, with the national price net balance at -45 i.e. 45% more respondents experienced price falls rather than rises and they are expected to continue with the price expectations net balance still at -39. The lettings market has for sometime benefited from the fallout in the sales market, as households who cannot access mortgage finance opted to rent instead. However, this month growth in tenant demand stalled, while new lettings instructions are only barely rising and the volume of lettings transactions is expected to pick up at its slowest pace since this variable was introduced in the survey (October 2011). Rents, meanwhile, are falling and rental expectations are quite negative.
BEN TAYLOR OF THE PORTUGAL BUYING GUIDE
Ben Taylor of the Portugal Buying Guide is another of OPP’s favourite and most insightful commentators on the Portuguese property market. He says: “Only a foolishly bold individual would make confident predictions about Portugal’s property market in the current economic climate.
“Few would disagree that buying a property in Portugal right now as a short-term “flip” investment would be very unwise. Properties are taking a long time to sell, even at vastly reduced prices, so there is a risk of being stuck with an asset if your plans change. However, if you plan to be in it for the long haul, there is undoubtedly a buyer’s market to be taken advantage of. “There’s no shortage of choice either, from rustic properties in the hills to apartments in the Algarve, which are now beginning to appear at a fraction of their original prices. I should make two important points in the case of these apartment developments:
“Firstly, the genuine bargains are to be found locally and not online, so an extended viewing trip is advisable. Secondly, it’s important to check the status of any development you are interested in in great detail.
“It’s very hard to make price predictions for the market in general. One important point, however, is that it’s true to say that Portugal’s market has never reached the extreme “boom and bust” that has been experienced in Spain.”
For more information:
www.portugalbuyingguide.com
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