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Lisbon property market bounces back as demand and investment soars

The Portuguese capital Lisbon is experiencing a real estate revival, according to Knight Frank’s new insight into the city.

It’s currently in the spotlight as it’s been ranked the best city for investment and development prospects by PwC for 2019, up from 11th place last year.

This is being driven by affordable house prices, a low cost of living, improving transport links and solid economic fundamentals, which is allowing Lisbon to become an international destination for tourists, developers and investors in equal measure.


Market sentiment has further been boosted by the arrival in recent years of a number of international developers.

Strong returns are on offer in a city famous for its custard tarts, funiculars, football and fish, with gross residential yields in 2018 of 8% on the outskirts and 6% in the city centre itself.

Knight Frank’s report reveals that there are a number of prime locations ideal for investment. Lisbon, built on seven hills, has a varied range of neighbourhoods, each with their own distinct character – from upmarket Chiado to village-like Belém, and the old town to historic quarter Baixa.

The Avenida da Liberdade, for example, is the central spine of the old town running down to Baixa, and provides easy access to theatres, restaurants and the waterfront.

To the west of the city, meanwhile, is Belém (famous for its Pastéis de Belém bakery, said to be the most reviewed eatery in the world), which is overlooked by the Ajuda National Palace. Previously home to dockyards and warehouses, the area now provides green space, parks and plazas.

For Lisbon’s cultural heart, investors need to look towards the affluent district of Chiado. It’s largely been rebuilt following a fire in 1988 and generates some of the biggest premiums in the city, with prices now close to €10,000 per sq m.

Additionally, the coastal town of Cascais – situated just 30 km to the west of Lisbon - is a favourite second home destination made up of detached villas, world-class golf courses and excellent international schools.

Who is driving demand?

With domestic wealth increasing, the number of Portuguese buyers actively purchasing property is on the up, helped by low unemployment (currently at 6.4%, a 17-year low) and the fact that the Portuguese economy has surpassed the Eurozone’s average GDP for the last four years.

For a country that was immersed in a deep financial crisis from 2010-2014, with a £70 billion bail-out required from the EU and the International Monetary Fund in mid-2011, it’s been a remarkable turnaround.


Aside from domestic buyers, international demand is also strengthening with an increase in the number of English, Turkish, French, Brazilian and Chinese buyers.

Lisbon is also becoming an ever more popular tourist destination – in 2018, the number of international visitors reached 4.5 million – which is good news for those looking to rent out their investment property as rental demand is likely to be high.

The current lack of rental stock is helping to boost the performance of the investment sector and lead to the sort of yields on the outskirts and in the city centre mentioned above.

Investors should also be aware that Portugal’s Non Habitual Residency tax regime (NHR) enables anyone who hasn’t been resident in the country for the past five years to be eligible to receive pension income, rental income, capital gains on real estate and non-Portuguese income tax-free. The NHR is valid for 10 years.

What other government incentives are on offer?

To encourage investment and new infrastructure, Portugal started its Golden Visa scheme in 2012. While Golden Visas – which are a permanent residency visa for those who invest, typically through the purchase of a property, a certain amount of money in the issuing country – are commonplace in a number of economies in southern Europe, the scheme has been at its most popular in Portugal.

Since 2012, more than 7,291 residence permits have been granted to non-EU residents, with real estate the most popular way of obtaining residency. Some 6,879 opted to purchase real estate (through an investment of €500,000 or more), 397 transferred capital and 15 created a minimum of 10 jobs.

The latest data reveals that Chinese, Brazilian and Turkish buyers have been the most active applicants, with Chinese applicants particularly dominant.

It should also be noted that, in Portugal, there is currently no wealth tax, inheritance tax or gift tax – which can help to make investment much more profitable.

How are homes in Lisbon priced?

Very competitively, according to Knight Frank's research, especially when compared with London or other major cities. In Lisbon, €1m can buy you 125 square metres compared to London where it only gets you 43 square metres. In other words, you get quite a bit more bang for your buck in Portugal's capital.

Money also goes much further in Lisbon than in Vienna, Paris, Rome or Berlin, and offers slightly better value than Madrid.

Knight Frank’s research team also sought to capture the pulse of Lisbon’s residential market by handpicking the latest data, indicators and trends to enable buyers and sellers to understand current market conditions.

It found that average prices per square metre have risen steadily since 2009 and have really started to surge in the last few years. In 2018, for example, prices were 10.1% higher than in 2017. Equally, prime prices have soared since 2012 and were 6.9% higher in 2018 than the year before.

What about future investment?

To meet growing demand from young professionals, students and entrepreneurs – with Lisbon now home to three tech parks, 90 higher education institutions, two universities and a vibrant, growing startup scene – the city is significantly upgrading its transport infrastructure.

A €210 million Metro project is currently underway, eventually leading to two new underground stops and the regeneration of Cais do Sodré, the city’s main transport hub for trains, the metro and ferries.

Furthermore, the new Monitjo Airport – set to open its doors to the world in 2022 – is currently under construction and plans to service 50 million passengers per year once complete, rising from 28 million at present.

You can read the full PDF report here, with insights and expert knowledge from Knight Frank’s Portugal team Alex De Koch Gooreynd and Oliver Banks.

Previously, Mark Burns of property investment firm Hopwood House analysed why the outlook for Portugal’s property market was brightening and how Golden Visas had boosted the country’s property investment sector. 


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