The Property for sale market in Monte Estoril (Monte Estoril Residences), Cascais, Estoril, and Lisboa has been in the last four years experiencing a property price boom, with market prices recovering from a steep recession and downtime that occurred in the crevices of the Portuguese property collapse from 2010 to 2012, during the downtime property prices dropped from all-time highs by more than 60% and in recent years have recovered by more than 45% from the lows. Now with prices climbing at record rates, it is believed that the market will continue to increase and start to stabilize around 2022. For the year 2020-2021, there are significant driving forces still in play.
This will be the last year that the Golden Visa Residency tax program is to be offered to ex-pats in the Lisboa region. This means that the people who are considering relocating from noneuropeen countries will be able to benefit from the special tax incentives and the Schengen Visa program which allows nonresidences to gain a visa which will provide full access to Europe simply by investing more than 500K euros into the property in Portugal. From the year 2022 onwards this program will no longer be offered on the property that is located outside of the Lisboa area.
With this in mind, Lisba property has a significant driving force, which has another backwind, the political discussion is to now limit the NHR program in Portugal to start charging a minimum tax of 10% on pension funds from outside Portugal, these two tax incentives have been two main drivers of foreign investment income into Portugal, and are responsible for wage increases in the property and tourism sector that has seen wage increases locally by more than 50% in the last 4 years, side by side with depressed property values. In fact, wage inflation is a significant driver of rent increases across the region. In retrospect, according to Casa Pronta the rental market increases have seen prices pushed up by nearly 50% in the last few years alone.
These drivers have created significant price movement for Portugal, moving Portugal out of the recession phase that has dogged most of the southern European countries such as Italy, Spain, and Greece who are all still very much suffering in the recession phase that has plagued much of middle and southern Europe for many years now with austerity measures being the main political tool leveraged by political elites in northern Europe, such as the OECD and the European central bank, have largely tried aggressively to curtail tax evasion and increase taxes within Europe, while at the same time stimulating the economy with cheap money again pushing asset prices up hard, however, despite the austerity, tax loopholes closing and the financial stimulus pushing people into ever higher debt and reliance on the central government, Italy, Greece, and Spain remain largely still stuck in recession while only those countries smart enough to implement attractive tax incentives have improved the GDP.
While Portugal, on the other hand, has been very intuitive to implement such tax measures such as the NHR regime and the Golden Visa Regime and tax releif on property reinvestment across Europe, which has been a huge impact on the economy in Portugal. If you drive on any of the main road arteries or the A1 motorway connecting the north of Portugal to Lisboa, on Monday mornings or Friday evenings you will see gridlocked roads that are packed full with migrating workers coming from the north to take part in the boom experienced in the central parts of Portugal and the Lisba region, typically Lisboa, Cascais, Monte Estoril, and Estoril. These migrant workers are managing to take a small part in profits that the biggest property boom Portugal has witnessed in 25 years. With this backdrop it is not surprising that Portugal is witnessing property prices in line with big cities such as New York, at 9000 euros per square meter for property seen in Lisboa, Cascais and Monte Estoril and Estoril, these prices are still unrivaled in other parts of Portugal, but places like the Algarve having Right of first refusal/tax relief, are starting to see property prices rise also.
To give you an example of the deal flow currently being seen in Portugal here is one example project offering an investor an amazing return on investment of over 25%, with the timeframe of the investment being 18 months - 24 months maximum.
This exclusive property investment in Monte Estoril is for one house that is part of a two-house project, the property owner of the two lots originally planned one exclusive residence on a conjoined lot, but planning for such a concept was refused, resulting in the forced planning of building two houses instead of one. This opportunity makes it possible for an investor to finance the project and receive a very high return on investment given the input and risk. The project is being fully managed by the owner of land who will make two identical houses and sell one house that is a carbon copy of the house he intends to build for himself. This input alone and driving incentive will align very well with the property investor who will receive a stake in a project that is already two years in the making and yet receive an equal opportunity to leverage off the back of profits that come from this arrangement. The one available property is being sold for 1,275,000 Euros and the current market price of such a house in the area is in excess of 1,55,0000 and typically you can find new apartments for 1,300,000 in the same area that are smaller. So with market prices at around 8000 euros per sqm, this opportunity is offering a finished house for 3800 euros per sqm, leaving the investor a large area for profit. This project has been extremely well managed financially from both a tax and expenses perspective, hence the type gains possible. One of the areas that are being passed over is the fees on marketing, this is because the property is being marketed directly from the owner without external marketing agencies involved saving more than 6% off on this project saving 94k Euros on the asking price meaning that the profit available for an investor is larger. This sort of saving has been practiced throughout this project resulting in a non-commercial project with nice gains for an investor.
This project is offering a complete house with five stores for sale, of brand new construction, finished in stone, zinc, and wood and retailing at 3800 euros, you literally couldn’t build this house for the same money yourself. It would cost an investor an extra two years in further planning, and finding land identification is almost impossible at any reasonable price in this area. Not least having to manage the project is a full-time job and will be a 4-year project in total. The investor of this project is able to buy into the deal halfway through now that all the planning is complete and will be able to profit a nice little 30% gain with a real turn around on a sensible investment.
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