Back to healthy growth, but still room for more
In 2019, residential real estate transaction volume was 25 billion euros and commercial real estate was 3.2 billion euros (40% in retail, 27% in offices, and 10% in hospitality). The Golden Visa program contributed 625 million euros, which is 2.5% of the total investment.
In Lisbon, residential property prices grew 8%, down from the previous two years (19% in 2018 and 26% in 2017), but still very significant growth, which leads us to believe that we are entering the market consolidation phase. Purchases were made by citizens of more than 80 different nationalities, who contributed more than 30% of the sales volume. This shows how Lisbon is now a globalized city, this diversification helps to reduce the risk of concentrated exposure to certain geographies.
Recently, the Portuguese Government approved the 2020 budget, as parliament allowed the suspension of the Golden Visa program in the metropolitan areas of Lisbon and Porto, only keeping it active in the remainder of the territory. This measure has been causing great concern among market agents, because it signals the will to gradually withdrawn the previous stimulation programs, in line with what happened in 2018, with the suspension of the authorization of short-term rental licenses in the historic centre of the city.
Interest rates have remained historically low, contrary to what the ECB signalled at the end of 2018, keeping the trend of cheap and abundant capital, benefiting real estate as a very compelling alternative asset. Rental yields have been decreasing slightly, currently standing at 4.4%, as a result of the increase in property prices above the rental price increase. In the historic areas of the city, they are already below 4%, on average.