Investments

Portugal is a wonderful place to live, invest and to do business. It has skilled human resources, a world-class infra-structure, friendly business environment and easy access to markets. This factors have contributed to a continuous flow of new investments into industry, commerce, tourism and services. This is a guide that we consider to be an important tool to help you through investment decisions, demonstrating the potential to conduct safe business in a stable country. Portugal is proud of the way it welcomes visitors and investors. At Algarve Realtor we are always available to help interested developers learn more about investment opportunities in Portugal.

 

Introduction

Portugal is located at the Iberian Peninsula, it is bordered by the Atlantic Ocean to the west and south, and Spain to the north and east. In addition to the continental territory, also comprises the archipelagos of Madeira and the Azores. It has a population of 10.6 million, the population density is 115 inhabitants per square meter. Portugal`s territory is divided into three administrative divisions.

The first division comprises 18 administrative districts plus the autonomous regions of the Madeira and Azores. Lisbon is the capital of Portugal and it is the largest city with 480,000 inhabitants and approximately 2 million inhabitants in the Greater Lisbon. The second largest city is Porto, located in the northern region with 210,000 inhabitants and 1.3 million in the Greater Porto Area.

Portugal is a democracy. There are the President of the Republic, the Assembly, the Government and the Law Courts. The current President, Aníbal Cavaco Silva, was elected for a 5 year period. The elections for the Assembly of the Republic are held every 4 years, followed by the appointment of the Prime Minister (currently Passos Coelho) who then has the obligation to form the government.

Portugal was a founding member of NATO in 1949 and a member of the United Nations since 1955. It has been part of the European Union since 1986.

Property Market

The property market in Portugal has been highly developed with a relative high quality of supply in all sectors, with a dynamic demand of foreign occupiers. The market is quite transparent, with numerous international consultants providing information on every aspect of the property sectors. There is also a contingent of international developers and investors, many of the most important European investment houses have assets in Portugal.

The legal and fiscal laws are favorable to property investment funds which, since 1980, have achieved a strong growth. Currently this industry is responsible for the management of more than 13 billion assets, divided over all sectors and regions in Portuguese territory.

In 1999 Portugal joined the euro, which placed the country on the radar of many international investors. The Investment made in 1998 increased from around 180 million to over 400 million, from this investment 90% came from foreign investors. At that time almost all asset transactions were mainly done in the office and shopping center sectors. Since then the market has continued to develop positively with increasing investment and growing demand for investment products. The year 2003 closed with growth of approximately 150% in the investment volume and unprecedented levels of liquidity in the property sector.

In 2007 the continuously growing investment market broke through the 1 billion barrier in asset transactions, a new investment record. This was a truly exceptional year and the euphoria felt by the investors was hardly dented by the events in the United States (summer 2007), which only later came to be seen as the harbinger of the major crisis of recent years. Only later, in the end of 2008 and 2009 the full effects of this economic crisis were felt in Portugal, the impact was almost immediate on property investment. The fear or virtual non-existence of funding had a severe effect on the property market. The growth of around 30% per year over 2006 and 2007 went down more than 60% in 2008, at slightly more than 500 million. In 2009 the market remained depressed and the overall transactions didn´t go over 590 million. In the second half of the year came the first signs of recovery in the European economy. In 2010 a level of guarded optimism in the market made a few investors return but in the second quarter, concerns over the sustainability of European sovereign debt took its toll on the investment activity. The following two years reflected a crisis scenario, and 2012 was the year where Portugal had a lower amount of property investment, a total of 108 million, less 36% then 2011.

Finally in 2013 the first stronger signs of Investment market activity, after a slow first trimester the total of transactions reached in the year was a total of 322 million, 3 times more than the previous year.

The investment market in Portugal has been dominated by institutional investors, international funds focused on retail sectors and office located in “prime” areas. The general domestic funds have been also interested in offices but also industrial assets with low management requirements. In terms of property assets the diversification has clearly been the main reason for their market entry.

Since the start of the decade an important level of demand in the industrial, hotel, health and educational sectors have been noticed, as well as the most important investment in Retail and office spaces.

Foreign investment in property

Over 4 billion has been invested in Portugal during the last 14 years by Germans, British , French, Dutch and Americans. Over 50 international investors, invested directly or indirectly in Portugal since we joined the Euro currency. This figure could have been higher but the market is not large enough to supply the demand at the time.The property investment market came on the radar of foreign investors in 1999, when Portugal joined the euro.

Some important European investment houses, interested in diversifying the risk and achieving higher income returns decided to invest in a country that offers security, transparency and less competition. Property investment in Portugal is directly associated with the future economic and financial market performance. As a partner country of the Euro zone our good track record in terms of capacity to re-balance the accounts had a very positive effect on the increase of investors.