What are the prospects and trends for the premium real estate market in Portugal? How has the market changed in recent years, and in particular in the last year and a half, due to the pandemic? What is the difference between the Algarve market and that of Porto and North of Portugal? Has the prevalence of teleworking, a little bit all over the world, changed the criteria for buying a house? Is Portugal seducing more foreigners of other nationalities as a result of this labour change? What assets does Portugal use to compete with other European cities, such as Madrid or Paris?
Ricardo Alves Costa, CEO of LUXIMOS Christie's International Real Estate, which operates precisely in the high-end segment, took part in a webinar led by the journalist Joana Petiz from the economic newspaper "Dinheiro Vivo" on the "Future of Real Estate in Portugal", shared the surprises and lessons of the pandemic and gave some answers. For the economist, there is a premise that has not changed: "Portugal has characteristics that position it above most of the competing countries"; and a premise that should not change: the alteration of the Gold Visas is a mistake. He also lifted the veil on the future: Americans are the new nationality enchanted with Portugal.
Joana Petiz (JP) - As an economist and an agent who has been in the premium real estate market for several years, you must have already witnessed several oscillations in the sector. This time, after a year and a half of pandemic, can you already identify signs of acceleration and appreciation of real estate?
Ricardo Costa (RC) - Our focus is on the Porto and Algarve markets. I am an economist, as you said, and I can interpret the economic cycles, whether they are long, short or medium term. But what happened with the Covid 19 pandemic was a surprise. The cycle slowed down and almost everything went to zero. In this company - LUXIMOS Christie's International Real Estate - we have not completely replaced physical visits with virtual visits. However, we have gradually adapted. And I recognise that the digital impulse has been decisive in overcoming some of the shortcomings that this pandemic has brought.
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JP - Do you feel that people are more confident, more willing to do the whole home buying process remotely?
RC - In all the gestures and direct actions of everyday life, people have been getting used to digital technology, participating more and more in a completely different lifestyle. And yes, there are some clients who started buying real estate without physically visiting the place. But this is not unrelated to the fact that the brand I represent brings an extreme amount of confidence. There have been clients who have taken this step because they feel protected. We don't adulterate what we advertise. This trust, which has been consolidated over many years, was decisive for the brand to bridge the physical distance.
JP - In other words, the Christie's brand, for having known standards of performance, worked as collateral in the relationship with the clients.
RC - If the market works in a certain way, and if at a certain moment the market assumptions change abruptly, and if simultaneously there is a desire to buy, it is normal that people want to take the least possible risk. Christie's is a 250 years old brand, of course this is a confidence factor. I could give you several examples of investors who only came to visit the properties afterwards. And I can even confess that some have not even come yet. The positive differentiation of the brand has benefited us. In terms of market share, our companies came out stronger.
JP - And in terms of price and supply, what effects has the pandemic had?
RC - The market changed in some points, but there were some surprises. The Algarve market is a good example of that. I even feared that that market, due to the various restrictions resulting from the pandemic, would go badly. On the contrary, we had a very interesting experience. For one fundamental reason: the Algarve already has a critical mass of foreigners who live on a permanent basis in Portugal, and who have kept the process of buying and selling property active. Just to give you an idea of what I'm referring to: more than half of the owners to whom we sell houses in the Algarve are not Portuguese. For this very reason, when the pandemic broke out, with the Algarve being a market made up almost 100 per cent of foreign buyers, we feared the worst. But it really was a surprise. The only difference is that prices didn't follow the upward path they were on, there were only marginal, subtle increases. In the North of Portugal, the scenario was different. This difference is related to the properties that were sold for local accommodation. Here, there was stagnation. And you can't even say that prices fell, the market simply ceased to exist for two or three months.
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JP - And has it recovered in the meantime?
RC - It is recovering. When we talk about the real estate market, we have to divide it into four segments: on the one hand, national and international; on the other hand, that which is intended for residence and that which is intended for tourist exploitation. These are completely different things. In what was intended for tourism, there was a deceleration. But we are gradually reaching the pre-pandemic point.
JP - Right now, Portuguese cities are competing, through tax incentives and residency programmes, with large European cities, such as Madrid or Paris. Now that the hybrid work model (teleworking) seems to be here to stay, how do you think we can improve our competitiveness?
RC - I would like to start by answering, referring to tax incentives and programmes such as the Gold Visa. It is quite frustrating to see ideology meddling in a vile way in economic activity. In that sense, the country has lost immense competitiveness. Perhaps this loss is not yet being reflected, but it will be noticed in the medium term. You gave the example of Madrid, a city that keeps its Golden Visa active and will certainly benefit from the bumps and uncertainties that are being consistently passed on abroad.
JP - In Portugal, the Gold Visas will be directed, as of next year, to the interior of the country.
RC - I know many countries in the world and I seriously believe the following: Portugal has some absolutely unique things, like the landscape, the people and the security. It has characteristics that position it above most countries. What made these characteristics visible was precisely programmes like the tax regime for non-habitual residents or the Golden Visa. Now, once you have made a visualization push, you cannot sacrifice the country. Right now, the Americans who are coming to Portugal are buying property and most of them are not even going for the Gold Visa. But the truth is that everyone is talking about it.
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JP - The characteristics of the country are enough to justify the change...
RC - Yes, Portugal is placed in the spotlight, because it presents different and differentiating characteristics. But also because it offers a tax environment that favours attracting certain investors or clients. If at any given moment there are bumps in this offer, the same happens as with inflation. In other words, the problem is not that inflation is big or small; the problem is that we do not know what level it is going to be at. When we know that the level is high, there will probably be a percentage variation that will have bad effects. Ideologies aside, I don't understand how Portugal can reject people who bring money into the country. I also don't understand why only the net investment in real estate is analyzed and not all the anchor and polarizing effect of that investment is accounted for. A client that buys real estate, probably also buys a car. And surely he will buy clothes, he will go to restaurants, he will bring friends. It is an elementary reasoning, anyone understands this.
JP - But is there ignorance about this polarizing effect or do you think we are just in the realm of ideology?
RC - It's hard to escape ideology. Let's look at the other side, at Spain. What do you think will happen there when we say that Gold Visas will have restrictions? I have several friends who work in Golden Visa legal support and all of them have had lots of clients who stopped investing in Portugal and started looking for alternatives in Spain.
JP - Even because for a Brazilian or an American the distance between Portugal and Spain is a pea.
RC - There is a fundamental point, which is this: these clients don't usually vote.
JP - If we want to attract foreigners to the interior of the country, we should also be investing in attracting Portuguese people. But it is not easy to attract people to places where there is no culture, no schools, no hospitals...
RC - Portugal is a fantastic country. The demand is there, the attractiveness is there. If there is a desire to boost the interior of the country, there should be positive discrimination, not negative. I'll give you an example, even going against an area that we work actively, which is the Algarve. The Algarve, unlike Andalusia, has no great museums, nor such a splendid history. So, why do people feel attracted to the Algarve? Why does the Algarve have so much sex appeal?
JP - Because of the climate, the beaches, golf...?
RC - Yes, the Algarve has all that. But what makes it different from Spain? One thing that no politician will ever change: that Atlantic breeze! We don't have the Mediterranean with water that hot (and not everyone likes water that hot), but we have that fantastic breeze. We've been winning prizes and gaining notoriety in golf. And then, over the years, the English built up a relationship with other English people and with the locals and today they feel at home. Can you imagine suddenly having the pretension of sending Americans or Englishmen to the interior? In relation to culture and infrastructures, your question is relevant, but that's not the problem. Because we have good motorways that serve the whole country. And the country is reasonably well endowed with hospitals. The problem is in the distortion, in things as simple as this: I arrive at a restaurant, I want to eat fish and they give me meat. I don't want meat and I leave.
JP - And do you think the Recovery and Resilience Plan (RRP) can bring any interesting changes to the real estate business?
RC - I don't know. The vocation of politicians should not be to interfere in the economy. Now, if there are EU funds, I want to believe that they can be reasonably channeled. But politicians should not interfere in what investors want. On the contrary, they should create a mild, friendly framework, ensuring them a climate of comfort. And they should advertise the country. Sometimes, politicians' best investment is to keep quiet.
JP - What are Christie's next bets ten years from now?
RC - We still need to reach more clients and reinforce, both in the Algarve and in the North of Portugal, two specific nationalities: the English and the Americans. The United States of America is a market with fantastic potential, and the main asset for them is security, which is one of our strong points. The Americans are the new nationality enchanted with Portugal and proof of this is the growth in interest from US investors in Portugal, particularly over the last two years. What's more, we're the gateway to Europe. When we look across to the other side, across the sea, we are their neighbouring country. Strategically, it's very important to strengthen the attraction of these clients. And we have the advantage that we all have good friends in the USA, we can easily promote local initiatives. It's a strategic bet. The American market is a priority.
