Bubble in real estate? More expensive houses bought without bank credit
The real estate continues in great excitement. House prices are rising across the country. Banco de Portugal launches notices, but promoter says the most expensive purchases are made without credit from the bank.
The real estate market continues to show signs of vigor. Although a large part of the increase in demand is concentrated in Greater Lisbon (mainly Lisbon and Cascais counties) and in Porto, data for the first quarter show that the appreciation of real estate, especially in the residential sector, is expanding To the whole country.
Also the commercial real estate business is attracting more international investment. The announced sale of the Blackstone fund from four shopping centers in Portugal – Sintra Retail Park, Forum Sintra, Forum Montijo and Almada Forum – could even raise the investment to 2.5 billion euros this year.
The value compares with 1.3 billion euros obtained last year and was advanced by Eric van Leuven, partner of Cushman and Wakefield in Portugal in the presentation of the Marketbeat study on the evolution of the real estate market until March. The deal announced by the US fund could be the largest real estate operation in the Portuguese market, with analysts pointing to values that could reach 900 million euros.
Far from the size of these big deals, the residential market continues to have a positive evolution. Data from the first quarter, reported by Marketbeat Portugal, promoted by promoter Cushman and Wakefielf, show a new growth in demand. This semi-annual study cites the SIR (Residential Information System) to advance that in the first three months of the year, demand in the residential segment grew 16% in Lisbon and 61% in Oporto, compared to the same period last year.
On the same day that this study was published, Confidencial Imobiliário, a newsletter that accompanies this market, reveals that in the first three months of the year there were house price increases in 95% of the counties of the country. Although widespread, the increases were particularly strong in Lisbon and Cascais, with prices up 24.3% and 18.3%, respectively. In Oeiras, prices rose 13.6%. In Greater Porto, only the municipality of Porto has appreciated. Despite the greater focus in some areas – another highlight is the Algarve where prices rose between 15.3% and 26.7% in the municipalities of Lagoa, Loulé and Faro – Ricardo Guimarães, director of Confidencial Imobiliário says that it has only recently been generalized The upward trend in house prices.
“Until now, the market represented an asymmetrical behavior of the historic centers of Lisbon and Porto and the Algarve, driven by international demand and tourism, compared to other locations dominated by traditional residential demand. , Mainly due to the resumption of mortgage credit that only in March reached the 720 million euros of new loans granted, that is, five times more than in February 2013. ”
Other data, the same trend. The Cushman and Wakefield report, which is based on the SIR (Residential Information System) sample, points to price increases of 17% in Lisbon and 24% in Oporto. In the capital, the highest valuations were in the neighborhoods of Belém, Ajuda and Estrela, “an evident reflection of the process of appreciation of the supply that the most traditional neighborhoods of Lisbon are going through.” In Porto, prices are rising more in the more premium residential area, Foz.
Lisbon, Cascais and Oeiras are the three municipalities of privileged performance of the Front Door Christies, real estate developer that is directed to the upper and upper middle segment. In a joint analysis with Cushman and Wakefield, also made available in Marketbeat relative to the first quarter of the year, reveals the foreigners have dominated purchases made this 2014, leading 62% of transactions made since 2014.
Bubble? Expensive purchases do not use credit
Despite the increase in domestic and foreign demand, which is highly targeted to this high segment, with real estate starting at 700 thousand euros, the director general of the Christies Front Door takes away a scenario of real estate bubble in this market. This is because the overwhelming majority of transactions are made without recourse to bank credit. Rafael Ascenso underlines that in the sales made by the promoter in the first half, about 170, 95% were paid without bank credit. The real estate mainly operates in the counties of Lisbon, Cascais and Oeiras.
The Director General points out to the Observer that this is a trend felt in the high segment where the Front Door operates, but that corresponds to a “paradigm shift” in the entire real estate market. Before the crisis, many operations even in the high segment were financed with bank credit, from the clients, but also from the promoters. It was very easy to get bank credit for the land, construction and for the purchase. There was a large facility that did not correspond to the actual repayment capacity of these loans, which resulted in the execution of many houses by banks and a devaluation of market prices. There is now a greater separation “between the actual ability to acquire and the desire to have.”
Rafael Ascenso points out that real estate bubbles are usually associated with easy and excessive access to bank credit, which is no longer the case because banks have closed the tap, after having lost many millions with exposure to the construction and real estate sector. Now even the promoters and investors in the sector work mainly with equity and buy to invest.
Moreover, in the analysis released this week, “demand growth was a consequence of the supply not having been accompanied by a growing demand. (…) It does not seem to us that prosecutors will give in to the temptation to contribute to a rise in the prices of square meters in their launches, because this would make them stop being competitive, driving away foreign investors. ”
Despite an increase in demand in the first three months, the average figures registered lighter levels compared to 2016, 6% in Lisbon and 3% in Cascais, where there is greater demand for larger houses.
But if the banking is not animating the higher segments of the real estate market, this is not so when we are talking about buying from home to housing. As the Confidencial Imobiliário recalls, the volume of housing loans granted by banks is in a steady recovery, returning to pre-crisis levels. In May, the highest figure since December 2010 was reached.
The Cushman ad Wakefield report stresses that the resumption of the economy, which reopened the door to “a more aggressive stance by the banking system in housing credit.” The demand in the residential market is being motivated by the acquisition of own housing, where the use of bank credit is the majority, but also by purchase for investment purposes, “mostly with little or no funding”, highlights the study Of Cushman.
Despite the paradigm shift in real estate, signs of buoyancy in the market are being followed by Banco de Portugal (BdP) that warns of the risk of a return to the past. In the financial stability report published in July, the BOP says that “rising real estate prices coupled with economic recovery and increased competition between institutions could create incentives for less restrictive lending practices, , Or to non-financial corporations. ”
And who is buying?
The Portuguese are still the biggest buyers, with 38% of sales made, followed by Brazilians who were responsible for 25% of purchases made since the beginning of 2014 that passed through the Front Door in the counties of Lisbon, Cascais and Oeiras.
Advanced information to the Observer reveals that buyers from Brazil made 172 transactions during this period in a total universe of 682 transactions promoted by the Front of Christies between 2014 and the first three months of this year. The French appear as the second largest international home buyers in this segment, followed by South Africans.
Data already in the first half confirm the weight of Brazilian investors, which represent 35% of the value of the transactions carried out by this company, along with the Portuguese who represented 34% of the turnover.
Although these numbers are the result of the transactions carried out by the Front Door, the director-general Rafael Ascenso admits to the Observer that the weight of Brazilian investors in the residential market of higher segments in the capital is a more general trend. In the case of this real estate, the importance of buyers in Brazil also results from a promotional effort that has been made in the Brazilian market in recent years.