Interview with The K Advisors
Prague, 30th of March 2022

With the Portuguese Real Estate Market being one of the hottest in Europe, interest from the international investing community is at an all-time high. Miguel Anjos, Business Developer & Head of Valuation from The K Advisors, answers our questions about trends and expected activity in the market, alternative asset classes, and more.

Moratoria were in place in Portugal for longer than most European countries. How have they helped and what impact has the pandemic had on the RE market?

The Imposed delayed payments allowed by the lender had a positive impact on the economy and consequently on the real estate market. After its termination in September 2021, and the recent prevention rules and management of non-compliance credit agreements, which forced financial institutions to give detailed attention to the clients who have access to moratoriums, it is expected that there will not be a significant increase in defaults in the real estate sector.

At the end of September 2021, the date that marks the end of the moratoria granted until September 2020, the global amount of loans covered by moratoria was 19,200 million euros, 17,200 million euros less than in August. All sectors of activity recorded a decrease in their loan amounts, with hospitality and Food & Beverage sectors still with the largest share, 37.1% of the total.

Regarding the loans used for acquisition, development and construction works in residential assets for own use or renting, as well as for the acquisition of plots for development, in September 2021 there were 83,800 debtors, 60% less than in August 2021, representing a decrease of approximately 8,000 million euros.

How are prices evolving, by asset class, in the Portuguese Real Estate market? Are any strong upticks expected?

We registered different dynamics across the Portuguese Real Estate market over the last years.

Residential: whilst analysing the main real estate indicators in the residential sector during 2019-2021, only the number of sold dwellings decreased in 2020, with the transaction price, € and €/sqm, increasing over the same period. For example, in Lisbon, the average transaction values, €/sqm, reached €4,000/sqm in 2021, almost 100% more than the national average. In 2022 there is already a slight increase in these indicators and this tendency is expected to continue.

Offices: the office sector led the demand for commercial assets, with €780 million, representing 40% of the total volume invested in Portugal. The purchase of Quinta da Fonte by Sixth Street for €145-150 million and the Navigator Portfolio by South for €120 million, were the largest deals in this sector.

Industrial: over the years, industrial and logistics sectors were stagnant due to the lack of quality supply. This trend has changed with the pandemic, with a general increase in online commerce and demand, pressuring the market for new supply by the logistics operators.

Hospitality: since the beginning of the pandemic in March 2020, with international mobility restrictions, most hotel units have closed and investment decisions have been postponed. There was a significant decrease in all key performance indicators, with the most affected being the occupancy rate. In 2021, especially during periods with less restrictions, the sector recovered, but still with low occupancy rates compared with previous years. During the current year, it is expected that there will be several large deals and a general recovery of the sector.

Commercial investment: in 2021, commercial real estate registered €2,020 million invested in Portugal, less than the previous three years. The main reason for this trend was the postponement of several major investments. Nevertheless, it is expected that they will occur during the current period, making 2022 an excellent year.

How are the Banks managing their NPL/REO Real Estate-related assets and what types of portfolios have recently come to market/will come in the next months?

Portugal reached a historic low in the non-performing loans (NPL) ratio of 4.0% in the 3rd quarter of 2021, 1.3 % less than in the same period of 2020. The NPL ratios of individuals have remained constant since the end of 2019, at around 3%, and the ratios of Non-financial corporations reduced to 8.3%, contrary to the increase recorded in the 3rd quarter of 2021.

2021 registered different dynamics on the NPL/REO selling portfolio across the major Portuguese banks. We identified more than €4,000 million euros in GBV across at least 11 deals.

PortfolioSellerValue M€
CrowESC1500
HarveyNovo Banco640
ZIPNorfin320
LimeBPI300
GerêsMontepio300
WebbMillenium BCP270
WilkinsonNovo Banco216
RowMillenium BCP180
GreenMillenium BCP145
MercuryCaixa Geral de Dépositos128
Pool 54 & 55Santander90

The year started with the sale of €60 million Lucia Project by Millennium BCP and Montepio is currently selling a €1.400 million portfolio. We foresee an active year.

What is the key to successful Valuations of RE assets in Portugal and what are the challenges? What resources are available to Investors locally?

The key to success in the valuation business is, first of all, consistency. This can be achieved with an experienced team provided with excellent market data. In this business, we have to guarantee that we are always updated in terms of, not only market activity, but of legislation that can impact the valuations, such as urbanistic, lease, fiscal, etc…

We have to improve on a daily basis and understand how we can provide the best services to our clients. The present and future are related to the digitalization and data analysis (big data) of the sector. We can inform the market that we are currently working on a proprietary internal platform to aggregate market data and valuations.

In Portugal, we continue to have several challenges that, if surpassed, would bring more transparency and confidence to the market, general access to transactions data, consistency by all market players with areas definition, complete online cadastral information, among others.

Which asset classes are of interest to Investors?

Due to the impact of the pandemic, the Retail and Hospitality sectors were the most affected and will be the most demanded for by international players in order to perform with their investments. Good opportunities are and will be on the market.

Hotels, Residential, Retail, Logistics: how are these markets all evolving in terms of supply, cap rates, demand, regional differences, etc? In particular with Hotel/Tourism, have you adjusted your valuation parameters after the pandemic?

Yes, definitely. The sector, as expected, was affected by the decrease of tourist arrivals, with a severe impact especially at occupancy rate levels. We foresee that only in 2023 we will reach pre pandemic levels.

How are market rents and the build-to-rent market developing?

Market rents have evolved with different dynamics across the main Portuguese regions. The annual rents by region have slowly increased however, the numbers of leases have decreased in all regions, except in the Lisbon Metropolitan area. The average total annual rent for the housing market in 2021 was at €10.2/sqm/month, which represents a 14% annual increase. Although the demand and prices are increasing, the Built to Rent (BtR) market is still not attractive to investors mainly due to the lack of tax incentives and to the rise of construction costs. The pipeline is residual if compared to the potential demand of Portuguese households. We foresee that the government will be forced to intervene in order to boost the BtR market similarly to what has happened in other major European cities.

Miguel Anjos, Business Developer of The K Advisors will be attending the NPL Europe 2022 summit in London on 5-6 of May (see info). If you would like to attend and arrange a meeting with Miguel to discuss The K Advisor valuation services, contact us now to arrange a chat.


SmithNovak © | Contact us | Privacy Policy