Housing Boom?

In little VRSA...

I am not a real estate professional and can’t predict what will happen next. But as I walk along the streets of Vila Real de Santo Antonio, I sense a pending real estate spurt.

Installing the Pombaline roof on future luxury apartments overlooking the river.

Market Professionals

To try to get a sense of what is happening in the Portuguese housing market I consulted the website Confidential Imobilário which publishes statistical data based on actual real estate transaction prices, yields, and residential contracts:

…launched in 1988. Produced since then, the Confidencial Imobiliário Price Index is the oldest statistical series on the national real estate market. The time span of the index and its credibility make it referenced by the most relevant authorities in the national and international financial system, from Banco de Portugal, to the European Central Bank and Bank for International Settlements. In Portugal, it is used by almost all major credit institutions. - Confidential Imobilário

While housing sales dropped by 8% over the summer months, prices continued to increase. New leases in Lisbon and Porto saw a 10% increase, while home sale prices saw a 21% increase compared to the prior year. A lack of supply seems to be driving this increase in prices.

More new apartments overlooking the river.

Taking a Walk

I wrote before about the lack of available rental real estate in VRSA. I consulted Idealista again before writing this post and found that the majority of the listings excluded the summer months from the “long-term” rental price. In fact, I can find only two unfurnished apartments available for all 12 months of the year.

Some of the listings for the new apartments that are on the square at approximately €3000/square meter. - Idealista

But as I peruse the “comprar” (for sale) part of the website, my “walking about” impressions were confirmed. There is a new build/renovation spurt taking place in VRSA. Off-plan sales are brisk. (In fact, the Nautilus apartment complex I included in a prior post was sold out before the demolition was complete.)

Here’s the status of the Nautilus project today.

Phoned a Friend

Actually, I called our realtor and invited him for coffee. I wanted to ask him what he thought was going on in VRSA. Permit me to share a few of the observations he shared with me:

• Monte Gordo has gotten too expensive — People looking for oceanfront apartments flocked to our neighbor Monte Gordo. Yes, this is the town that reminded me of Fort Lauderdale and offers fishing boats on the beach. Recent activity has driven up prices with new listings topping €8000/square meter. (A square meter is 10.7 square feet.) Compare this to €5200/square meter for the Palacio Guadiana, above, which will overlook the river and VRSA marina.

One block of the square, this is one of my favorite buildings. 331 square meters is being renovated.

• Spanish Investors - A Spanish real estate investment fund is currently renovating several buildings in the historic zone. With approximately 75% already reserved, off-plan sales are brisk. (Delivery of these homes is expected in late summer/fall 2023.)

These apartments, see Idealista listing above, overlook the square.

• Zoning - It seems that after a 4-year hiatus, the city has gotten around to documenting the rules for renovations. (“Plano de Pormenor” or detailed plan.) Investors like certainty!

Closer to the VRSA train station, these new apartments come in at approximately €2500/square meter.

Nothing is Certain

In investing and real estate nothing is certain. However, in addition to the areas highlighted above, there is a lot going on. An area, along the river, closer to the ocean which today contains people living in ruins has been purchased by developers.

Yes, people are currently living in these ruins along the river.

In all over 10,000 square meters of land has recently been purchased along this section of the river. I suspect development in this area will take some time, as people will need to be relocated. (Relocating such people is never a quick or easy process.¹) However, the views from this area are truly spectacular…and there is one real estate adage that has been proven again and again. Location, location, location.

Final Note: Like many Trump voters that fail to recognize the error of their ways, I am well aware of “choice-supportive bias”. Certainly, I hope there will be an increase in real estate values so perhaps my cognitive bias is showing. Only time will tell.

Choice-supportive bias or post-purchase rationalization is the tendency to retroactively ascribe positive attributes to an option one has selected and/or to demote the forgone options. It is part of cognitive science, and is a distinct cognitive bias that occurs once a decision is made. For example, if a person chooses option A instead of option B, they are likely to ignore or downplay the faults of option A while amplifying or ascribing new negative faults to option B. Conversely, they are also likely to notice and amplify the advantages of option A and not notice or de-emphasize those of option B. - Wikipedia

Next Week: flowers in the cemetery and the benefits of having a routine.

1. Such persons may claim ownership rights if they live on a property uncontested for 10 years. The Portuguese Civil Code defines Usucapião in Article 1287º as the possession of the right of ownership or other real rights of enjoyment, maintained for a certain period of time, allowing the holder, unless otherwise stipulated, to acquire the ownership rights corresponding to its use.