Re-igniting the national economy through the real estate sector

15 Oct Re-igniting the national economy through the real estate sector

Hugo Santos Ferreira, Executive Vice President, APPII, shares his optimism for the Portuguese economy and international presence in the post COVID-19 era

Portugal is quite unique when it comes to the real estate market. Let’s begin the interview by hearing you sum up the ‘key ingredients’ that Portugal boasts that make it such a competitive destination for real estate investors?

We have been able to show our ability to learn from other European countries that were first hit with the pandemic. This allowed us to mitigate the harsh effects using quick consolidated measures. That also shows our political stability and agility. We have continued construction activity and selling properties right across the pandemic. The real estate sector in Portugal today represents 15 percent of total GDP, making us a strategic sector for the economy. To provide an insightful perspective, tourism before the pandemic accounted for 15 percent of total GDP. If we combine the construction and real estate, we contribute to 17.4 percent of total GDP. All the measures that were once available in Portugal for investors are still up and running, especially the Golden Visa programme. Investors can expect a good return on their assets here as we have been growing as a sector, non-stop since the economic crisis.

Real estate investors have been a driving force of the Portuguese economy in recent years. With a 15 percent contribution to GDP, the sector holds sway in defining what the immediate future should look like to revitalise activity. We have seen that, at the start of the year, APPII designed and proposed a package of exceptional measures for the government and relevant authorities to review. How has this manifesto been received by the authorities?

When we relaunched the ‘relaunch programme’ we had the vision to convince the government that the Portuguese real estate sector is a strategic sector worth investing in. We are also ready as a sector to help relaunch the economy. The Prime Minister and the Minister of Economy are behind our initiative, with the Prime Minister going as far as stating that ‘Attracting foreign investment right now is more important than ever’. With him acknowledging that the real estate sector is the one that brings in a large amount of foreign exchange and has been proving to do so for decades.

There were nine measures stated in the manifesto, one of which was the fact that many administrative processes that once required face to face interaction can now be done virtually, speeding up the administrative processes associated with real estate purchases. Within these nine measures we picked four vital measures, one of which is the relaunch of the Golden Visa programme. To clarify the importance of this programme, since its inception it has garnered more than EUR 5 billion of real estate investment. In 2019, it reached EUR 700 million of investment and EUR 85 million for the government. The real estate sector since the end of the economic crisis reached more than EUR 130 billion in investments and the sector has grown more than 20 percent per year continually. Foreign investments since 2014 have reached as much as EUR 30 billion in the real estate sector. All the programmes that currently exist also need to be realigned with Pan-European initiatives like the European Green Deal and the Europe Next Generation initiative, which is one of the main initiatives we are going to do before the relaunching of the Golden Visa programme. We also want to see how we can use these programmes to steer investment into other sectors of the economy, because as it stands, 90 to 97 percent of investment through the golden visa programme is destined to real estate. There is opportunity for this to spread across our economy.

President of APPII, Henrique Polignac de Barros pointed out during the Urban Rehabilitation Week in Lisbon that ‘The market will need massive investments, and that there is a lot of liquidity worldwide, which will be invested in countries that find the most intelligent solutions to attract that investment’. What would be your message of continuity or stability to international investors who have been or are now interested in investing in Portuguese real estate?

Compared to many countries in Europe we have an enviable political stability. In terms of capital, equity and investors this is the most important aspect when thinking about investing anywhere. In 2020, you will not find a safer country in Europe, since Portugal is ranked the third safest country in the world, according to the Global Peace Index. We are living in a global economic crisis; however, we know that liquidity still exists across the globe and it will soon be time where the major jurisdictions across the world will be competing to get the largest share. Our government and city officials from Porto and Lisbon want to make it clear that we are gearing up to create an environment that streamlines all of the previous bureaucracy that investors faced, to be able to compete with the other global jurisdictions.

Construction sustainability is no longer just a flag, but a necessity and a condition for doing more and better business. Energy efficient designs and higher quality construction are becoming requirements and a condition in this business. How has the sector responded to these challenges? What is the importance of sustainability in real estate projects?

We are very much aware of the new standard across Europe and want to adhere to measures outlined in the European Green Deal. One of the measures we want to implement in the new Golden Visa programme is to link real estate and energy efficiency via new technology. We want the Golden Visa to be a SMART Visa, attracting investments towards the efforts being made to decarbonise the country. This is a very specific and concrete example of how the construction and real estate sector are aligning to tackle these pertinent challenges. A good majority of new projects being put forward in all asset classes have measures to significantly mitigate the carbon footprint and further protect the environment.

We have seen that APPII has launched a new website to strengthen the real estate investment and promotion market in Portugal, bridging member companies with international players that intend to enter the national real estate market. Could you share more regarding this dynamic? How will this happen across the platform and what is the recent feedback you are getting from both players?

APPII is one of the main gateways for foreign investment in Portugal and, since 1991, one of our objectives was to facilitate foreign direct investment. Since the beginning of the time of discovery Portugal has been across the globe discovering the world, however only since 2014 has the world rediscovered Portugal in terms of a destination to invest and live. To highlight how successful this platform has been I must highlight the following: 50 percent of our members are foreign investors, funds and private equity from all over the world. Through this programme what we try to do is create synergies between these foreign investors with our local members. 85 percent of the foreign investors wants to work with a local established partner and we are the central point for them to find the right stakeholders within the construction and real estate industry.

APPII has almost existed for 30 years, establishing itself as the main door to open for real estate investors in Portugal. With your 30th anniversary coming up in 2021, what would you say are the higher-level strategic objectives for APPII in the coming decade?

Our idea for the future is to continue improving on what we have already achieved. Our target is to consolidate the association to be the main entity representing the real estate sector in the country, not only for investors, but also for the Portuguese authorities and local players. On the other hand, our goal is to be able to explain in an objective way that the real estate sector is the most strategic sector for economic growth. Real estate is at the top of the economic pyramid and we will be the sector to reignite the whole economy.