Uncertainty and instability are among the most repeated words in the most recent study from PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI) about the trends in Europe real estate.
But, even in this turbulent scenery, that also replicates in Portugal, Lisbon has managed to nail/keep/land an honourable 7th place in the ranking of the most attractive European cities to invest (see table), according to the new edition of Emerging Trends Europe 2017, to which Expresso had access.
A group of 781 of the most influential leaders in the real estate industry, private equity funds and family offices, scored 30 European cities according to their real estate opportunities, their assets’ profitability rates and their growth potential. This year, there were large movements in several cities compared to the last study’s ranking.
The most noticeable was the rise of German cities to the top 5 among the more interesting to invest, having 4 of those places: Berlin, Hamburg, Frankfurt and Munich. Another highlighting change is the quick descent of London and Birmingham, penalized due to the ‘Brexit’ phenomenon, which has come to overshadow the investors’ expectations (the study does not reflect yet the Trump effect).
Lisbon, which in investment fundraising in the last 12 months has gathered ‘just’ 2 billion euros (2.1201 billion U.S. dollars), one of the lowest sums in Europe, still manages, proportionally speaking, a good performance in the investors scrutiny for the granted potential. “In spite of being a small market, Lisbon is in this position because the investors believe that the price of real estate assets is low. A position even above other Iberian cities such as Madrid and Barcelona, where the sums are much higher”, says Jorge Figueiredo, PwC partner, recalling other issues that disfavor the Spanish, such as the pro-independence referendum in Catalonia.
Lisbon has made a unique path in the last three years in this investor assessment. In 2014, it did not go beyond 26th place (in 28 countries), jumped to 9th in 2015 and 7th this year, remaining in this position for 2017 for its growth potential. "Both opportunistic funds and traditional funds can find assets in a city where yields are among the highest in European capitals. There is, indeed, a great potential for profitability for those who are willing to accept risks", the study said.
Searching for good deals in more secondary cities such as Lisbon is, in fact, a clear trend among respondents. Lyon, the city that climbed higher in the ranking (closes the top 10, rose 15 places), is also a good example of this. Like Amsterdam and Zurich, "two capitals that have been gaining popularity among investors," says Jorge Figueiredo.
The hurricane 'Brexit'
Faced with atypical times, with the unstable financial market and the real estate subjected to various vicissitudes, the investors are unanimous in saying that the 'Brexit' effect will “redefine the map of real estate investment in Europe”. For 89% of the respondents, the countries’ political instability is the biggest concern at the moment. “There is a wave of populism in the UK, Italy, Poland and even Germany, and this is creating uncertainty, not opportunity”, said the manager of a German fund with business around the world.
And when we talk specifically about 'Brexit', 92% of more than 700 investors seem to be convinced that this exit from the European Union will cause a fall in the value of their assets and in the fundraising. However, only 21% believe that Brexit could have a negative impact on the volume of transactions taking place in the rest of Europe.
Istanbul, a former real estate star, also fell in disgrace (28th place in 30), but for other reasons. Once strong in the capture of international capital, the city has been undermined by the constant terrorist attacks. "When the market began to recover from the attacks in March, it again suffered another attack, the one of the airport in June, where 45 people died and 230 were injured. This had a very negative impact on investors”, said one of the managers quoted in the document.
Real estate that is up (or not)
In addition to the careful analysis of 30 main European cities' attractiveness, the study states the trends referring to the type of real estate to be invested or not.
And definitely on the rise are student housing, retirement/assisted living, healthcare and hotels. 61% of respondents identified student residences as a good capital investment alternative in 2017 and 51% the hotels. A trend in which Lisbon is already starting to score points, as the head of PwC underlined, along with Spain and Northern Europe countries.
On the downside are the assets located on the periphery, whether business parks or shopping centers.