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Portuguese economy might recover by the end of 2021
20 May 2020 |

There are several variables involved in the recovery of the Portuguese economy. But José Araújo, Real Estate Assets’ Director at Millennium BCP is confident that the positive indicators will come together and that «at the end of 2021 we could be in the same place we were in 2019».

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In his opinion «Portugal will recover much quicker than the other countries, but to go back to where we were, 1 year and half will be required». This is because «the spreads are low, there is a lot of liquidity in the market, the funds will recover (…) and the developers are not stopping their own plans, they are waiting to see in order to develop new projects», he explained at the initiative Iberian Property Investment Talks.

But this recovery will depend on other factors such as «unemployment, the health of the economy, support of the European community, deficit, the need of liquidity to support companies, and the discovery of a vaccine which will take one year», he mentioned.

Buildings’ prices should stabilise «but will not have a big drop»

The Portuguese real estate market’s good moment doesn’t seem to allow great drops in terms of buildings’ prices. According to José Araújo, «in a very short time, prices will stabilise and possibly drop a little, because all the sectors in the economy will decrease their activity».

But «the sector is very strong right now and we must be able to work towards stabilising prices without having them drop too much. Of course, this will depend on investors, companies and people’s reaction and how they will spend their money», he explained.

On the other hand, «we have to be prudent about assessments and the market because this is a unique situation. We must remain calm because the causes behind this crisis were health-related and not economic», he highlighted.

Confidence will be the basis for recovery

One of the most important variables for the sector’s recovery will be the confidence on the sanitary conditions passed on to the consumers. «There are different issues about health security that could influence some segments like short-term renting, hotels and also somewhat retail and shopping centres. If we are able to quickly implement security measures in these segments, people will have more confidence and come to these establishments».

Now is the time to prepare for the recovery of the economy. « We have to start preparing the recovery now. If the security measures are implemented by the shopping centres, it will transmit confidence to the consumers», he believes, highlighting that in terms of tourism there need to be «changes in terms of health security at airports and in airplanes. We have to allow some time for those companies and for the economy to restart», he remarked.

Nevertheless, «I believe shopping centre tenants will pressure owners to lower their rents. Shopping centre managers will need to take some action, but so will banks».

Digitisation might shape the future of the real estate

Despite not being a new issue, digitisation accelerated in the last few months, and to such an extent that, according to José Araújo, it will shape the future of the real estate, since it «represents fewer costs for the companies and faster decision taking in some cases».

«Housing consumers location preferences might change somewhat, since, with remote work, their choice may be to live outside the city or in villages, because it is cheaper. The fact that they do not need to go to the office so often may lead them to choose the suburbs», explained the man in charge of real estate at Millennium BCP.

On the other hand, «the way people do business will change completely, but they will still need to visit the properties themselves to see what the property is like and where it is located. In the end, I believe that people will still want to see what they are going to sell or to buy».