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Real estate investment generates returns of 7.8% in 2019
17 April 2020 | Susana Correia

Confirming the strong attractiveness of this type of assets, in 2019, Portuguese real estate generated a total return of 7.8% to investors, above the 7.4% average on the 24 international markets monitored by the MSCI Annual Index.

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The annual results of the Índice Imobiliário Português (Portuguese Real Estate Index) were presented this Wednesday in an online session and showed a slight decline when compared to the 8.1% returns of the previous year, «which is due mainly to the lower growth in terms of asset valuation», explained the Vice-President for Client Coverage at MSCI, Luís Francisco.

Recalling that 2020 coincides with the 20th anniversary of this Index in our country, Luis Francisco remarked that the 2019 results «are perfectly in line with the 7.8% average of these last twenty years», a percentage that «demonstrates the resilience of this type of assets throughout all the cycles».

On this point, Pedro Lancastre, JLL’s general manager for Portugal, explained that 2019 «besides having had a great number of transactions, was also a year of great liquidity for the sector». To Pedro Coelho, administrator at Square Asset Management, these results show that «in the long run, real estate is by far the sector with the highest returns. Hence why the great international investors invest increasingly more on this type of assets».

In terms of investment segments, «there was a rebalancing in terms of portfolio, with the hotel and housing segments having gone from a residual presence to representing 12% of all real estate investment», something that, he added, is also a reflex of the strengthening of those types of assets within the investors’ strategies.

The strengthening of the commercial real estate market in Portugal is also reflected in the sample analysed by the MSCI, which during the last year went from 24 to 32 vehicles that took part in it and whose portfolios represented 5.081 assets and 8.000 million euro, providing this Index with a 31% coverage of the Portuguese institutional real estate market.

Less space for vulture investment on the post Covid-19

João Lelis recalled that «the circumstances of this crisis are very different from those which affected the last decade’s great financial crisis» and, as such, he believes that «the great opportunities which were there for vulture investors 10 years ago are not there now». But he admits that there are exceptions.

According to Manuel Puerta da Costa, administrator at BPI Gestão Ativos (BPI Asset Management), in the post-Covid-19 «vulture investors will find opportunities mainly in the hotel segment, which is the one most affected by this crisis, precisely because of that leverage issue».

Pedro Coelho explained that «generalist investors who, during the last years have invested in real estate looking for revenues, but who now need liquidity and, as such, are pressured into selling their assets so as to gain the necessary capital to inject in other lines of business. Or, for example, we have global investors who have 20% of their portfolio allocated to real estate and now, due to the devaluation in other sectors, such as stock and others, will have to sell assets to counterbalance the portfolio», he added.