Austerity Cuts Boosting Investor Confidence in Portugal

Individuals are returning to the Portuguese market and looking to invest in property following the influx of distressed bargain hunters that flooded the country last year. Agents and developers are beginning to report a shift in demographics in line with economic recovery....

Individuals are returning to the Portuguese market and looking to invest in property following the influx of distressed bargain hunters that flooded the country last year. Agents and developers are beginning to report a shift in demographics in line with economic recovery.

Portuguese real estate companies have generally been considered to be less reluctant to slash the value of properties in the country throughout the downturn and investors have often been frustrated with the lack of cheap distressed property.

But as the real estate market begins to recover - Knight Frank Global House Price Index recently reported 0.2 per cent growth in prices over the course of 2009 - many are now viewing the market with renewed optimism.

Confidence

Developers in the region are reporting a return of confidence to the market, according to Infinito Real's managing director Stephen Anderson, who told Overseas Property Professional that it was becoming easier to close property investment deals.

"What we've seen is a much more confident and educated client who has realised the potential for investment is ripe now," he explained.

Meanwhile, in a recent report by Jones Lang LaSalle, managing director Manuel Puig said: "As we moved into 2009, expectations could not have been worse for the property market, with the economy in recession and the investment and occupation markets shrinking. However, by the end of 2009 the extremely pessimistic forecasts did not materialise and the market adapted itself to the new circumstances, which in turn is leading to a return of confidence."

Cut the Deficit

Both Spain and Portugal have pledged to cut spending as part of the recent European Union loan package agreement. Deficits are set to reach 8.5 per cent of gross domestic product in Portugal, above the eurozone's required three per cent limit. In addition, the two countries promised to put forward "significant" budget cuts for the coming years.

The country's credit rating was downgraded two notches to A-minus recently by Standard and Poor's, which said the structural weakness of Portugal's finances and its uncompetitive economy justified the cut.

Bank of Portugal Governor Vitor Constancio said the deficit-reduction measures had been "well received in the financial markets". And despite the short-term restrictive impact on the economy, the measures will only be temporary and the economy will eventually come out of the woods.ADNFCR-3415-ID-19787514-ADNFCR

- Friday 21 May 2010

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