After making a stopover in Lisbon in 2014, Tariq El-Asad, from London, became enamored with Portugal, specifically its unsung potential. Although having visited and conducted business in Portugal regularly since 2004, it was en-route the World Cup in Brazil that he sensed, quite vividly, that something great was just around the corner for the country, and soon after established the real estate consultancy Tamea International, specializing in helping investors source buildings, design concepts and execute the rest. El-Asad, who today works with a wide array of international investors and collaborates with 70 partners across Portugal, tells us how the property boom is changing the face of Lisbon.
What were the catalysts that transformed Portugal’s property market from one beset by degradation into the boom we see today?
If you were here four to five years ago, you would’ve seen most of Lisbon just falling apart, with buildings in ruins. The market conditions back then were such that landlords couldn’t even maintain let alone develop their properties; they were handcuffed by very strict rent controls. But back in 2012-2013, there was a lifting of those rent controls and that immediately unlocked the potential in the city. Everyone thinks this boom came out of nowhere. We have long recognised the potential, but the removal of rent controls was the trigger, combined with the introduction of the golden visa, non-habitual residency, the boom in tourism, and the growth of an incredible tech and start-up ecosystem supported by the Government. That combination of factors is what paved the way.
How are you working with investors to renovate Lisbon’s historical buildings?
Tamea International offers a ‘360 Development’ service which begins with us gaining an understanding our client’s investment targets. We then source buildings, carry out feasibility studies, develop the concept, execute the project, perform branding and marketing functions and manage the sales process. In some cases we source opportunities and invite our clients to co-invest with us while we adopt the role of project managers. Although acquisition prices for renovation projects have risen over the last few years, there are still good opportunities in the market and we are currently delivering 18% to 30% IRR on a variety of rehabilitation projects typically ranging from 12 to 36 months.
What impact do French buyers and investors have on your business?
The French make up about 15% to 20% of our business. From 2015 to 2017, there was a big jump in French investors, and we brought in French staff to help us keep up with that specific demand. Three of our five top investment clients are French or Franco-Swiss investment groups. I’m told that Portugal has peaked French curiosity in recent years and, quite naturally, French investors came to explore the market and quickly recognised the increased demand in Lisbon, particularly from France. These investors want to make the most of this opportunity and we are here to assist them.
What impact is Airbnb having on the Lisbon property market?
One of the key catalysts for rapid price growth in Lisbon is the boom in tourism. To get a hotel approved and built takes a very long time, but the tourism demand is here now, so short-term rental apartments is the solution. On one hand, you have developers who renovate and operate apartment buildings then sell them with guaranteed rental returns. This has proven to be very attractive to Golden Visa buyers and other investors looking for a fixed yield because it means one can buy a fully-managed apartment and not have to worry about guests, repairs, and fluctuating income. However, serviced apartments alone cannot support the demand for tourist accommodation so investors are operating within the huge Airbnb market in the city as well. The majority of our French clients look to buy smaller, traditional and prime location properties which they can enjoy for three or four months per year and rent via Airbnb to generate an income the rest of the year.
Do investors prefer short-term or long-term rentals in Lisbon?
It depends on the type of property in question and how involved investors want to be with the property management. Some investors prefer renting to long-term tenants because the values are increasing as the economy improves and more international people move to the city centre. Short-term rental management fees are higher than most expect – 25% to 35% is the typical rate – but people are happy to pay because nightly rates and occupancy rates in Lisbon are high which results in good yields. An average rental yields for short-term are around 7-8% gross which works out at around 5% NET but, of course, can be higher in cases when investors buy well.
How is the property boom changing the face of Lisbon?
Until a few years ago, we didn’t have thousands of Brazilian, Chinese, Russian and South African buyers or even French and other Europeans heavily investing in Lisbon real estate. Most importantly, Portuguese have confidence in the market once again and are significant players in Lisbon’s regeneration. Forgotten and unloved parts of the city now have life again with new bars, restaurants, shops and hotels seemingly popping up every week. Although it’s important to keep a balance by protecting what makes Lisbon unique, much of the change is positive. The likes of Google, Daimler and BNP Paribas establishing new offices here also has a combined impact on the business environment and real estate market. What we’re seeing today is a direct result of the Government policies implemented to boost specific sectors of the economy. We are witnessing the internationalization of the city, which I believe will support the internationalization of prices. Values have long been well below the likes of London, Paris, Madrid, Barcelona and Berlin but Lisbon is now becoming the European capital that it should be.