Economy

Iberian Peninsula and Latam: Mutual Investment Hotspots – PART 2

27 Jul 2024 min reading

Latin American investors are increasingly looking to Spain and Portugal, while European players are seeking opportunities in Latam. This trend reflects a growing interest in transcontinental investments, with both Latin American and European investors focusing on the Iberian Peninsula and Latin America.

Understanding local market dynamics and regulatory environments is crucial for investors. In Portugal, the implementation of the Simplex Urbanistic administrative system is expected to streamline processes, reduce bureaucratic delays, and improve conditions for real estate investments. This tool aims to increase efficiency and transparency, thus reducing exposure to white-collar corruption.

The short-term outlook for the Portuguese real estate market remains uncertain due to global economic volatility. However, the long-term outlook is promising, with the Simplex system playing a key role in maintaining investor confidence and fostering growth. Investors with a longer horizon, such as those operating on a five- to ten-year basis, can benefit significantly from the market's potential growth.

While the Portuguese market has not undergone the same level of revaluation observed in the United Kingdom, France, Germany, Italy, and Spain, this stability can be either a risk or an opportunity, depending on the future evolution of the market.

The Portuguese real estate market is attracting a diversified range of investors and is evolving into a mature and dynamic sector. After the global monetary crisis, investment was minimal. Today, there is a marked shift towards value-added and opportunistic investments, driven by higher interest rates and tighter credit conditions. Major investors, once dominant, are now less active due to unfavorable risk-return profiles at current maximum rates.

The biggest challenge is the mobilization of capital in the current context. High interest rates and a competitive global market for investment funds have made investors more cautious and selective, often favoring larger, well-established funds over smaller, regional ones.

The Portuguese market heavily depends on foreign capital, representing a risk given the intense global competition for investment funds. This reliance on external capital is a significant challenge for local developers and investors.

In the current climate of high interest rates, debt investments have become more attractive than equity due to the higher yields achievable with lower risk.

Looking ahead, there is optimism about the long-term prospects of the Portuguese real estate market. Innovation and sustainability, along with accelerating licensing and adopting new building methods and materials, are key. Ideological issues from the past often hinder this evolution, which both Portugal and its housing market need.

We must focus on developing new real estate products to meet growing demand across various sectors. Hospitality and tourism are performing exceptionally well, driven by strong tourist demand. Logistics remains resilient, and new markets, such as data centers, are emerging due to Portugal's excellent connectivity. Other sectors like student accommodation and self-storage are also driven by strong underlying fundamentals and demand.

Portugal is well-positioned for growth when interest rates stabilize, and global conflicts subside. We can expect more transactions and investments as investors adjust their strategies to new economic realities. This will enable Portugal to capitalize on its strengths, retain human capital, and talent, and position itself ahead in the global market.

Economy