HOW PORTO BECAME A MAGNET FOR INTERNATIONAL REAL ESTATE INVESTORS

A high quality of life combined with a tourism boom and strong property market have made Portugal’s seaside city a favorite among global investors.

We’ve sung the praises of Portugal in previous posts, citing cinematic scenery, a Mediterranean climate, and foreign investment incentives like the country’s Golden Visa program and non-habitual resident tax regime.

But while historically more tourists have been drawn to the cosmopolitan gleam of Lisbon, Porto – the country’s burgeoning second city – has been stealing the international spotlight lately.

With its authentic, hip vibe, balmy weather, unparalleled food and wine scene, and booming economy, Portugal’s Cidade Invicta (unvanquished city) is a rising star among travelers and investors alike.

As some foreign and local investors look beyond traditional European property markets, Porto has grown in popularity among global investors and entrepreneurs.

A study from EY’s European Investment Monitor calls Porto “a magnet for investment” and cites an average yearly growth rate of 11.4 percent in foreign direct investment (FDI) in Porto and the surrounding region from 2013 to 2018.
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What is it about Porto that is captivating foreign investors?
We’ve explored four reasons Porto stands out compared with other European cities:

An upswing in tourism (Pre COVID crisis)
Long overshadowed by hotspots like France and Italy, Portugal is witnessing an unprecedented growth in international visitors. Porto in particular has emerged as a shining example of Portugal’s tourism boom.

Voted the #1 European Best Destination in 2012, 2014, and 2017, Porto is welcoming record-high numbers of international tourists seeking vibrant culture, idyllic beaches, striking medieval architecture, affordability, and an outstanding culinary scene.

And an increasing number of international visitors has translated into increased demand – which has given way to soaring property values and higher vacation rental rates.

In fact 2019 Porto had highest increase in revenue per available room in all of Europe.
Since 2014, property prices in the city’s historic center has more than doubled, while housing prices citywide have been climbing since 2016 at a steady rate.
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In 2018 Porto saw the highest increase in housing prices in all of Portugal, with property prices up 15.6 percent from the previous year.

Massive development
To prepare the city for becoming a competitive and stable economic hub, the local government has made extensive public investments in infrastructure.

In 2016, the city launched construction on the Campanhã Intermodal Transport Terminal, which will integrate buses, trains, subways, and taxis. Poised to become a transportation center for all of northern Portugal, the terminal will offer connections within the city and region as well as internationally.

Other noteworthy projects from Porto City Hall include converting a slaughterhouse into a center for high-tech companies and the renovation of the local food market. In addition, to encourage and stimulate innovative endeavors, Porto launched a startup program that earned the municipality the award for Best Startup Friendly City in Europe.
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Massive development has made the city a magnet for global investors. The local economy has been seeing steadily growing levels of international capital, and the region secured 21 FDI projects last year alone.

High capital appreciation potential
Even amid the economic boom and rising property values, property in Porto and all of Portugal remains a remarkably good value.
The Global Property Guide ranks Portugal’s home price to GDP per capita ratio as one of the lowest in Europe. And in terms of price per square meter, Portugal boasts some of the most affordable city center real estate in Western Europe.

Property pricing is especially appealing in Porto. Pricing per city center property for Porto averages around 2,655 EUR per square meter.

Compare this to Lisbon, where comparable properties are priced at 4,276 EUR per square meter, Paris (11,014 EUR/square meter), London (14,430 EUR/square meter), and Amsterdam (7,506 EUR/square meter).
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As demand surges, Porto’s housing market is forecasted to continue to thrive. Low property values coupled with rising prices can mean higher capital appreciation for investors who act quickly.

High standard of living
Of course tax incentives, economic growth, and high capital appreciation potential by themselves would not be enough to make Porto the latest darling of smart real estate investors.

Fortunately Porto has a lot more going for it. Situated on the northeast coast, Porto enjoys a temperate climate year-round and 220 days of sunshine per year.

The bustling waterfront hub combines modernity and tradition, juxtaposing its historical monuments and baroque with contemporary architecture and cutting-edge Michelin-starred eateries.

A safe city with excellent infrastructure, colorful culture, and low cost of living, Porto pulls in an eclectic mix of expats, entrepreneurs, digital nomads, and retirees from around the globe.

Energetic, charming, and innovative, Porto has become one of the most promising investment opportunities in Europe.