In the three years that Davis McKinney has lived in Porto, he has witnessed the seemingly inexorable rise of the city’s property prices. By the time he sold his own apartment earlier this year, it had appreciated by 50 per cent from when he bought it in 2018. But, more recently, as he has started hunting for a new, larger, place and renting in the meantime, McKinney has noticed the market is changing.
“I’m looking online a lot and I’m seeing prices start to come down, both in sales and rentals, and that’s unheard of here in the past five or six years,” says McKinney, 68, who is originally from Chicago and moved to Porto to fulfil a long-held desire to retire in Europe.
Official data show the median property price in the city increased 32 per cent between December 2016 and December 2019, to €1,062 per sq m. In 2020, however, as the pandemic derailed the tourism on which much of Porto’s property market depends, annual growth slowed to 8 per cent. After sales dropped sharply across the country in the second quarter of the year, transactions in Porto recovered to finish 2020 about 6 per cent lower than 2019, according to SIR, the Residential Information System.
“The relationship [the property market has] with tourism is enormous,” says Andrés Jennings, a local estate agent. “We’re definitely seeing a shift in consumer confidence . . . The last year has seen a massive drop in sales and inquiries, and an increase in properties, so I’m seeing Porto turning very much into a buyers’ market in the third quarter of this year.”
Miguel Poisson, managing director of Portugal Sotheby’s International Realty, adds that exuberance in the market was already waning before the pandemic.
During his house hunting, McKinney has noticed discounts on certain listings. “What I’m trying to buy is a new construction and they dropped the price twice without me asking,” he says. The total reduction amounted to a 10 per cent discount on the apartment’s original asking price.
Many date Porto’s property boom to 2012, when the national government introduced its Golden Visa residency scheme — allowing non-EU citizens to obtain a residency permit by purchasing a new home worth €500,000 plus taxes (or less in some cases for an older property) — and amended a rental law that had made it difficult for landlords to raise rents.
About the same time, tourism erupted. In 2013, Porto city council recorded about 2m overnight stays in the city. By 2016, there were 6.9m overnight stays. “Since 2016, Porto really started to become a place that people would go for holidays,” says Jennings. “It brought in more cranes than a bird sanctuary.”
Rising tourism facilitated a sharp increase in holiday let purchases, says Jennings, let by Portuguese landlords and Golden Visa residents, who are only required to spend between seven and 14 days in Portugal a year.
But with tourists grounded by Covid-19 travel restrictions, many rental and holiday let apartments have been left vacant. The city’s tourism tax revenue (a fee charged to overnight visitors) fell 63.3 per cent in 2020, according to the local authority.
As lockdowns loosen, there is light at the end of the tunnel for the city’s tourism industry. Last weekend, the city’s Estádio do Dragão hosted the Champions League Final, and Portugal has been on the UK’s “green list” of overseas travel destinations since mid-May.
“I hear more English tourists, I hear more French and German, especially downtown,” McKinney says. “I went out for lunch on Sunday and we were surrounded by English tourists . . . It’s nowhere near where it was pre-Covid but you’re definitely starting to see more of them back.”
What you can buy for . . .
€400,000 A one-bedroom balcony apartment between the historic centre and Bonfim, on sale with Cluttons.
€746,000 A two-bedroom refurbished apartment in downtown Porto (pictured), near the Bolhão market, on sale with Portugal Property.
€2.9m A five-bedroom villa in Foz with an indoor pool and garden, on sale with Sotheby’s International Realty.
Whether this will reinvigorate the local property market remains to be seen. From December 2020 to March this year, the last month for which data are available, the median price per square metre in Porto has risen 3 per cent to €1,183.
But prices vary a lot depending on where you are in the city. One of the most expensive areas in Porto is Foz do Douro, whose sandy beaches and wide avenues sit at the mouth of the Douro River. In 2020, the average asking price in Foz was €4,213 per sq m, according to Savills.
Most foreign buyers in Porto are Chinese or Brazilian, drawn to the city as it is between 20 and 30 per cent cheaper than Lisbon, says David Moura-George, director of Portugal and Spain at Athena Advisers. But “the new kids on the block” are American — in 2020, Americans were the third most common applicants for Portugal’s Golden Visa scheme, according to the Portuguese Immigration and Borders Service (SEF).
Trendy areas popular with digital nomads and young Portuguese include Bonfim and Campanhã, which neighbour the eastern edge of the tourism centre. According to Savills, the average asking price in Bonfim in 2020 was €2,999 per sq m. Josh Sokolow, a former data analyst, moved with his wife to Porto from Florida last October. The couple, who have both worked remotely for years, are hoping to buy in Bonfim, and are renting until they find the right place.
“We know that we need the property to be in a good location so that if we move on we could rent it,” says Sokolow, who video blogs about Porto and their house hunt. “It’s basically the up-and-coming neighbourhood in the city.”
There are tax incentives for those buying in specific districts in Porto that have been designated as areas for urban regeneration — Areas Reabilitação Urbana. These include the historic centre and Bonfim.
To qualify for Portugal’s Golden Visa scheme with a real estate investment, applicants must spend €500,000 plus taxes on a new property, or €350,000 on a property older than 30 years in one of the ARUs. However, the rules are set to change in 2022, when property investments in high-density areas such as Lisbon, Porto and the Algarve will be excluded from the scheme.