Docstoc

Paying the price

Document Sample
Paying the price Powered By Docstoc
					FEBRUARY 2010 | www.opp.org.uk                                                                                                          Destination focus • Portugal         | 33

          COVER FEATURE




                                                                Paying the price
WORDS | Alex Evans




                                                                                                                                                                                       INDUSTRY
                                                                Portugal offers today’s international buyers everything they are looking
                                                                for – except the prices they are willing to pay. OPP asks whether
                                                                discounts are really the answer to increased sales in 2010




                                                                                                                                                                                       PEOPLE
                                                                                                                                                                                       DESTINATION
         Widely viewed as Spain’s           are currently around 1.160€/m2 - a             We have to face it; the time of sky-high profits is over. Which




                                                                                                                                                                                       BUSINESS
         expensive neighbour, Portugal      difference of 7%.                              purchaser or investor is going to fall for this any longer?
         has enjoyed much greater price        “With the caveat that this is an            Everyone knows that profits should be reasonable and
stability than most of its European         overview of the entire country, it seems       explained by rational calculations and no longer by greed.
competitor destinations. But the cost of    to indicate a stable, slow moving                                               Marcella Spee Horta e Costa, Azul Prestige Properties
this stability has been sales, with a       market that has regressed to previous
general refusal to discount among           levels, but not in an overly dramatic       a residential tourism destination, and             developers in promoting Portugal
developers sending international            way. Compare this to countries such as      has consistently been in the top five              has rolled on for years, but residential
buyers to markets with a more               Latvia and Lithuania where prices have      most searched on UK portals including              tourism consultancy VIVA IN has
pragmatic attitude – namely Florida,        dropped up to 65% in the last 2 years.”     Rightmove Overseas and The Move                    been pro-active in not only creating
Spain and Turkey.                                                                       Channel – but it’s international profile           a new platform for resort developers
   Amidst growing concern that              Price to sell                               needs work.                                        under an umbrella Portugal brand
                                                                                                                                                                                       DEVELOPER
Portugal will have another quiet year,      While many continue to blame                    “This market is fantastic for buyers,”         (vivainportugal.com) but has organised
OPP talked to developers, agents and        Sterling weakness for the decline           says Stephen Anderson, managing                    several conferences and workshops to
master agents about what they are           in sales to Brits, others believe that      director of agent Infinito Overseas                help developers adapt their sales and
doing to attract more international         developers seeing a smaller profit as       Property. “The quality is perhaps the              marketing strategies. The challenge,
buyers, which areas are likely to see the   an ‘unacceptable loss’ are maintaining      best in Europe for the money, the build            though, is convincing developers that
best activity, and what did sell in 2009.   Portugal’s ‘over-priced’ image – and this   density is low and the property sizes              they need to change their attitude
   So how bad was last year? “Average       is deterring buyers.                        are generous; the problem is there                 according to Viva In’s founder, Lucilia
house prices have shown a positive             “We have to face it; the time of sky     isn’t enough media out there to catch              Cruz Pinto.
trend throughout 2009,” observes            high profits is over,” says Marcella Spee   ‘undecided buyers’ attention.                          “A lot of developers did nothing last
                                                                                                                                                                                       MARKETING




Richard Mills, director of Azul Homes.      Horta e Costa, Commercial Director              “Portuguese property owners can                year. Some can afford to wait but this
“The average bank evaluation of a           of Azul Prestige Properties. “Which         benefit from a great rental return,                is an option for less and less. There’s
property was higher at the end of           purchaser or investor is going to fall      and incredibly cheap mortgage rates                a need to change and do something
the third quarter of 2009 than at the       for this any longer? Everyone knows         making the purchase easier and more                different together, preferably under an
start of 2009 and bank evaluations          that profits should be reasonable and       cost effective, but all this is irrelevant if      umbrella brand of Portugal. We need to
have returned to a similar value seen       explained by rational calculations and      it’s not known.”                                   realise that Portugal itself is competing
in 2004. Bank evaluations peaked at         no longer by greed.”                            The debate about the role of                   with other destinations, and other
around 1.250€/m2 in 2007, and they             Portugal has enormous appeal as          government, the tourism industry and               destinations are winning.”
              34 | DESTINATION FOCUS : PORTUGAL                                                                                                  www.opp.org.uk | FEBRUARY 2010


                 Property price comparison – Lisbon vs Algarve
               Algarve region includes municipalities of Albufeira, Faro, Lagoa and
               the towns of Almancil, Vilamoura and Vila Real de Santo Antonio; Lisbon
INDUSTRY




               region includes the districts of Lisboa, Cascais and Oeiras.


                 Location          Property type             Size            Price (€)

                 Algarve           Apartments                45 sqm          104,265
                 Algarve           Apartments                70 sqm          160,575
                 Algarve           Apartments                120 sqm         209,640
                 Algarve           Apartments                200 sqm         299,200
                 Algarve           Villas                    150 sqm         413,400
PEOPLE




                 Algarve           Villas                    250 sqm         634,250
                 Algarve           Villas                    450 sqm         1,102,950


                 Location          Property type             Size            Price (€)

                 Lisbon            Apartments                65 sqm          135,070
                 Lisbon            Apartments                120 sqm         341,760
DESTINATION




                 Lisbon            Apartments                200 sqm         450,600
                 Lisbon            Villas                    150 sqm         380,850
                 Lisbon            Villas                    250 sqm         442,750
                 Lisbon            Villas                    350 sqm         521,500
                 Lisbon            Villas                    500 sqm         750,500

               Source: Global Property Guide, Sept 1, 2009


                 But it’s also been a tough year for      are offered a 0.1% share of the future      Europe are keen to help and advise,          commission rate, offering 10% to those
BUSINESS




              the developers who have invested            sale, but the developer claims the low      but the time has yet to arrive when the      supplying leads and 40% to those
              heavily in promotion. Miguel Pereira        initial payment (£6750) and low stage       advice given is actually taken.”             who pre-qualify. It won the OPP Best
              de Abreu, CEO of resort developer           payments (€2,590) have helped it to            Infinito is actively building its         Estate Agent Award last year because
              Quintas de Obidos, told OPP last month      close the first phase.                      international network to bring more          of its network of 60 international
              that it achieved 21 sales out of 79 units      “For Portuguese developers, I don’t      foreign buyers into Portugal, but some       agent partners, multi-lingual support
              last year. While he maintains that not      think the answer is in dropping prices      developers are still wary of overseas        team and its comprehensive approach
              lowering prices, keeping construction       to compete with Spain, Cyprus and           agents. “We need everyone but some           to marketing – even organising
              to schedule and an investment in            Bulgaria,” says Artur Simes, owner of       of the rates being practiced in the          consortium stands at shows with
              targeted PR helped to maintain              agent Atlantic Estates. “For one, I’m       international market out there are           several developers sharing costs and
              confidence, the big question is whether     not sure margins are large enough           wow!” says Claudio de Sousa, owner of        promoting the destination as a whole.
DEVELOPER




              discounts would have achieved more.         to discount. But, more importantly,         Madeira developer Hi Life Homes.                “Key developers in the Portuguese
              Oceanico’s discount offer on its Prestige   Portugal is less affected by the crisis        “The norm in Portugal is 5%, but          property market need to come
              Residence Club in the Autumn of last        and does not have the massive               we as property developers question           together in an association, pool their
              year yielded good enquiries but zero        excessive inventory of other markets.       the overall efficiency of estate agents.     limited marketing funds, and develop
              sales, according to sales and marketing        “We have to be creative in focusing      Considering 7%-9% commissions,               effective strategies for promoting
              director, Nikki Dale.                       on our strengths, which for Portugal        overall margins for the developer            to and educating Germans, French,
                 In December last year, Vigia             means, lifestyle and value stability.”      reduce.”                                     Austrians, Swiss and more,” says Simes.
              announced a Boxing Day sale to slash                                                       Master agents like Atlantic Estates          “Other residential tourism businesses
              prices of holidays and services for         End the stalemate                           - which works with Vigia, Pestana and        (including estate agents) should
              fractional property at its Parque de        Anderson agrees that, in general,           Vale do Lobo - charge a standard 5%          work together to generate their own
              Floresta resort. In the same month, the     discounts are not the answer, but
MARKETING




              developer at Ponta do Pargo Resort in       some are committing commercial                 A lot of developers did nothing last year. Some can afford
              Madeira, Morgan Forbes, increased the       suicide by refusing to move on price.          to wait but this is an option for less and less. There’s a need
              price of a 13th share (to £17,914) to       “As businesses, it’s incredible that they      to change and do something different together, preferably
              coincide with planning consent for the      can survive; in fact this may be the last      under an umbrella brand of Portugal. We need to realise that
              new Nick Faldo designed 27-hole golf        generation that can get by on their            Portugal itself is competing with other destinations, and other
              course in the region. Investors in the      family’s land banked assets,” he says.         destinations are winning.
              five star resort with luxury apart-hotel    “Most agents working throughout                                                                         Lucilia Cruz Pinto, Viva In
FEBRUARY 2010 | www.opp.org.uk                                                                                                          Destination focus • Portugal       | 35

                                                                                                 “Although the lower end markets            POSITIVE CHANGE: how some
                                                                                              have been hit severely, the high end        developers in Portugal are
                                                                                              residential tourism market remained         adapting and innovating to sell...




                                                                                                                                                                                    INDUSTRY
                                                                                              steady throughout and especially
                                                                                              in isolated pockets like Quinta do          Martinhal Beach Resort & Hotel in
                                                                                                                                          the Algarve is promoting a Leaseback
                                                                                              Lago in the Algarve and Quinta da
                                                                                                                                          Plan combining both lifestyle and in-
                                                                                              Marinha in Cascais,” observes Ole           vestment, with fixed 4% rental return
                                                                                              Jespersen, owner and managing               for 10 years on the purchase price,
                                                                                              director of IRG International Realty        designer furniture pack included,
                                                                                              Group. “In these areas sales have           4-8 weeks of usage by owner (who
                                                                                              been steady and ongoing although            owns the freehold), and the operator
                                                                                                                                          pays the condominium charges. “We
                                                                                              often fuelled by realistic pricing or
                                                                                                                                          are at the stage where we are just
                                                                                              accepted offers.”                           about to open the region’s first 5-star
                                                                                                 The Algarve still gets the most          hotel and resort, and this adds to the




                                                                                                                                                                                    PEOPLE
                                                                                              attention, of course. This is borne out     confidence of the buyer,” says Martin-
                                                                                              by the latest Quarterly Confidence          hal’s Chitra Stern. Another developer
                                                                                              Survey from residential tourism             focusing on confidence is Quintas
                                                                                                                                          de Obidos, which has invested in
                                                                                              consultancy ILM THR, which found
                                                                                                                                          targeted PR, an actively managed
                                                                                              that 61.5% of the agents and                website and its agent network to sell
                                                                                              developers surveyed reported                79 family villas (all over €1.2m) and
                                                                                              increased sales in Q3.                      an aparthotel with 80 apartments.
                                                                                                                                          “The launch of the remaining facili-
                                                                                              The loan moan                               ties - Country Club and Riding Cen-
                                                                                                                                          tre - will further enhance the confi-




                                                                                                                                                                                    DESTINATION
                                                                                              While Portuguese banks like
                                                                                                                                          dence of the potential clients in our
                                                                                              Santander and Banco Espirito Santo          resort,” said CEO Miguel Pereira de
                                                                                              were far less exposed to the global         Abreu. Hoping to attract high-end
                                                                                              financial crisis than many others           buyers, Palácio Estoril Residências,
                                                                                              in Europe, developers and agents            a luxury residential condominium
                                                                                              still bemoan the lack of finance in         in Estoril, offers concierge support
                                                                                                                                          services from Hotel Palacio and a
                                                                                              Portugal – although rates for buyers
                                                                                                                                          range of privilege services through
                                                                                              are among the lowest in Europe.             an exclusive VIP Card scheme. These
                                                                                                  “Banks are not yet being                include sports, leisure and wellness
                                                                                              supportive for developers, and the          facilities in the region with discounts
                                                                                              same applies for clients to get a           varying between 15% to 30% on
                                                                                              mortgage on their property; until           Elements Spa by Banyan Tree, Esto-




                                                                                                                                                                                    BUSINESS
                                                                                                                                          ril Golf Course and Cascais Marina.
   Although the lower end markets have been hit severely, the high                            this happens sales will be slow,”
                                                                                                                                          Other developers looking at ways
   end residential tourism market remained steady throughout                                  says Eduardo Kol Netto de Almeida,          to distinguish their offering include
   and especially in isolated pockets like Quinta do Lago in the                              Marketing Director at CampoReal.            L’AND Vineyards, a country resort
   Algarve and Quinta da Marinha in Cascais.                                                  However, there is an upside to              in the Alentejo region with designer
                                             Ole Jespersen, IRG International Realty Group    this, he says. “All new or at an early      villas surrounded by vineyards where
                                                                                              stage developments have stopped             buyers can have their own private
                                                                                                                                          wine production and personal-
campaigns. Let’s also get government             different examples that need three           or are running very slow. This will
                                                                                                                                          ized bottles. Director Miguel Júdice
tourism and business development                 different ways to market the product in      impact very positively the existing         claims this ‘differentiating concept’
agencies involved to support these               order to reach the potential target.”        developments that have built                has helped to place almost half of
efforts to promote Portugal.”                       Constantino Jordan, Managing              properties and are mature.”                 its inventory already. Silver coast de-
                                                 Director of Property & Tourism                   Rui Parente, of law firm Neville de     veloper Bom Successo is launching         DEVELOPER
Year of adjustment                               Advisory, says developers seeing most        Rougemont & Associados R.L., also           a high-end fractional product after
                                                                                                                                          seeing more interest from buyers
Others believe that product, and the             success are those who have adapted           highlights an upside to buyers who
                                                                                                                                          “who want a holiday villa that gen-
way it’s packaged, is the issue. Carol           to a more sophisticated buyer. “It is        have lost finance after valuation           erates an income”, according to di-
Mahl, Sales Consultant at Re/Max                 necessary to analyse everything about        decreases. “This has turned into an         rector António Silva Pereira. Leisure
Portugal, says 2009 was “a year of               a development, from the infrastructure,      opportunity for financial institutions      Launch, developing on the Silver
adjustment” when a 10-20% decline                gardens, architecture, colour schemes        to implement new products such              Coast and Algarve, is seeing success
in transactions brought prices down              right through to sales material,” he says.   as ‘real estate leasing’,” he explains,     from helping buyers who lost de-
                                                                                                                                          posits and qualified for mortgages
– with the largest decreases in the              “The profile of sales and marketing          “where the financial institution
                                                                                                                                          on other developers’ failed projects.
Algarve. “I have property that can               partners must also suit.”                    ultimately buys the property from           Claiming to have received enquiries
                                                                                                                                                                                    MARKETING




be sold outright or to a fractional                 Mahl believes international alliances     the developer and rents it out to the       from distressed buyers from Spain,
ownership, a beautiful licensed manor            and referral partners are vital. “Europe     buyer for periods of up to 15 years,        Bulgaria, Turkey, Dubai, Rumania,
house with more than 400 hectares                needs a common MLS, or at least              at the end of which, the buyer is           and Caribbean, it has worked with
offering potential for an hotel group,           between some countries,” she adds. “A        entitled to buy the property for a          banks to transfer mortgages to its
                                                                                                                                          own projects. “In all cases they have
and family houses in Albufeira that              spirit of professionalism and sharing.”      residual value.”
                                                                                                                                          recovered their equity and upgraded
are easy to turn into rental businesses             Portugal has the product, and the             Slow planning has stretched the         to a superior quality property ready
with a little bit of organization, wit and       appeal, so which areas are likely to see     patience of foreign buyers, with            to use,” said MD Davide Patricio.
internet connections,” she says. “Three          the best activity in 2010?                   some developers waiting years
              36 | DESTINATION FOCUS : PORTUGAL                                                                                                     www.opp.org.uk | FEBRUARY 2010

                                                                                                          Key developers in the Portuguese property market need to come
                                                                                                          together in an association, pool their limited marketing funds,
                                                                                                          and develop effective strategies for promoting to and educating
                                                                                                          Germans, French, Austrians, Swiss and more.
INDUSTRY




                                                                                                                                                                   Artur Simes, Atlantic Estates


                                                                                                       Viseu – where prices are half that of             Did you know?
                                                                                                       the Algarve and 54 destinations are            Of the 973,209 foreign visitors to
                                                                                                       accessible from Porto airport only an          Portuguese property portal casa.
                                                                                                       hour’s drive away.                             sapo.pt (which generated 51,500
                                                                                                          Boasting the most blue flag beaches         leads in September 2009), UK
                                                                                                       in Europe, Portugal promises 10                visitors ranked third with around
                                                                                                       months of good weather, and a low              12,000 a month.
                                                                                                       cost of living – making it ideal as a
                                                                                                                                                      Ryanair is to open its 39th base
PEOPLE




                                                                                                       retirement destination. The question
                                                                                                       is whether Portugal will finally shout         at Faro in March this year with six
                                                                                                       about its appeal on the world stage.           based aircraft and 14 new routes
                                                                                                          “The fragmented nature of the               (28 in total) being launched –
              Market overview | Portugal needs to present a united front to international buyers       marketing effort of the Portuguese             which will increase traffic at Faro
                                                                                                       players and a lack of integrated               by around 1.3million.
              for planning only for new valuations        of government by estate agent                marketing planning, budgets and
              to make development finance fall            body APEMIP to address the issue of          public & private sector togetherness           Residential tourism consultancy
              through. “The Camras [town councils]        planning and, with the help of ILM, Viva     may mitigate the opportunity to                ILM is partnering with agent IRG
                                                                                                                                                      International Realty Group over
DESTINATION




              are a major drain on progress in            In and the Portuguese Chambers of            compete for UK buyers with Spain,”
              Portugal, still taking far too long to      Commerce, has forced it up Portugal’s        concludes Andrew Coutts of ILM,                the next three months to survey
              grant simple planning permissions,”         residential tourism agenda.                  clearly identifying Portugal’s main sales      potential demand for holiday
              says Graham Cockroft of developer               Portugal is smaller than Spain but       rival. “The Spanish market with a              homes in Madeira and Porto
              Wholesale Villas. “Ninety days is ample     it’s more than the Algarve and buyers        volume of available supply, aggressive         Santo, extracting nationalities,
              time to check out, consider and fail/       looking for cheaper property are now         pricing and a ‘sell or die’ mentality will     price paid, budget, location
              pass - whichever applies.”                  looking at the Silver Coast as well          represent formidable competition in            preferences, type of property, etc.
                 There has been sustained lobbying        as Central Portuguese markets like           2010 for any available demand.”
BUSINESS




                   What are                                   What are your                                 What have                                    Are discounts
               your developer                              predictions for                               you learned in                               the only way to
               clients telling                             second home                                   2009 that will                               close sales?
               you about the                               sales in 2010?                                help you in                                  Madeira is
               current market                              Indications are                               2010?                                        maturing at a
               and how they                                that at least the                             For those with a                             different pace
               are adapting?                               first semester of                             realistic idea of                            to regions like
               From our                                    2010 will con-                                prices (not ‘cafe                            the Algarve.
               three offices in                            tinue to present                              valuations’),                                We have solid
               Portugal - covering the Porto region,       difficulties due to the global economic       and an eagerness to sell, transactions       transactional evidence to show that
DEVELOPER




               Lisbon and central region, and Algarve      market; but there is still an enormous        were possible last year. In the past the     current list prices per sq m are within
               and south region - we have kept in          amount of wealth in Europe. In terms          question always seemed to be ‘how            5% of actual prices achieved over
               close contact throughout the year with      of marketing strategies for the high-         can we make another 50 sales?’ This          the last 12 months. However, we do
               resort developers and tourist operators     end segment of second homebuyers, it          year the question was ‘how can we            have lifestyle and investor offers. For
               and there are signs of optimism. We         will be very hard to be successful only       convert one more sale?’ By dealing with      example, buyers can defer 10% with
               have witnessed the increasing focus         relying on the traditional approach           each individual client we have seen          an 80% mortgage, which means
               on delivering a final product that is       to promotion. Developers have to be           opportunities that would have been           they only need a 10% deposit. We
               constantly upgrading, incorporating         more and more creative, cleverly using        missed in ‘easier’ years. Every penny        guarantee to pay off that 10% over 3
               new concepts of technology, security        their unique selling points and invest in     spent on marketing, inspection trips         years from net rental income. Buyers
               systems, leisure facilities and design.     personalized strategies (exclusive and        and other incentives has to come from        are offered 4 weeks free use each
               Doubtless to say, quality is only one       very well structured) directly to their       somewhere, and that somewhere is             year, and 8 weeks at 50% off. This is
               part of the puzzle and skilful marketing    existing databases. Also relevant to          normally the end product, so we focus        on fully completed, furnished and
MARKETING




               is now, more than ever, an element of       mention is the importance of the “word        on keeping costs to only the necessary       well-serviced resort property with all
               distinction, and plays as important a       of mouse” (clients and companies              items and passing on the saving in the       amenities up and running. It is also
               role in the individual performance of       sharing experiences through the social        form of the best golf property prices in     fully supported by an excellent rental
               each resort as our market as a whole.       networks – online communication).             the Algarve.                                 management operation.
               Luis Infante,                               Diogo Gaspar Ferreira,                        James E. Harrison,                           Roger Still, Development Manager,
               Managing Director, Horwath HTL              CEO, Vale do Lobo                             Sales Director, Pestana Properties           Palheiro Estate

				
DOCUMENT INFO