Built-to-Rent is the New Phenomenon in the Portuguese Real Estate Market

16 May 2022 min de leitura

Built-to-Rent is an investment business model with the purpose of building houses for the rental market instead of selling them, that is, building to rent. The construction for rent has been a winning bet in several countries such as England, Switzerland, Austria and Germany and is beginning to gain more and more ground in Portugal as a very viable alternative in different sectors.

Renting is often the main choice of younger generations who, due to their tendency to adopt more flexible professional careers, are looking for a housing solution that suits their needs. In addition, considering the current economic situation, renting appears as the most appealing and viable option for young people looking for their first home.

Also, with the acceptance and growth of remote work, more and more people adopt a lifestyle that allows them to work and travel simultaneously, choosing to spend periods of time outside their country, which consequently causes an increase in the demand for lease.

Therefore, with built-to-rent, the challenges and opportunities that arise are notably different from those seen with traditional housing, buildings for sale or other real estate and infrastructure investments.

Built-to-rent: Advantages and Disadvantages

Characterized by the climate, security and more affordable cost of living, Portugal has seen an exponential growth in cross-border real estate interest in European and Asian markets.

However, the tax burden of private real estate investment in Portugal can be discouraging, as the impact of the tax on the final value of a home varies between 30% and 40%, with the non-deductible VAT of 23% being a source of dissatisfaction.

Portuguese and foreign investors trust this model for its success in the most diverse countries. However, in addition to the tax burden, the constant changes in legislation and the associated bureaucracy are often a factor that will not immediately boost investment in the sector, although demand is increasing.

The rental market has, thus, a leading role, making private investment essential to respond to demand. In this sense, the Built-to-Rent presents itself as a solution to this problem and solves (or helps, at least) the housing problems that are felt in large cities in Portugal.

Although at an early stage, there were only around 12 private development projects in May 2021, nine in Lisbon and three in Porto, totaling roughly 3200 properties, as the projects take shape they are expected to acquire new investors and the model Built-to-Rent win “a new home” in Portugal.

Adapted from: Supercasa