Hugo Santos Ferreira

TBY talks to Hugo Santos Ferreira, President of the Portuguese Association of Real Estate Developers and Investors (APPI), about the focus of the group, market conditions in Portugal, and working with private enterprises.

What is the mission and focus of the association?

APPI represents all real estate developers and investors in the country. We are mainly focused on institutional investors across all asset classes, from residential to commercial real estate. The latter includes offices for logistics, retail, shopping centers, retail parks, and high street retail as well as alternative sectors such as senior housing, senior living, co-working, and co-living. APPI works to advocate for the industry before public authorities, entities, and government officials, including the ministry, parliament, and municipalities and to facilitate business development among its members. Additionally, the association serves as the primary gateway for foreign investors looking to invest in the country, with 50% of our members being international.

How do you evaluate the current market conditions of the Portuguese real estate market?

Residential investment remains the jewel of the crown in Portugal, with a total investment of EUR30.7 billion in residential real estate in 2022. It represents 40% of the Portuguese GDP. In contrast, that same year EUR3.3 billion was invested in commercial real estate. Despite challenges such as the pandemic, the real estate sector has proven to be one of the most resilient sectors of the economy and played a significant role in the country’s economic recovery after the 2012 financial crisis. Along with tourism, real estate has been one of the main engines of growth for the Portuguese economy, leading to a positive spillover effects for other sectors as well.

What makes Portuguese real estate innovative?

Portuguese real estate entrepreneurs are exploring new and alternative concepts such as co-living and co-working, although the pandemic put a halt on these new developments temporarily. Nonetheless, we have been making strides in other areas such as senior living and student housing. The latest trend in innovation is green construction, which involves modular systems and industrialization. We have made great advances in using wood instead of concrete for construction, which is fantastic for sustainable building. This is the commitment of the real estate markets to the new rules of sustainability, which will be the future trend. We are also focused on reducing costs, particularly in affordable housing projects, though industrialization and modular building. We must lower costs to align with sustainability guidelines. Additionally, we are improving the levels of energy efficiency in buildings. Sustainability targets provide an opportunity for recovery, reconstruction, new construction, green construction, and CAPEX expenditure, and all players and stakeholders are committed to achieving them. Commercial real estate already abides by green regulations, though there is much to do on the residential side, especially in terms of public policies to make sustainability a reality. Right now, there are discrepancies between EU directives and the Portuguese legal framework, for example, in terms of self-generated PV energy, which leave investors at a crossroads.

What are the other needs of real estate investors in Portugal?

One important issue for investors is green financing. Unfortunately, there is a huge problem with access to new affordable housing. The Portuguese middle class would not be able to afford green housing because it will be much more expensive, and the Portuguese government must play a role in providing green loans for housing. Portuguese people cannot be obliged to bear the costs of sustainability. The Portuguese PRR and European Green Deal are focused on fighting climate change, promoting sustainability, improving the energy efficiency of buildings, creating new affordable housing, and fostering economic growth in member states with new concepts of sustainability. In this case, to make affordable housing available, it is essential to make it green. Therefore, creating financing options to lower costs and allow Portuguese developers and real estate investors to produce affordable housing is the way forward. By 2030, the goal is to have all new buildings in Portugal be green.

What are the positive aspects of the Mais Habitação program according to the business community?

Unfortunately, there are few positive aspects. This package of measures is insufficient to create more affordable housing in the country. What is really needed is to create confidence for owners in the lease markets because there are an estimated 700,000 vacant units in Portugal. These are owned by Portuguese landlords who do not trust the Portuguese legal regulation on housing leases. The package should have given those landlords confidence to put those units on the market, but it failed to do so. In addition, more measures are required to bring more residential supply. The current housing problem is based on two things: lower salaries that do not keep pace with increasing real estate assets prices and a huge lack of supply. This imbalance in the market is pushing housing prices higher, causing investment to halt, endangering the Portuguese economy. The country needs foreign investment to push economic growth, but the package was has hampered Portugal’s ability to attract investment.

How does APPI promote investment and help private enterprises?

We are the main gateway for investors interested in the country, and our role is to promote investment and support private enterprises. With foreign members representing 50% of our membership list, we act as a Portuguese ambassador for real estate investment in Portugal. Our primary task is to showcase Portugal’s positive attributes and convince them to invest in the country. We are still on the radar of real estate investors worldwide. Once they come here, we facilitate their entry by forming connections with local players such as real estate developers, Portuguese banks, construction companies, and asset managers. Through these connections, investors can receive the support they need to invest in the country.