The moment to buy, said Baron Rothschild after the Battle of Waterloo, is “when there is blood in the streets, even if that blood is our own.” Portugal’s streets may not have literally turned red from 2011 to 2014, but investors fled at a time when the country was struggling to recover from an international bailout. Except Claude Kandiyoti. Who sought real estate to buy in Lisbon.

In 2014, Kandiyoti’s family holding company, Krest Real Estate Investments, bought nine buildings constructed in central Lisbon for 46.5 million euros. Currently, the portfolio of 33,646 square meters is valued at at least three times more, the head revealed.

“We’re not a big real estate developer, we’re just a family that understood the country,” said Kandiyoti, whose family also invests in hotels, retail, warehouses, and new residential projects in Portugal. He added that the company is not considering buying real estate assets in the city center since prices are very high, he revealed in an interview.

The real estate boom in Lisbon caused a 66% rise in house prices in the capital since the first quarter of 2016, surpassing wage growth and prompting calls to the government to take action to make prices affordable for local residents. Now, even investors like Kandiyoti, who aim to achieve high returns with their bets in Lisbon, are starting to sound the alarm about real estate prices in the city center.

Fighting back Kandiyoti is no stranger to Portugal. His family has been doing business with the southern European country for almost three decades through the textile trade. The family decided to invest in real estate after Portugal requested financial assistance in 2011 because a “window of opportunity” opened up to invest in a country that was “fighting back,” he said.

“We wanted to be part of that,” said Kandiyoti. “It’s great to be in a country that is recovering from a crisis, rebuilding, regaining confidence. That confidence is back. It’s at its peak.”
Affordable real estate Currently, as Lisbon’s real estate boom continues to drive up prices, Kandiyoti says it’s time to invest in more affordable real estate projects for residents. His company is currently building three new apartment buildings in Miraflores, a residential area on the outskirts of Lisbon, for families and a “new type of Portuguese who are returning and who can afford it,” he said.

Prices for the Jardim Miraflores project range between 3,500 and 5,000 square meters. Which is less than half the price of an apartment on Avenida da Liberdade, where the cost per square meter is 10,500 euros, according to Jones Lang LaSalle.
“Only foreigners can” buy, Kandiyoti said, referring to the prices practiced in the city center. “The Portuguese are simply leaving the city. What will happen if foreigners decide to leave?”
Portugal has become a magnet for foreign investors who bought real estate across the country at an accelerated pace as the economy began to recover from the EU and IMF bailout. The government’s decision in 2012 to grant golden visas to foreigners who bought real estate and tax incentives for foreign residents to boost real estate transformed Lisbon’s hills into views with new hotels, apartments rented through Airbnb, and coworking spaces for a new wave of foreign residents.

Lisbon, overall, remains relatively cheap in terms of real estate prices compared to other European capitals. The average price of transactions for new properties in Lisbon was 3,482 euros per square meter in 2018, compared to 4,345 euros in Madrid and 12,910 euros in Paris, according to the Deloitte real estate index.

Foreign money Foreign investors accounted for 8.2% of total real estate purchases and 13% of transaction value in 2018, according to the National Statistics Institute (INE). Kandiyoti, who invests in affordable residential projects in Belgium, says he would like Lisbon to have a clear policy on affordable housing prices.

Prime Minister António Costa, who won a second term in the October 6 legislative elections, promised to continue implementing measures to attract foreign investors. The country needs them. After growing for five consecutive years, Portugal’s economy is facing headwinds from the EU, the main export market, with Germany flirting with a recession due to increased risks of a no-deal Brexit and the trade war. In order to stem the exodus of residents to the suburbs, the government has begun offering tax benefits to landlords who offer discounts to tenants under a program called affordable rent. The program has attracted very few families since its inception in July. Rising real estate prices in Lisbon have created a dilemma for Kandiyoti, who says he does not want to buy real estate in the city center because it is too expensive, but also does not want to sell the assets he has. “Where can you invest your money and have returns like those in Lisbon,” Kandiyoti questioned. “Many people who lived on my street in Brussels moved to Lisbon and not because of tax issues. They moved because of the quality of life.”

(Original text: Lisbon Investor Who Bought With Blood in Streets Grows Cautious)