CHALLENGES WHEN RENTING LONG TERM IN PORTUGAL
Portugal is a small country and very little was known about it few years ago. Things have changed drastically and, similar to the Portuguese discoveries in the past, the world is discovering Portugal. It started with tourism, but at this moment, many companies are expanding to cities such as Lisbon and Porto.
The increasing number of people moving to Portugal, the fact that the new generations are more likely to having mobility and the reduction of properties available for long-term rentals have brought a difficulties to the rental market, not only in Lisbon and Porto, but also in other district capitals, such as Braga, Aveiro, Coimbra and Faro.
In the past years, many foreign people and companies found in Portugal a safe and pleasant place to settle, various factors have contributed to it like a Nice weather, good food and wine, safety, the overall friendliness of the people, and the fact that Portugal has become a fairly developed technological hub. We can affirm that Portugal has become trendy and the Portuguese people and businesses are taking advantage of that.
From the real estate point of view, many buildings have been refurbished in the past years and many are still to be refurbished. Prices have risen and even expatriates, that usually have a higher budget, are having a hard time finding a home that fits their needs within their capability.
Another important change in the Portuguese society is that our millennials prefer to rent, because having mobility is a priority to them. They also prefer to live close to the city center, where at this moment there are fewer options for long rentals. Local people are unsatisfied with the fact that they are obliged to move to the suburbs because of the price increase in the properties that are located in and close to the city center.
The third main reason contributing to the “crisis” in the long-rental market is that investors and owners prefer the short-rental market. Short-term rents are much more expensive and bring a much faster return on investment. Hence, there are very few properties for long-term rentals and prices have risen significantly in the past two years.
The quality of the properties has also improved and property owners and investors are willing to have a return on the investments made. This contributes to high prices and challenges when negotiating lease terms for expatriates. In the past, most of the owners asked for two months in advance and a guarantor. Now they also require a deposit of 1 to 3 months of rent and more months of rent in advance as a guarantee.
The changes in general conditions of the rental market happened very quickly and the market is still adapting to it. The Portuguese government has implemented changes in the rental policies and is studying solutions for rewarding property owners that sign long-term lease contracts. We believe that the right balance is yet to come. The current situation is not sustainable and a better adjustment of the market will favor locals and expatriates.