Lisbon polishes up its act as property boom accelerates

The Portuguese capital is enjoying a surge in construction activity with planning permissions and projects soaring after years of urban decline.

A construction crane rises in downtown Lisbon. Today the city today is a hive of activity as the property market recovers. Patricia De Melo Moreira/AFP

Lisbon's azure skies are dotted with forests of cranes as scores of construction workers give Portugal's capital a shiny and new, if pricey, veneer.

For years the local construction industry lay in the doldrums - but today the city is a hive of activity, a boon for those involved in its overhaul.

"Eight years ago, with my colleague, we were going from door to door offering our services," recalls Roman Kurtysh, a stonemason from Ukraine who specialises in facade revamps and working at height.

"I still don't know how we survived," grins Mr Kurtysh, a stocky man in his 40s with a thinning beard who left his homeland for Portugal almost two decades ago.

He tried his hand at various jobs before setting up Rkesa, an urban renewal firm, with compatriot Oleksandr Shulyak in 2009.

"In those days, at the end of the month we would draw a salary of €53 (Dh233) each," says Mr Kurtysh. "We were ready to throw in the towel."

Early 2014 brought a turning point. Three years after receiving an EU bailout loan package of €78 billion Portugal began to drag itself out of a deep-seated economic crisis.

The two Ukrainians took full advantage.

"From that point on, our order books began filling up," says Mr Shulyak, who leads the firm's team of "steel monkeys" - high-rise workers who scale 16 Rkesa sites in the capital alone.

Rkesa is just one example of the surge in construction activity with planning permissions and projects soaring after years of urban decline.

By mid-2017, the sector employed 310,000 people, 8 per cent more than the 287,000 of one year earlier, according to Portugal's National Statistical Institute (INE).

Sector production rose 5.9 per cent in 2017, in contrast with a 52 per cent slump in the 19 years that went before, estimates the Portuguese construction industry federation Fepicop.

"In the past five years, restoration has been a key driver, accounting for more than 80 per cent" of construction activity, notes Jose Velez of real estate consultants Prime Yield.

Before 2013, in Lisbon "one building in three was empty, decrepit or in an advanced state of disrepair", says Luis Mendes, a researcher at the University of Lisbon's Institute of Geography and Spatial Planning.

That is no longer the case, with many of Lisbon's typical flaking and weatherbeaten ochre facades masked by swathes of scaffolding behind which brand new buildings are emerging.

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A batch of regulatory measures has enabled the building revamp to move on apace, says Mr Mendes, singling out the lifting of a decades-long freeze on rents as well as the introduction of "golden visas" for non-EU nationals to take up residency if they spent at least €500,000 on property.

Another measure has been the recent introduction of a preferential tax regime for "non-habitual residents" regularly spending time in Portugal or owning real estate there.

Beyond that, the government has introduced a raft of fiscal measures including a five-year exemption from local taxes for purchasers of an old building earmarked for renovation as well as a reduced value added tax rate of 6 per cent.

"Today, the country is less dependent on these programmes. It has gained repute and Lisbon is trendy," says Luis Lima, president of Portugal's association of real estate professionals and agents Apemip.

Furthermore, "the [construction] sector is benefiting from a highly favourable backdrop," says Rui Campos, head of the Association of Civil Construction Industries and Public Works.

Other positive factors are last year's record 20 million tourists, coupled with economic growth of 2.7 per cent and low interest rates.

"There remains much to do in the renovation market," says Mr Campos.

"We are talking around one million homes requiring repairs in Portugal ... for a market valued at an estimated €24bn."

The market is primarily concentrated on Lisbon and second city Porto, where prices have been spiralling, forcing less well-off residents to move out of central districts.

"There is a market for this rehabilitation, and we must make the most of it," says Rafael Ascenso, who heads the Porta da Frente real estate brokerage specialising in luxury homes.

Campo das Cebolas was traditionally a popular, once rather decrepit district low on appeal with a slew of crumbling buildings and off the tourist beat despite being near the centre of town.

Today, it is enjoying a new lease of life, as witnessed by a renovated apartment with a view over the River Tagus which helps it to command a price tag of €900,000.

"This investor allure has allowed the creation of a pleasant city as well as the revival of districts which had been abandoned. It's a one-off opportunity," Mr Ascenso concludes.