Portugal's hidden billions (Part 2)

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Second Homes - Portugal was a poor country with a hardworking people who carefully took care of their resources. Families grew vegetables, harvested fruits and nuts, rode bikes. They were happy, we had plenty of gold in the central bank, many had it in jewelry, but there was no freedom of speech.

We now have around 380,000 homes for sale/rent that are locked up. An investment of €40 billion. If this money went to SMEs to increase their competitiveness, we would be exporting twice as much and have almost no unemployment.

An estimated 40,000 such properties are in the Algarve and Costa Vicentina, that could be sold to foreigners. But...

1. There is a risk of losing values; bureaucracy requires signing up an attorney to handle the purchase made by a foreigner. Unlike other countries, here there is no single agency, as the conservatória, which guarantees the property be ready for sale without mortgage, late taxes, etc.

2. Many owners think we are still in 2009 and give a 5% discount on an asking prices that already is 45% above the market value. This arrogance in not negotiating puts off most northern Europeans.

3. Many believe what they read in the newspapers, that the sale of real estate is rising, the golden visa scheme is bringing in millions. There are hundreds of properties sold in this scheme in the range of €500,000 or more, not €5,000.

4. To capture the customer, many salesmen over-priced properties and are now ashamed to recommend the client sells at the current market price. They prefer not to sell the property and thus avoid deflating the market.

5. The banks evaluated constructions at 2008 prices and prefer to keep these higher valuations in their balance sheets, rather than selling them on at market value turning paper figures into actual cash losses.
In the coming months the Bank of Portugal will have to force banks to sell properties at any price to strengthen their balance sheets and to prevent collapses similar to BPN.

WAYS OUT

1. Many want to improve a holiday home. They fear having their plans rejected by the municipality. There are officials making it difficult to get a property ready for sale. If the salesman, who knows the local authority, works with it to approve the claims, the property is easier to sell.

2. A conditional sale allows the potential buyer to get a feel for a home, the neighborhood and its neighbors before rushing into a deal getting dissatisfied later. A rental scheme, often for two years, can result in the rent being deducted from the eventual sale price. But the salesmen want to get their commission at once, in a hurry, and do not listen to the customer.

3. Some large mediators and banks, in partnership with a foreign agent, bring large groups to see properties in the Algarve and Alentejo and only show what they feel like selling. Now, every buyer has a different profile and won’t want to be shown around 20 properties. They will end up dissatisfied with salesmen insisting they buy something that does not suit.
These and other reasons cause many customers to end up in other areas such as the North or worse, Tangiers, Turkey, the Canary Islands or Cape Verde.

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