“Build to Rent & Affordable Housing” was the theme of the session organized by CBRE, that took place on the second day of Portugal Real Estate Summit.
During this session, Cristina Arouca, Head of Research of CBRE Portugal, shared some research insights that demonstrate how residential is becoming the most popular asset class in several countries, mostly driven by build to rent projects. Recent deals concluded in September confirm this trajectory - with special highlight to 28,500 residential units sold in a portfolio spread over Germany, Denmark, and Sweden, that amounted to more than 9 billion euros.
Nevertheless, there are still several factors constraining the BTR growth in Portugal such as the long licensing processes, and the higher returns that the current build to sell model offers when compared to build to rent.
Nuno Nunes, Head of Investment of CBRE Portugal, moderating the session, kicked off the discussion with the question: what are the key factors to which more effort should be conducted to boost this market?
Pedro Baganha, Deputy Counselor of Oporto Municipality, believes that there are two fundamental aspects that need to be addressed in order to boost affordable housing and this BTR model: first, there is the need to build an effective policy «which includes having rules and incentives and place, being PDM one of the best examples with a final result of increased capacity of the buildings»; secondly, to reduce taxes for refurbishments – and in this matter Oporto municipality is already succeeding through the “Porto com Sentido” project.
Claude Kandiyoti, CEO of KREST RE Investment, pointed out the importance of establishing the difference between affordable housing and social housing, and in his opinion «setting the trade fundamentals is also defining history, and that history needs to involve both public and private sectors, on an eye-to-eye dialogue, avoiding a posture of looking up to the authority». The CEO added that we are in a time of need of real housing, and what we do not need is a speculative market.
Henry Gallego, CEO & Chairman of Ktesios Real Estate SOCIMI, agrees and defends that affordable housing must be founded in a «joint venture between the public and private sectors».
«It is possible to combine good returns with a positive social impact» adds Henry Gallego, and in Spain, «while many investors are looking for the shiny project, Ktesios prefers to move to smaller cities and provide quality housing for working class people, at low renting values, with a good quality level assured. The challenge now is to replicate this model in Portugal, which we are already analyzing».
The audience present in the session also contributed to the dynamic of it, posing multiple questions to the panelists, being one of them related to the risk inherent to this market.
In this sense, Pedro Baganha explained in more detail the “Porto com Sentido” initiative, that already takes into account that issue – Oporto municipality rents the dwellings to “sub rent” them after, meaning that the people become tenants of the municipality, who becomes in charge of the management of the units, and consequently absorb the lack of payment risk.
Henry Gallego also commented on this topic, once more sharing Ktesios experience and explaining that «the risk of lack of payment decrease by increasing the number of tenants, and that is why we also look for properties outside the big city centers».