Tag Archive for: Due diligence


Have you ever wondered:

  • How has the sales price of T4 apartments in the city of Porto evolved over the past 15 years?
  • What is the net yield of a prime apartment in Lisbon?
  • What is the rent which the commercial unit next door was rented out for last year?
  • What are the forecasts for residential prices in secondary locations of Lisbon?
  • What are the benchmarks for ancillary costs for office space?

If you came to Portugal from one of the countries with a high level of transparency in the real estate market, like England, France, Australia or the USA, you probably have already unsuccessfully searched for data on these or similar questions.

Despite Portugal’s recent evolution in market transparency, foreigners from more transparent countries should take extra care of understanding and managing the differences.

Although real estate market transparency cannot be changed much by an individual, every buyer should familiarise themselves with the market environment they act within. Knowing what you are getting into before logging in your capital is crucial. In many countries, and Portugal is no exception, foreigners often make naïve decisions and enter unnecessary risk and costs.

Transparent markets vs. opaque markets

In one sentence, the difference between transparent and opaque real estate markets is the availability of information.

In transparent markets you will easily find reliable, detailed and standardised information for the present and past. In opaque property markets that information is rare, often has no standardised definition or underlying calculations, refers to wider geographies rather than to micro locations and the historic equivalent is only available for a few years rather than two or more decades. The leading publication to evaluate and report on the transparency level of the worlds real estate market is JLLs Global Transparency Index. The main factors it assesses reflects quite well what makes the difference:

Table listing 14 transparency topics or criteria classified into 6 sub-indices: performance measurement, market fundamentals, governance of listed vehicles, regulatory and legal, transaction process and sustainability.
Source: JLL Global Transparency Index, 2022 by JLL, LaSalle, 2022

Market participants often notice differences for the first time when they get in contact with real estate professionals. More transparent markets are much more professionalised, have higher access barriers for advisors, tighter regulations of provided services and higher clarity and efficiency in all aspects of service delivery.

Why does it matter for you as a buyer?

As mentioned in various posts on Real Estate Bricks, real estate investment is all about risks and returns. Market participants need to understand and try to minimise an investments risk while figuring out and trying to maximise the respective returns.

An investor, who prepares to make an investment, for instance, will do a thorough analysis of the market, the potential investment, its tenancy as well as the expected costs and income in the future. To do this data on all aspects will be needed. The more reliable data there is, the better and more realistic the analysis will be.

Reversely, this means that, in an opaque market, the assessment of risks and returns becomes vague and often nearly impossible. This creates market inefficiencies and risk for all market participants.

This does not necessarily mean that you should only invest in transparent market. Great gains can be made despite and often because of opacity. However, you should always understand as much as possible about a potential investment, its market and how it relates to your personal risk-return-profile.

What is the level of transparency in the property market in Portugal?

Portugal has been categorised by JLL as a transparent market (second best of five categories) market for the past 12 years. It was on place 19 of 81 in 2010 and currently holds 24 of 94.

However, what should be noted is that Portugal improved its score from 1.82 (2010) to 2.37 (2022) on a scale of 1.00 to 5.00 with 1.00 being the best.

On one hand this is in line with the global trend – most countries’ transparency score improved. On the other hand, this is also the result of measures and trends specific to Portugal, as, for example, improvements in laws and regulations, increasing foreign investment and a constant rise of market activity.

Here are some of the countries from which people have moved in high numbers to Portugal in comparison:

Rank (1-94)CountryScore 2022
1United Kingdom1.25
2United States1.34
16Hong Kong SAR1.98
30China (Shanghai and Beijing)2.54
Source: JLL Global Transparency Index, 2022 by JLL, LaSalle, 2022

Note that within all countries, there can be significant differences between sub-markets. A sub-market could be, for instance, a geography (e.g. London City) or a real estate asset class (e.g. residential Netherlands).

Those differences of transparency within countries are often results of a high number of listed companies or funds (since they are obliged to collect and publicise lots of information) doing many transactions and maintaining portfolios of specific assets. Another factor is foreign investment, since investors from more transparent markets not only demand more information, but also produce (through transactions), collect and share more information when they enter the more opaque markets. Within Portugal, the more transparent sub-market are Lisbon and the Algarve with residential, offices and hotels being the most transparent use-types.


Real estate market transparency can vary a lot between countries. Overlooking these or not taking them seriously can create unnecessary risks to your investment. It is important to understand that many of the factors that impact this are macro factors, meaning they are not very obvious when analysing a single apartment or building, but the impact can be large and long lasting.

As an investor, you should always be aware and work out your appropriate risk-return-profile.

Also, keep in mind that the less transparent a market is, the more experience and informal information matter. Therefore, try to work with experienced local advisors, because their skills and knowledge can reduce gaps that publicly available knowledge leaves.

If you would like to understand your personal risk-return-profile and if investing in Portugal is suitable for you and your investment goals, we can assist or refer you to an expert.

Contact RCP to discuss a potential service proposal or get linked to respective experts.

In case we put you in business with 3rd-party servicers we may collect a referral fee from them.

Further reading on the topic in English

The above combines the references publication with the authors primary and secondary research as well as his professional experience.

A good read (in English) on the topic is:

Link: JLL Global Transparency Index


Once one of Europe’s worst performing economies and housing markets, Portugal has shown a remarkable upswing over the past 10 years and, more recently, resilience against some of the covid-related as well as post-covid challenges.

Shaken up by international and national issues many investors ask themselves if it’s now all over and the market is about to plummet as rapidly as it rose.

‘One man’s joy is another man’s sorrow’, meaning that you could also say that something that poses a threat to one investor is an opportunity for another one.

In the following we understand threats as any disruptive development that reduces the performance of the market rather than just specific groups of market participants.

We will look at arising opportunities in troubled markets in separate posts if and when the discussed threats gain traction in the market.

Political threats

Whilst not the most obvious threat to residential real estate investment markets, political factors impact all areas of life and are on of the most important framing factors.

Traditionally, but especially in the past few years leftwing parties represented the majority in parliament. One of their goals has been to improve the populations’ living conditions by increasing regulations of parts of the economy.

In 2023 the housing law package ‘mais habitação’, drawn up in March and very likely to come into effect end of October, changes significant parts of the investment environment. Some of the most severe changes regard short-term letting, Golden Visa, licensing, forced letting and rental caps.

Not only do these measures have direct impact on supply and demand as well as prices; they also shake investors’ confidence and have the potential to reduce future capital inflows and, hence, property prices. One of the major factors to attract international capital are political stability and a favourable investment environment. Therefore, short-notice and strong changes can have a strong negative reaction.

What is more, some of the planned measures have not yet been worked out all the way to the practical implementation. That means that at least for the end of 2023 and maybe beyond friction and unclarity remains around fundamental topics such as the licensing process.

Economic threats

Like most countries and asset classes, the abrupt rise in interest rates creates difficulties for many market participants. Since interest rates are decisive for investment decisions, values and the costs of financing the impact is very strong.

The consequences will only become visible with time since many occur with time lags.  

This can lead to gaps between sellers’ and buyers’ pricing expectations which may not be bridged in the short term and the transaction market get stuck with the situation (as it is already the case in most European commercial real estate markets).

However, this threat may be offset or even reversed if mortgage rates are updated (most private mortgages are not fixed) and many owners are forced to sell at the same time.

Market threats

Firstly, more and more investors remain in standby position since they expect pricing corrections as a result of interest rate changes.

Secondly, the termination of real estate investment as a path to obtain a Golden Visa removed a share of the demand from the market.

Thirdly, domestic demand is very dependent on debt conditions which have worsened significantly.

The above market threats, amongst other factors, have already contributed to a slowing dynamic in Portugal’s residential market – apartments remain longer in the market and the rise in prices has been much lower in Q2 2023 than in most quarters of the previous years.

Legal threats

Parts of the above-mentioned housing market law package ‘mais habitação’ is a change in the licencing process, which is designed to ease and speed up the licensing. However, some of the details have not been entirely defined, which means an adjustment period with some insecurity regarding responsibilities and steps may hamper the process before it becomes a routine for all stakeholders and gets more efficient. This will affect new construction and refurbishments that require a licence from the municipality.

In the medium-term to long-term it can be expected that more licences will be granted quicker, which increase supply of residential space to the market. This may put pressure on the sales prices, however, there is a fair likelihood that there will not be surplus supply.

Construction cost threats

Lack of qualified labour and strong demand for construction services have already caused costs to increase year after year before covid. With the beginning of the war in Ukraine building materials have become more expensive and drove those costs further up.

In addition, labour costs are still rising supported by high inflation in correlation with high interest rates. Further, demand for construction and refurbishment services remains strong.

The above combined with pressure on house prices can led to decreasing margins for developers and owners.

Ownership threats

Most of the above will affect owners of residential real estate more indirectly than directly. However, there are some direct threats that owners should have on their radar in 2023.

Firstly, this would be the new law contained in ‘mais habitação’ that allows for the forced leasing of permanently vacant residential units. It limits the owners’ options to use their property as planned and may bind to an unfavourable tenancy which they have to stick to.

Secondly, with 2023 bringing some summer temperature records the requirements for isolation of façades, windows, doors and roofs as well as technical parts, such as air conditioning are rising. Buildings which do not fulfil these requirements may face limited rentability and saleability in the future or respective works need to be factored in.


2023 is undoubtedly a year with some unusual threats to residential real estate markets in Portugal.

These include threats on the macro level, such as politics and the economic environment, but also some specific to the real estate market and its legal framework. Depending on the respective market participants construction cost threats and challenges for existing owners add to that.

It is important for aspiring investors as well as owners to keep an eye on upcoming changes and evaluate options for action and react timely where necessary.

However, some of these threats are still in their infancy and may not come through as strong as expected at all.

It should be remembered that Portugal’s, and especially Lisbon’s, residential market still benefits from limited supply and stable demand which can keep many problems away. This applies to the sales market and even more so to the rental market and, hence, which adds an additional layer of safety.

If you would like to:

  • Get assistance on potential acquisitions and arising opportunities,
  • Analyse your existing assets in regard to your risk exposure,
  • Assess the impact of the above or other threats on your planned investment or
  • Evaluate your options for action in the Portuguese real estate market

just contact Real Estate Bricks to discuss a potential service proposal or get linked to respective experts.  

In case we put you in business with 3rd-party servicers we may collect a referral fee from them.


Depending on where you are from and how active you have been in real estate purchasing you may have come across buy-side services (sometimes called acquisition services) provided by so called buy-side advisors or buyer’s agents (different terms for the same thing).

Ironically, buy-side advisory is better known and more frequently used in more transparent, and therefore less risky and more accessible, markets. This is because transparent markets are more diverse and professionalised and therefore have given rise to a wider range of services and roles.

But let’s get on it and see why how a buyer’s agents can add value to your property investment.

This post refers to buyer’s agents instructed by the buyer (you will find more details on the different roles and their typical compensation here). If you would like to learn more about the differences between real estate agents and valuers you will find a comparison here.

Areas covered by buy-side advisors

Most investment topics circle around risks and returns. You would always want to understand and evaluate those two whilst minimising risks and maximising returns.

Identify, understand, avoid or quantify risks related to:

  • Politics (e.g. law package ‘mais habitação’)
  • Economy (e.g. labour market, affordability)
  • Submarkets (e.g. up-and-coming areas or neighbourhoods in decline)
  • Building (e.g. condition, maintenance and condominiums)
  • Tenancy (e.g. potential rent, leasing options)
  • Legal (e.g. encumbrances, contracts)
  • Construction (e.g. licensing, potential refurbishment)
  • Financial (e.g. interest rates, asking price vs. value)

Tip: The above risk will have to be on every buyer’s radar. However, if you are a digital nomad intending to invest in Portugal, you might want to check out our post on risks specific to digital nomads.

Professional advisers will help to avoid common mistakes, such as:

  • Using the asking price as market value (overpay)
  • Not understanding pricing (insufficient comparison to other options)
  • Understand letting situation (gap in returns as result of wrong estimate)
  • Over-estimate potential returns (e.g. mistake rent as the return after tax and operational costs)
  • Rely on sellers or sell-side brokers advise (their interest contradicts that of the buyer)
  • Not include further advisors (hidden problems can be costly risks)
  • Buy based on personal taste (and get disappointed when selling at later point)

Services provided by buy-side advisors


Potential services that may be requested span anything between the first investment intention all throughout all details of the purchase to after-sales support and sometimes even implementation of the property business plan.

However, covered geographies and topics as well as competencies vary greatly between advisors.

Before the property search begins

  • Understand clients situation and goals
  • Discuss potential submarkets and property types
  • Define a client-specific investment approach and derive a search profile
  • Think outside the box to include less obvious opportunities

Identify potential properties

  • Observe market online (e.g. Idealista, Imovirtual)
  • Maintain contacts to brokers and check on upcoming sales
  • Draw from personal network to identify off-market opportunities
  • Quick checks, calls and viewings as appropriate

Analyse investment opportunities

  • Collect and apply relevant research and informal information
  • Be aware of market developments and anticipate what happens before it is visible
  • Apply personal experience
  • Evaluate and compare investment opportunities qualitatively and quantitatively
  • Benchmark by comparing research data, market rents and costs data with the property in focus
  • Work out a property specific business plan
  • Prepare financial analysis (and-or BOV, a brokers opinion of value, or valuation model) pricing in any risks as well as future costs and returns
  • Understand value as-is and prepare potential scenario analyses, e.g. for the impact of the law package ‘mais habitação’ in regards to short-term letting, taxes and rental caps
  • Fill knowledge gaps the client may have and act as sparring partner where necessary

Manage the purchase process

  • Negotiate with the seller or their broker together or on behalf of the client
  • Act as single point of contact and monitor timing and quality of input from all advisors:
    • Lawyers
    • Tax consultants
    • Technical specialists
    • Architects and construction companies
    • Environmental engineers
    • Property appraisers
    • Mortgage brokers
    • Property managers
  • Deal with public institutions
  • Foresee problems in the transaction or with the property early on and avoid surprises
  • Make tender(s) to engage advisors
  • Organise translation of documents and contracts
  • Communicate and push and save the client time where possible
  • Bridge cultural differences and balance characters to minimise friction losses
  • Communicate with leasing agents to understand potential future tenancy options

Support post-purchase steps

  • Set up first steps with servicers, e.g.
    • Property manager
    • Leasing agents
    • Accountant
    • Architect
    • Contractor
  • Observe market to advise on potential exit timing and-or sell on client’s behalf later
  • Provide access to local network

Conclusion and next steps for you as an investor

A good buyside advisor will act as your local contact during search, transaction and, ideally, during implementation of the investment strategy. Also, they will tell you when there is a good opportunity for an advantageous exit.

However, not all advisors offer all the above services. Many may have more narrow scopes or have outstanding expertise in particular geographies, investment cases or services. Take time to analyse service proposals and understand different specialisations. Contact Real Estate Bricks to go this step with you and make a proposal or connect you to relevant advisors.

You will often find designated buy-side advisors, brokers who specialise in sales or purchases and in some cases valuers focusing on a narrow but very important part of the transaction. Reading here about the differences between agents and valuers is a good start. Would you like to explore what the above services would cost you? Find more information on brokers’ fees and compensation of real estate professionals in this post.