Buying in Lisbon

Part 2 of my reply to Pierre about buying a ruin in Lisbon

“We want to move to Lisbon permanently early 2013 and found several nice rentals.
But we also found an old house in Lisbon, on the border with Alfama. It needs very serious renovation (practically RECONSTRUCTION). But once done, we would have a T2 for ourselves, and 2 T1 for daily/weekly rental with great views (including the river). Total costs aprx. 250K. Would you consider this a risky investment?”

In part 1 of my reply I looked at the general economic outlook in Portugal. It is not good. However, let’s now look at the particular deal.

If this deal was anywhere else in Portugal I would say it was way too expensive. I must admit I dont know what house prices or rentals go for in Alfama. It certainly would appear to be a great spot overlooking the estuary. You really do need to check other prices in that area. A quarter of a million just for a ruin sounds crazy. Let me put it like this. I have a three bed apartment in London. It is close to several tube stations, and there is a massive amount of work available for good pay within walking distance. It is worth about the same amount.

Lisbon wages are not as high as London wages, so why is a ruin worth so much money? Something sounds not right here. I can in that area find for sale a property split into two apartments ready to move into for €150,000 (that’s half the price of your project) so unless the one you have your eye on has spectacular views from the top of the hill with courtyard and garden I have no idea why it costs so much.

A capital city should have a proper rental market, but you really do need to tramp around the streets and see what deals you can find, then get back and get out the spreadsheet and do your homework. Down here in the Algarve you’d have to be a total idiot to buy anything with a view to renting it out. You can rent a 1 bed apartment for €50 a week. For twice that you get something really nice. Lisbon should be much better, and at least Alfama is a hip place to be.

On the other hand, to put things into perspective, in this week’s Unique Members’ Bulletin there is a hotel in Cumbria going for £35,000. That is the price in a well known beauty spot in a wealthy country. You have a home and a business for a pittance. You cant get that kind of value in Portugal. Wages here are about €1,000 a month. That’s less than half what they are in the UK. House prices have to fall considerably in Portugal. They are still extortionately high.

I have been asked to look at Turkey and Sicily next. Let’s see what turns up.