Rising Rents and Lack of Student Housing haunt Portugal's Rental Market

High rents in Portuguese towns and cities drive tenants to seek rooms or house-shares rather than rent a property on their own, according to a report by newspaper Correio da Manhã. The newspaper stated that the average age of sharers has risen to 33, showing that it is no longer just students opting for this type of accommodation.

Portugal's rental prices have risen sharply in recent months and the rental market comprises now more of short-term rather than long-term rental contracts too. The country's National Tenants' Association stated that it is no longer viable to rent properties and estate agents like Colliers International and JLL report that a lack of supply of properties is driving up house prices and rents in the residential market in Lisbon, Porto and the Algarve. This is confirmed by the monthly survey index conducted by the Royal Institution of Chartered Surveyors and Confidencial Imobiliário.

Further price rises of around 4.5% are predicted for the next 12 months, with the growth rate estimated to accelerate to ca. 5.5% on average over the next five years. Last year property prices rose by 12.8% nationally, but in central Lisbon's historic districts prices rose by 21.1% year-on-year, in fact doubling since 2013.

In Porto surveyors predict the strongest price growth over the next 12 month period, while the Algarve shows the strongest projections over the coming five year period.

The lettings market tells a similar story. Rents continue to grow sharply due to lack of supply and high demand. A report by JLL on Portugal's student housing sector in Lisbon, Porto and Coimbra concluded that the number of foreign students coming to Portugal had more than doubled since 2010 and this had added to the pressure in the rental market. The existence of professional student housing is "essential to keep Portugal attractive for foreign students", the report said, but a lack of around 15,000 beds with "European quality standards" in the main three university cities means that demand far outstrips availability.

This is an opportunity for investors and developers to come up with solutions for Portugal's student housing sector.

Both Lisbon and Porto have already come up with innovative solutions to accommodate students, not just during their university years, but also after graduation. Between 30% to 40% of international students would like to remain in the cities after their studies are concluded. Creative labs and start-up hubs combined with new policies to "encourage young professionals to establish" themselves in Lisbon and Porto have sprung up here and there in the urban fabric, allowing young professionals to found their own companies or be employed by already existing companies that have their HQs in these cities.

Today's students, so the JLL report concluded, are looking for strong brands, high quality and design and close proximity to recreational areas that include cinemas and meeting rooms, game rooms, spas and gyms and other sports facilities as well as retail outlets and restaurants.

Students also expect easy access to laundry services, cleaning and catering and would prefer to live somewhere with a concierge service. Trends in development should reflect this preference. New student housing in Portugal should therefore contain "flexible and open areas for different uses" and buildings should be designed using a modular construction system. Housing, above all, should adhere to strict principles of sustainability, the JLL study said.

For investors in this sector of the residential market, Portugal offers great opportunities to get involved. There is a desperate need for more student housing, with growing numbers of international students opting to spend their study time in Portugal and staying on after graduation.

For the academic year 2016/2017 Portugal counted some 42,600 international students among its numbers, derived from 178 different countries. Portugal saw a growth rate of 119% in international student numbers from 2009 to 2017. Of these international students, some 51% hailed from Portuguese speaking countries. Combined, Lisbon, Porto and Coimbra had to accommodate some 362,000 students.