Real estate market trends: medium-high segment

Get to know my answers in 2025, for Portugal, to a set of questions related to this topic, aimed at investors and developers.

Analyzing the profile of the buyer in the upper-middle segment, it is observed that the majority are of foreign origin, followed by Portuguese buyers from the upper middle class, with emphasis on expatriates who return to Portugal or who seek to invest, possessing a purchasing power equivalent to that of foreigners.

Real Estate Market:

1 - What are the most sought-after areas currently by Portuguese upper-middle class families for the purchase of housing?

Currently, the most sought-after areas are mainly concentrated in the metropolitan areas of Lisbon and Porto, but also in certain regions with a high quality of life and strong urban development.

Greater Lisbon and Surroundings:

• Porto: The city of Porto has been gaining prominence as a top tourist and residential destination. Neighborhoods such as Baixa, Ribeira, Foz do Douro, Boavista, and Cedofeita are highly sought after by those looking for a cosmopolitan lifestyle with a rich cultural, gastronomic, and leisure offering. Urban rehabilitation has been a strong focus, with the recovery of historic buildings and the creation of new luxury developments. The proximity to the Douro River and the sea, combined with the excellent transport and services network, make Porto an increasingly attractive city.
• Matosinhos: Known for its quality beaches and excellent fresh fish-based cuisine, Matosinhos has been establishing itself as a prime residential area. The neighborhoods of Senhora da Hora, Leça da Palmeira, and Matosinhos Sul are some of the most sought after, with a diverse range of properties, from modern apartments to luxury villas. The proximity to the sea, the quality of life, and the easy access to the center of Porto are factors that contribute to the growing demand in this region.
• Vila Nova de Gaia: On the opposite side of the Douro River, Vila Nova de Gaia stands out for its Port wine cellars and stunning views over the city of Porto. Neighborhoods such as Canidelo, Mafamude, and Valadares are highly sought after by those looking for a quiet residential area with excellent access and a diverse cultural and leisure offering. The proximity to the beaches and the quality of life are attractive factors for those choosing to live in Vila Nova de Gaia.

• Foz do Douro and Nevogilde: sought after for their premium seaside location, stunning views, and beach access. They offer high-quality housing options, including luxury villas and apartments. Social prestige and proximity to exclusive services contribute to increasing the value of investment and demand.
• Boavista and Campo Alegre: these areas are important business centers, with offices, companies, and various services. They attract professionals and families who value proximity to their workplace while not neglecting urban quality. They also offer a wide range of commerce and leisure options.
• Matosinhos: with emphasis on the Leça da Palmeira area, for its proximity to the sea and quality of life. It has become a prime area for those seeking a high-quality lifestyle.
• Historic Porto Zone: With the rehabilitation of downtown Porto, this area has attracted investors and families looking to live in renovated historic buildings. The supply of luxury properties has increased, with high prices due to tourist demand and area appreciation.

Outside major urban centers, families are increasingly looking for:

• Setúbal Region: favored for its proximity to Lisbon, excellent environmental quality, beaches, and good real estate options. In addition to premium locations like Herdade da Aroeira and Quinta do Peru in Azeitão, notable areas include São Lourenço, São Simão, Sesimbra, and Tróia. Sesimbra, particularly the parish of Castelo, also stands out in terms of real estate demand. On the other hand, closer to Almada, new developments are emerging in the project phase, prioritizing proximity to the capital (Caparica Hills being a good example).
• Algarve: popular for the quality of properties, safety, mild climate, and premium tourist and residential infrastructure, areas like Vilamoura, Quinta do Lago, and Vale do Lobo stand out. Albufeira, Lagos, and Portimão are also rising areas. Vilamoura (and neighboring Quinta do Lago and Vale do Lobo) maintains its prestige and international demand. Other areas with good potential include: Faro, Ferragudo, Tavira (currently in high demand), Alvor, and Carvoeiro.

I would like to make an additional note about areas like Braga and Aveiro, which have recently emerged as attractive options due to their growing economic dynamism, good connections to Porto, and overall quality of life.

2 - Are there any recent changes in location preferences?

• Urban Decentralization:
  • Trend: More demand outside major cities (Lisbon, Porto).
  • Reason: Remote work, search for more space and nature, lower cost of living and lower prices of premium properties.
  • Highlighted Areas: Outskirts, semi-urban areas, medium-sized localities.
• Valorization of Space and Nature:
  • Priority: Larger houses, with gardens/balconies and green areas in the surroundings.
  • Impact: Boosts demand in less dense and more distant areas from city centers.
• Rediscovery of Small Towns and the Interior:
  • Attractiveness: Cities like Braga, Aveiro, Coimbra and the interior (Alentejo, Douro) are gaining new popularity, attracting not only wealthy foreigners but also immigrants and new tourism-related businesses.
  • Advantages: Quality of life, lower cost of living, slower pace, nature.
• Emphasis on Sustainability:
  • Concern: Growing interest in efficient, ecological houses with renewable energy sources.
  • News: Eco-friendly communities and co-housing continue to emerge, despite no longer being a novelty.
• Algarve beyond tourism:
  • Evolution: The Algarve has changed! It is no longer just a holiday destination, as more and more people decide to buy and stay (beyond tourists), especially those looking for a sunny retirement.
  • Diversification: Currently, there is a year-round dynamic in the Algarve, outside the "Golden Triangle".
• Premium Areas continue to thrive:
  • Lisbon and Porto: Remain at the top, but demand is more selective, prioritizing factors such as outdoor spaces, quality of construction, sustainable projects, urban rehabilitation, and nearby service offerings.
• Move from major cities to outskirts? This trend not only continues but has accelerated, fueled by the rise in prices in urban centers over the last decade. Despite the higher financial capacity of the upper-middle segment, the demand for more affordable quality housing often leads them to settle in more peripheral areas.

3 - What factors are most valued in choosing a location?

In summary, families value in order of importance:

1. Space & Nature: Spacious house (interior/exterior), gardens, nearby green areas, tranquility, nature, and fresh air.
2. Safety: For families, safety and the tranquility of the area have become priorities. It is no coincidence that gated communities remain so popular. And although Portugal is considered a safe country, it is understandable that those coming from other realities bring with them this increased attention to the issue of security.
3. Quality Services: Good schools (with emphasis on international schools and private colleges), access to health services, nearby commerce, etc.
4. Good Accessibility: Good road access, fast internet, easy parking, etc.
5. Leisure & Lifestyle: Leisure activities, sports facilities, pleasant environment, urban planning and coherence, social life, etc.
6. Work: Access to job offers. Less crucial with the option of teleworking, but still a relevant factor.
7. Transportation (Optional): Public transportation continues to be important for some lifestyles and more central locations, but the car remains the most used option for those living more than 10 km from the city center.

4 - Is there any area with high demand but limited supply, where there may be a development opportunity?

Yes, absolutely. There are several areas in Portugal that combine high demand for housing with still limited supply, creating interesting opportunities. These areas represent a potential for investors and developers who can identify market needs and respond with appropriate projects.

In a nutshell, some of these areas include:

Cascais Line (outside the prime areas of Cascais and Estoril):

• Procura: Famílias jovens, casais e profissionais que procuram um equilíbrio entre qualidade de vida, custo de vida mais acessível e oportunidades de emprego. Cidades como Aveiro, Braga, Coimbra, Leiria, Setúbal, Viseu e outras cidades médias em crescimento têm vindo a atrair cada vez mais residentes.
• Oferta: Com o aumento da procura, a oferta de habitação tem vindo a diversificar-se, com novos empreendimentos residenciais, reabilitação de edifícios antigos e maior disponibilidade de apartamentos e moradias para diferentes necessidades e orçamentos.
• Oportunidade: Investimento em projetos de reabilitação urbana, promoção de espaços verdes e de lazer, melhoria dos transportes públicos e infraestruturas, para atrair mais residentes e dinamizar a economia local.

• Location: Consider the location of the property in relation to amenities, schools, and urban centers in smaller cities or unique regions with potential for tourism or lifestyle.
• Demand: Assess the current demand for modern and functional housing for families, as well as the potential for exclusive and differentiated projects that capitalize on the unique characteristics of each region.
• Quality: Focus on offering competitive prices with high construction quality, as well as developing projects that meet the new needs of residents (flexible spaces, sustainability, leisure areas).

Specific areas in the Algarve (outside the Golden Triangle and mass tourism centers):

• Demand: The Algarve now attracts year-round demand, with areas like Lagos, Tavira, Olhão, Monchique, and the interior of the Algarve becoming popular for those seeking a more authentic and less crowded experience.
• Offer: Limited availability of new and modern housing that meets the needs of permanent or semi-permanent residents, with potential for projects integrated into nature and local culture.
• Opportunity: Develop residential projects that promote an authentic Algarve lifestyle, focusing on sustainability, landscape integration, and respect for local culture. High-quality residential tourism projects targeting those seeking genuine experiences and tranquility may also be of interest.

Factors to consider when identifying opportunities:

• Local Urban Planning: It is crucial to analyze the Municipal Master Plans (PDM) and other urban regulations to understand the possibilities and construction restrictions in each zone.
• Existing and Planned Infrastructures: Check if the area has or will have adequate infrastructures (access, sanitation, telecommunications, services) to support new real estate projects.
• Sustainability and Environmental Integration: Projects that demonstrate concern for sustainability and harmoniously integrate into the landscape and local environment tend to be better received and valued.
• Detailed Market Study: It is essential to carry out a rigorous market study to confirm real demand, identify the specific target audience, and define the type of product and prices suitable for each area.
• Local Partnerships: Collaborating with local entities, such as Municipal Councils, parish councils, and business associations, can facilitate the development process and ensure that the project meets local needs.

Most Sought-after Typologies

1. Apartments vs. Villas (Demand in the Last Year):

• Villas: There has been a relative increase in demand for villas in recent years, but apartments continue to be more sought after overall.
• Why?: The pandemic reinforced the desire for more space, privacy, and outdoor contact, characteristics more associated with villas. However, the apartment market is much broader and more diversified, especially in urban centers, which keeps demand high. In addition, villas in good locations and at affordable prices for the middle class continue to be scarce, hence the market for houses for the Portuguese high segment practically coincides with the luxury segment.

2. Most Sought-after Typology and Prices:

• Localização: A localização continua a ser o fator mais importante na escolha de um imóvel. Proximidade a transportes públicos, escolas, hospitais e áreas de lazer são valorizadas.
• Estado de Conservação: Imóveis em bom estado de conservação são mais procurados, pois evitam gastos adicionais com obras e remodelações.
• Áreas de Lazer: Imóveis com áreas de lazer como piscina, ginásio, jardins comuns são cada vez mais valorizados, proporcionando conforto e qualidade de vida aos moradores.
• Segurança: A segurança do imóvel e da área envolvente é um factor determinante na escolha de um imóvel, especialmente para famílias com crianças.

• Entre 300.000€ e 500.000€ - Esta faixa de preço é a mais procurada por famílias de classe média/alta, oferecendo geralmente imóveis de qualidade e com as características mais valorizadas.

• 500,000€ - 800,000€: This is the most active price range and sought after by middle-class families. It allows access to quality 3/4-bedroom apartments in good locations or houses in more peripheral areas or smaller cities.
• > 800,000€ - 1,500,000€ (and above): There is also significant demand in this range, especially for the high-end segment and luxury villas, premium apartments in prime areas (Lisbon, Cascais, Porto, Algarve) or properties with very specific characteristics (views, exceptional location, large plots). The market above 1.5 million is more exclusive and has lower demand, but continues to have demand for a niche market of wealthy buyers, with a focus on foreign buyers and Portuguese investors.
• < 400,000€: Although there is still demand, this price range begins to limit options for middle/upper-class families in terms of location, typology, and quality, especially in the most desired areas. It may be more relevant in smaller towns or peripheral areas.

2 - Are families willing to pay a premium for location or do they prefer larger properties in more distant areas?

• Location is often a priority, but...: Location remains crucial, and many families are willing to pay a significant premium for a better location, especially if it means proximity to urban centers, services, good schools, and leisure.
• ... Balance is sought: However, families are increasingly sensitive to high prices in prime areas and seek balance. Many are willing to reduce the size of the property or opt for a slightly smaller typology (e.g. 3 bedrooms instead of 4) to maintain the desired location.
• Distant areas are compensated by advantages: Properties with larger areas in more distant areas have become more attractive to some families, especially if the price difference compared to central areas is significant and if the peripheral area offers a good quality of life, security, and reasonable access. The final decision depends a lot on the individual priorities of each family (lifestyle, work, children, etc.).

3 - Changes in Average Budget (Current Economic Conditions):

• Average budget tendentially stable, but...: The average budget available for purchase remained relatively stable for middle/upper class families, in the sense that the most sought-after price range did not change drastically.
• ... Reduced borrowing capacity: However, current economic conditions (high interest rates, inflation, economic uncertainty) have reduced the borrowing capacity of many families and increased caution. This means that, although the nominal budget may be similar, the actual value they can finance and the financial effort rate to support a loan have increased.
• Greater price sensitivity and negotiation: Families are more price-sensitive, more thoughtful in their decisions, and more inclined to negotiate purchase prices. There is a greater demand for opportunities and properties with "reasonable prices" or below market value.

3 - Percentage of Clients with Housing Credit:

• Majority resort to credit: The majority of middle-class families (estimate: 60% - 80%) resort to housing credit for home purchases, even with considerable equity. This is due to several factors: historically low interest rates (except from 2022 to 2023), tax benefits of housing credit, and financial management (obtaining liquidity for other investments or needs). In the high-end segment, especially among foreign buyers, this percentage is lower.
• Financing patterns: The percentage of financing varies greatly. Although the legal maximum may be higher, many families choose to finance between 60% and 80% of the property value, using their own capital for the initial down payment to reduce the total loan amount and interest charges. In some cases, families with greater financial capacity may request financing below 50% or even buy without resorting to credit, a more common situation in the high-end segment.
• Precaution and reinforced financial analysis: With the increase in interest rates in the last 2 years, there is greater caution in contracting credit. Families make more detailed simulations, compare offers from different banks, and carefully analyze their ability to support payments over time, considering possible increases in interest rates.

New Trends

1. Is there an increase in demand for innovative housing models (co-housing, modular housing, etc.)?

Yes, demand is growing, but it is still an expanding niche. Innovative models such as co-housing, modular/prefabricated housing, and coliving are gaining traction, driven by a new wave of buyers who are more open to alternative solutions and have social and environmental concerns.

• Co-housing and Coliving: Attract people for the community and shared spaces. Ideal for those who value social interaction and seek to reduce urban isolation. They may be appealing to active seniors, single-parent families, or young professionals. In Portugal, they still have little expression.
• Modular Housing: Seduces with its speed of construction, flexibility, potential for customization, and, in some cases, more controlled costs. The perception of the quality of modular construction has significantly improved, becoming a more credible option.
• Obstacles to mass adoption: Despite the growth, these models face challenges: legislation and licensing not always adapted, more difficult bank financing, and a certain cultural resistance, with municipalities at the forefront, facing these less traditional concepts.
• Promising future: However, the trend is clear: the demand for innovative housing will continue to grow, driven by demographic changes, environmental concerns, and the search for lifestyles more aligned with contemporary values. We can expect to see more projects of this type, especially in younger communities and in urban areas with a strong sense of community.

2. In general, has there been any change in housing demand trends in the last 5 years? Are there any relevant changes expected in the next decade?

Last 5 Years: The Pandemic Earthquake and Beyond: The last 5 years have witnessed profound and accelerated changes, greatly marked by the pandemic:

• Urban exodus and suburbs in vogue: Valuation of the periphery and semi-urban areas, search for space, nature, tranquility, and lower population density.
• Home as a multifunctional refuge: Housing has become central in our lives, with a demand for spaces adaptable to teleworking, leisure, and family life.
• Sustainability on the radar: Environmental concern has ceased to be a niche and has become a relevant factor in the purchasing decision, although not always decisive.
• Essential technology and connectivity: Fiber optics, smart homes, fast charging for electric cars have become almost as important as location.
• Inflation and interest rates changing the game: The recent rise in inflation and interest rates has dampened enthusiasm, putting budget and borrowing capacity at the center of decision-making. Obviously, this factor is less important in the high-end and luxury segment.

Next Decade: What to Expect? In the next decade, trends are expected to consolidate and intensify, with some new developments emerging:

• Sustainability at the forefront: Sustainability will no longer be an "extra" but a basic requirement, especially in the European space, with tighter regulations, tax incentives, and appreciation of more efficient properties expected.
• Smart technology and automation: The smart home will become the new standard, with integrated systems for energy management, security, comfort, and leisure, as well as digital customization of spaces.
• Planned communities and focus on well-being: There will be a growth in planned communities offering shared services, abundant green spaces, sustainable mobility, and a focus on residents' well-being. Concepts like "15-minute cities" (an urban model aiming to ensure all essential services are accessible by foot or bike within a 15-minute radius) will gain importance.
• Maximum flexibility and adaptability: The homes of the future will be ultra-flexible and adaptable to the constantly changing needs of families, with modular spaces, removable partitions, and biophilic design that adjusts to different life stages.
• Micro-Housing and space optimization: In dense urban centers where land value is high, micro-housing focused on quality, intelligent design, and shared common spaces may increase, with space optimization being key.
• New property ownership models and housing access: Alternative models such as long-term leasing with included services, housing leasing, or shared ownership may gain relevance due to the difficulty of home ownership for younger generations and increasing professional mobility. This is already a growing reality in Europe, with municipalities and investment funds leading this change.
• Regionalization and customization: Trends will be increasingly regional and personalized. What works in the Algarve may not work in Minho. Understanding local needs and preferences is crucial for project success.

Differentiating Factors

1. Currently, what characteristics or concepts make a real estate development stand out from the competition?

In a competitive market, "more of the same" is no longer enough. For a development to shine, it needs to offer something truly unique and aligned with current desires. Key differentiating factors include:

• Bold and Innovative Design: It's not enough to be modern, it has to have personality, tell a story, integrate into the landscape, and appeal to emotions. Architecture that surprises, that uses differentiating materials, that creates memorable spaces.
• Authentic Sustainability: Sustainability ceases to be optional and becomes a "must-have", but it has to be real and measurable. High energy certifications, ecological materials, renewable energy solutions, intelligent resource management, integration with the surrounding nature. The "green" has to be credible and generate real value for the buyer.
• Experience and Lifestyle (More than just "Homes", "Homes"): Buyers are not just looking for square meters, they are looking for lifestyles. Developments that offer experiences, that promote community, that facilitate well-being, that integrate relevant services and amenities in everyday life (coworking, gym, shared leisure spaces, smooth mobility, etc.). It's about selling a "dream" and not just "walls".
• Strategic Location (Reinvented): "Good location" is no longer just "central". It can be the outskirts with excellent accessibility, quiet areas with stunning views, emerging localities with authentic charm. The key is to reinterpret the concept of location, find "hidden treasures" and enhance them with appropriate projects.
• Personalization and Flexibility (Made to Measure): Developments that offer some degree of personalization and flexibility (in the floor plan, in the finishes, in optional services) gain points. The modern buyer wants to feel that the house is "theirs" and adapted to their needs. Even in larger projects, there may be room to offer customization options.
• Emotional Communication and Branding: The way the development is communicated and "sold" is crucial. Storytelling that appeals to emotions, that creates a unique identity, that goes beyond traditional brochures and websites. Content marketing, immersive experiences, collaborations with influencers, exclusive events - everything counts to create buzz and desire.
• Integrated Technology: Smart homes, but without "over-engineering". Technology that simplifies life, increases comfort and security, optimizes home management and consumption, but is intuitive and discreet. Not gadgets for gadgets, but solutions that really add value.

2. Other examples of successful projects

It is difficult to point out "universal" successful projects, as success is multifaceted and depends on the context. However, here are some examples of successful formulas:

• "Urban Eco-Resort" (Lisbon/Porto Periphery): Condominium of apartments/houses in a green area near the city, with biophilic design, sustainable materials, renewable energies, community gardens, coworking spaces, outdoor gym, shared mobility (bikes/electric cars), wellness programs, and active community. Success factors: Authentic sustainability, focus on quality of life and well-being, community, proximity to the city and nature.
• "Atelier Villas" (Costa Vicentina/Comporta): Small development of detached villas with minimalist design integrated into the landscape, large panoramic windows, extensive private gardens with a natural pool, natural and local materials, personalized concierge services (local experiences, private chef, surf lessons, etc.). Success factors: Exclusivity, designer label, landscape integration, privacy, discreet and authentic luxury experience.
• "Living Hub Senior Coliving" (Braga/Aveiro Medium City): Building of T1 and T2 apartments for active seniors, with generous common areas (living rooms, library, gym, terrace, community restaurant), support services for daily life (cleaning, laundry, minor repairs), social and cultural activity programs, central location with good access to services and transportation. Success factors: Response to a growing demographic need (active seniors), focus on community and well-being, adapted services and amenities, convenient location.
• "Modular Creative Neighborhood" (Urban Regeneration Zone): Set of customizable and flexible modular houses, built in record time on a site undergoing urban regeneration, with shared outdoor spaces (gardens, playground, socializing areas), creative workshops and coworking spaces on-site, partnerships with local artists and craftsmen for house decoration and customization, regular cultural and community events. Success factors: Innovation (modular construction), relatively affordable prices, appeal to a young and creative audience, urban regeneration, focus on community and local identity.

3. Is there any gap in the market that real estate development companies are not yet exploring?

Despite the diverse offerings, there are still some potential gaps:

• Accessible "Stylish" Housing for Young People and Middle Class: There is a great need for more affordable housing, without sacrificing design, quality, and location. Projects that focus on well-designed and optimized mini-apartments, efficient modular construction, in regeneration areas with good potential, co-living solutions for young professionals, could have great demand. The challenge is to maintain quality and aesthetic appeal in a lower price segment.
• Intergenerational Communities and Co-housing for Families: Co-housing has the potential to go beyond the senior niche. Projects that integrate young families, active seniors, and other age groups, promoting the sharing of spaces and services, mutual aid, and diversity, could respond to a growing demand for more community-oriented and sustainable living models. It is necessary to create the "right model" that appeals to different generations.
• Flexible and Adaptable Housing for Digital Nomads and Remote Workers: With the growth of remote work, there is a market to explore for housing designed for those who work from home or travel frequently. Apartments/houses with integrated and functional offices, coworking spaces in the condominium or in the area, telework support services, flexible lease agreements, could attract this growing audience. The concept of an "integrated home-office-social hub" in one space.
• Creative and Sustainable Urban Rehabilitation Projects (in small Cities and Villages): There is enormous potential in the rehabilitation of degraded buildings and neighborhoods in small towns and villages with historical charm. Projects that preserve local identity, integrate sustainable solutions, attract new residents, and revitalize the local economy, can be very successful.
• Exclusive Themed Condominiums: Growing demand for themed condominiums that offer personalized lifestyles and unique experiences. Projects like Eco Surf Resorts, Wine & Nature Condominiums, or Equestrian Condominiums, with infrastructure and activities focused on specific interests, attract an audience that values exclusivity and community.
• Rural Micro-Wellness and Digital Detox Resorts: In the countryside, there is room to develop small rural resorts focused on well-being, nature, and digital disconnection. Properties integrated into the landscape, with careful design, offering authentic experiences (local cuisine, nature activities, yoga/meditation retreats), personalized services, and a focus on tranquility and "slow living." A "discreet luxury" for those looking to escape urban stress and reconnect with themselves and nature.
• Student Residences: Growing demand for student residences with study spaces, leisure facilities, and services (laundry, etc.), close to universities. Integration of areas for events and focus on a safe and stimulating environment.
• Senior Residences: There has been an increase in demand for senior residences with adapted apartments, social spaces, health and well-being services, and social activities, which prioritize autonomy and quality of life, integrated in areas with green spaces.

In summary, the differentiating factor lies in offering more than just 'houses': it consists of creating experiences, lifestyles, communities, and solutions that meet the constantly evolving needs and desires of buyers with a higher level of demand.