According to a report by ECO, during the last four years, the median value of a square metre of bank valuation in Portugal has grown at an average rate of 10.25 percent per year and rents have grown, on average, by 8.3 percent per year.
In Lisbon, the square metre of bank valuation recorded, in the last four years, an average annual appreciation of 9.4 percent, placing the capital at the top of the municipalities with the highest price per square metre, with a property of 100 square metres valued at around €350,000 (€3,500 per square metre).
However, over the same period, rents from new leases in the capital rose by an average of 4 percent per year. This made real estate investment in Lisbon with the rental market in mind less appealing. Currently, taking into account the price of the square metre of the bank appraisal and the rents charged in the country, Lisbon is the least appealing municipality.
On average, for €1,000 of investment in the purchase of a house in Lisbon, landlords receive, per year, less than €500 rent, equivalent to a yield of 4.1 percent. In August 2018, the average annual rate of return on leased properties in Lisbon was 5 percent.
At the opposite extreme is Vila Nova de Gaia, with the average yield of real estate investment focused on leasing (ratio between rents received in a year by the value of the property) reaching 5.9 percent. Even so, it is a value far from the average return rate of 7 percent that the northern municipality had in the first half of 2018.
In Portugal, the average yield of real estate investment focused on rental is currently 5.3 percent, around 0.7 percentage points below the value recorded in December 2018. The drop in the rate of return on real estate investment focused on rental is transversal to the entire country and is mainly explained by the fact that the value of bank appraisals has increased more sharply than the value of rents in recent years.