Property in Portugal Is Driven By Fear and Greed

Published on 3rd June, 2012

The former managing director of Chase Investment Bank in London, Roger Abraham, spent twenty three years as a resident in Qunita do Lago has shared his views on financial and property markets after observing the good and bad times they have seen. This man is no armchair economist, but offers sane advice that comes from observing human behaviors and emotions which in his opinion are driven by fear and greed. His advice is also based on the published economic indicators.

Mr. Abraham exited his job at Chase in 1988, bought Quinta do Lago in Portugal from its owner Andre Jordan, and continued as a 50% shareholder and director until 1997. Over a period of some twenty years he was able to watch some unpleasant conditions in the market. He contends that, just as has happened in the past, those with wealth will over time start moving back toward higher quality assets in the real estate market. The reason for this is that they no longer place their trust in cash or in the banks that are supposed to care for their money.

Without anyone’s permission, governments have the authority to print more money, and this is just what many are doing. The only thing is that they cannot back up that money with assets. One safe investment bet will continue to be five star property which will protect capital from depreciation.

All one has to do is notice the prices art (example: “The Scream”) and London prime real estate brings along with the assistance provided by French and Greek buyers taking their finances out of the Euro. Today, London is often considered the second to the largest city of France! Here are Mr. Abraham’s reasons for acquiring Portugal top end real estate.

1. Since 2008 real estate values have decreased by 30%.

2. Since July, 2011, the Euro has taken another dip of 12% when compared to sterling.

3. High net worth individuals, purchasing the finest properties in the most desirable locations, have no troubles with what is perceived to be a shortage when it comes to mortgage finance.

4. The result of Eurozone Governments printing more money will most assuredly result in 5% per annum inflation.

5. Statements by the ECB and the Bank of England indicate that interest rates will remain around 1.5% or below in the near future.

6. Even when you ignore the taxes that are payable on interest, the result of such actions on cash deposits depreciation in real terms of 3.5%.

7. Just as is happening now, properties appearing for sale are priced below the cost of replacement, which means it doesn’t get replaced, which in turn slowly erodes the supply.

8. Portugal’s recent tax incentives for retirement has the effect of increasing residential tourism coming south from countries in Europe. These, in particular, are retirees outside what is known as the Eurozone.

9. The economy of Portugal is different from that of Spain meaning that is a contrast in terms of problems with banking practices due to the over-supply of property used for speculation.

10. Portugal so far has been able to meet the Troika fiscal targets that have been imposed by IMF which indicates that it is not likely to be requested to exit the Eurozone even though there may be a necessity to take more bailout funds.

During the 1988 through 1990 period when Roger Abraham was Quinta do Lago SA chairman; a good many plots were easily sold. However, only four were sold during 1991 and 1992.

It was as if the market had dried up overnight because of the downturn in the economy. Buyers were asking for significant discounts and those selling properties without needing money took the position of waiting until they could get the asking price. They did too, in a few years.

Mr. Abraham feels that a replay of this scenario is going to take place soon, even though wealthy buyers have taken notice of some recent bank repossessions and distressed sales make it seem less than urgent. One must admit that changing sentiments could happen as clarification of the Eurozone continues to take place.

Sources: http://algarvedailynews.com/

Published in: Money