QUESTION: During the WEC I came to understand Real Estate will crash. Then when looking at Socrates, it shows real estate indices, however I do not recognise these trends. First I thought they were in $, I need to translate them to euro base to recognise the trend. But no, the real estate indices in Socrates are in terms of euro already and going down, while currently prices are again going thru the roof. Can you please explain what I am missing here?

M

ANSWER: It all depends upon which market you are looking at. The core markets where there was a lot of speculation like Britain saw a peak in 2015 and has been declining. London is far worse. The German market was not the object of massive foreign capital inflows. They were primarily internal shifts within the Eurozone. I was in Bavaria recently and looked at houses and I thought they were cheap in comparison to the United States.

Nevertheless, the rise in the German market has been about 50% since 2015. When we look at it in dollars, the gain is about 10% less. Insofar as German real estate, it has been a peripheral market to the speculation. That means it will rise after others decline.

Keep in mind that as the currency weakens, tangible assets become the haven.

The Portuguese economy was bailed out by the European Union eight years ago. It is now booming, also in part for its aggressive attraction of courting foreign investors. If you want to live in Portugal long-term or permanently, you will need to apply for Portuguese citizenship or Portuguese permanent residency. Portuguese permanent residency is available after five years of residence, while Portuguese citizenship is available after six years, or three years if claiming Portuguese citizenship by marriage. Both Portuguese citizenship and permanent residency allows you to remain in Portugal indefinitely and access similar benefits, although there are some differences between the two. While residents can stay in Portugal indefinitely by continually renewing their permanent residency, there are certain added Portuguese citizenship benefits to entice foreigners to take on the Portuguese citizenship application process.

This movement has been a major factor behind Portugal enjoying its highest economic growth in nearly two decades, with the major trend fueled by record tourism, an upswing in the housing market from foreign investors, a growing tech sector, and strong exports. Private investment has returned to 2009 levels, helped by foreign investors including Chinese companies who have focused on Portugal.

But for every glitzy new hotel and fancy restaurant in Lisbon, there is growing concern that the infrastructure is aging. This was illustrated by the locomotive that fell apart in late February, which was rented from Spain as a stopgap measure. There has been a lack of public investment which is beginning to become obvious. Its total debt is close to 120% GDP, which is one of Europe’s highest. The ruling socialists have limited room to finance their dreams under the EU rules and at the current artificially low interest rates maintained by the ECB. The budget deficit of the 2010 era of 11% of GDP has been reduced by attracting foreign capital and cutting spending on public infrastructure. The problem that Portugal faces is that its success of late has been constructed on the immediate results, not long-term.