Real Assets Q&A: Fernando Sousa, Irbosol Group
Portugal’s Algarve region has long been popular with continental European holidaymakers, but the region also offers significant benefits to private markets investors that look to deploy capital in the residential real estate market. Greg Winterton spoke to Fernando Sousa, Managing Director at Irbosol Group, to get his thoughts on the drivers of return in the market.
GW: Fernando, for those who might not be familiar with Irbosol Group, tell us a little bit about the firm.
FS: Irbosol Group is an integrated real estate development group of companies that operates within the Algarve property sector, both within the tourism and commercial real estate segments. The group includes companies that operate in construction and maintenance as well as estate agency and asset management. Over the years Irbosol has built up deep experience of the Portuguese property market as an investment area.
GW: Investing into real estate opportunities in sunnier climbs like the Algarve is not a new concept, so why now? What’s changed in the past few years?
FS: Infrastructure in the Algarve has improved markedly over the last decade due to massive investment from developers and public authorities, making the location more attractive and sophisticated for real estate investors. The region also maintains its traditional attraction for foreign residents, including the weather, the best sandy beaches in Europe, gastronomy, security and the friendly locals of course.
Last year we saw one of the best years ever for tourism in Portugal, with more than 30m visitors and 77m overnight visitor stays. That brought in EUR 25bn in revenue, according to the government. This is growth of 37% compared to 2019, before the pandemic. Demand for residential property, especially at the high end of the market, remains very strong.
GW: What are some of the trends supporting Portugal as a destination for investment capital specifically as opposed to, say, the south of France or Italy?
FS: The price of tourism and high-end residential property in Portugal compared with other destinations is still cheaper, while the Algarve is becoming more accessible to foreign tourists and high net worth residents. Demand is exceeding supply by a considerable margin, as the market remains highly regulated.
I believe the Return on Investment is potentially higher in the Algarve than in France or Italy, for example. In 2022 and 2023 we saw approximately 2,100 millionaires – and above – relocated to Portugal. Many of them moved to the Algarve, which offers arguably the best significant price upside in the country. This is creating unprecedented demand both for high end villas but also for associated amenities.
GW: Why are you currently focused on residential real estate, and not commercial real estate, for example?
FS: We are focused more on residential real estate due to the existing trends of demand. That does not mean that we are not also looking at commercial real estate opportunities. Some players are already anticipating the increase in demand for commercial properties including ourselves. This is why our first real estate fund incorporates a mix of both residential and commercial assets.
As a developer we have been active in the market for a decade and have delivered on a number of successful projects. We see upside potential in both areas of the market.
GW: Looking ahead to the next five or so years. What are some of the other real estate investment opportunities in the Algarve region? And how likely are the existing tailwinds to support the region in the medium to long term?
FS: In the next five years we are going to see a substantial increase in both the demand and quality of the real estate projects being developed here, making the Algarve one of the top destinations in Europe for high end tourism and high net worth residents. I believe Portugal in the next 10 years will become the top location in Europe for HNW residents, from both inside Europe and further afield. This will not just be an Algarve story, however: we also see massive potential being created in adjacent sophisticated locations like Comporta near Lisbon that will complement Portugal and the Algarve as the top destination in Europe.
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Fernando Sousa is Managing Director at Irbosol Group
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