Exploring Transcontinental Real Estate Opportunities: Iberia and Latin America in Focus

Latin American investors look to Spain and Portugal as European players in search of opportunities in Latam. We are seeing increasingly transcontinental investments with growing interest from Latin American and European investors in the Iberian Peninsula and Latin America

Why Iberia?

Spain and Portugal stand out as the top destinations for real estate investment, having navigated recent economic challenges more successfully than many of their European neighbors. Its resilient markets are characterized by significant supply-demand imbalances and favorable fundamentals across several sectors. In Portugal, the strong export sector and low tax burden increase its attractiveness to investors. In addition, Spain's anticipated economic recovery and robust consumer spending are driving growing investor optimism. The combination of these factors, together with improved market stability and growth potential, makes the Iberian Peninsula an increasingly attractive region for real estate investment. Additionally, both countries offer strategic geographic locations, rich cultural heritage, and improved infrastructure, which further adds to their allure for investors looking for long-term gains.

Why Latin America?

At the same time, Latin America offers a growing range of diverse real estate investment opportunities, especially in infrastructure, healthcare, hospitality, and retail, requiring thorough research and local partnerships to capitalize on robust growth potential. The long-term outlook for Latin America is being shaped by natural resources, a growing and expanding middle class with increasing needs for allocation and construction of better infrastructure, combined with better access to capital and debt financing, especially in Mexico, Brazil, Chile, Colombia and Guatemala where a significant transformation in society is being seen.

Portugal's attractiveness goes beyond its scenic beauty and favorable climate. The burgeoning digital knowledge sector is increasingly becoming a significant key for investors. At the same time, economic indicators are favorable to Portugal on several fronts, with GDP growth and low inflation positioning Portugal as a promising destination for continued investment. Portuguese bonds reflect this confidence, with bond interest rates lower than those of some major European economies such as A stable and promising. This financial stability underlines the country's potential as a safe investment environment. Portugal continues to leave its mark on the global investor landscape, but its size creates difficulties for larger portfolios as they have fewer exit options. Or simply said, that the days when the Blackstone’s of the world came to Lisbon and launched a hundred million in the country are over. But this can also be an opportunity, as the market is more stabilized and less interesting for sharks and more for long-term investment portfolios and funds.

There is a growing expectation that South American funds can use Portugal as a strategic entry point into Europe, leveraging its advantageous location and market dynamics. This was particularly noted in the luxury residential sector, where, despite a notable slowdown, Brazil's international interest remains robust. This trend of South American capital entering Portugal was compared to the way South African funds entered Central Europe about a decade ago.

Investors continue to favor Portugal, buoyed by its strong fundamentals. The retail sector has seen notable improvements. Once considered one of the weakest markets in Europe, it is now performing consistently, showing significant resilience and growth. Both the retail and hospitality sectors stand out as particularly strong areas, driven by high visitor numbers and consumer trends, with consumers spending like never before. Lucrative opportunities for investors are emerging, however, once again, liquidity remains a challenge, limiting the ability to make quick exits. Finding opportunities in Portugal can also be a challenge for opportunistic funds. Unlike Spain and Italy, where market saturation brings more non-core assets to the market, Portugal's market is less saturated. This lack of saturation limits the availability of investment opportunities, but it also suggests potential for future growth and liquidity.

Portugal presents a unique paradox for real estate investors, although it can be challenging due to its often-slow municipal processes, this same feature prevents the market from overheating. The slow pace of bureaucracy means that the rapid deployment of large investments is almost impossible, which in turn prevents the market from transforming rapidly.

This slower growth rate can be frustrating as it hinders the speed at which the market can expand. However, when economic pressures increase, the inherent gradualism of the market acts as a buffer, resulting in a more stable and less volatile environment. This has been the case lately, where, unlike other regions experiencing severe recessions, Portugal has maintained relative stability. In addition, the consensus of the discussions suggested that Portugal is better prepared now than in past crises, presenting stronger economic fundamentals and a more resilient market structure. This preparation boosts investor confidence, even amid global uncertainties.

Latin American investors are increasingly looking to Spain and Portugal, while European players are seeking opportunities in Latam. This trend reflects a growing interest in transcontinental investments, with both Latin American and European investors focusing on the Iberian Peninsula and Latin America.

Understanding local market dynamics and regulatory environments is crucial for investors. In Portugal, the implementation of the Simplex Urbanistic administrative system is expected to streamline processes, reduce bureaucratic delays, and improve conditions for real estate investments. This tool aims to increase efficiency and transparency, thus reducing exposure to white-collar corruption.

The short-term outlook for the Portuguese real estate market remains uncertain due to global economic volatility. However, the long-term outlook is promising, with the Simplex system playing a key role in maintaining investor confidence and fostering growth. Investors with a longer horizon, such as those operating on a five- to ten-year basis, can benefit significantly from the market's potential growth.

While the Portuguese market has not undergone the same level of revaluation observed in the United Kingdom, France, Germany, Italy, and Spain, this stability can be either a risk or an opportunity, depending on the future evolution of the market.

The Portuguese real estate market is attracting a diversified range of investors and is evolving into a mature and dynamic sector. After the global monetary crisis, investment was minimal. Today, there is a marked shift towards value-added and opportunistic investments, driven by higher interest rates and tighter credit conditions. Major investors, once dominant, are now less active due to unfavorable risk-return profiles at current maximum rates.

The biggest challenge is the mobilization of capital in the current context. High interest rates and a competitive global market for investment funds have made investors more cautious and selective, often favoring larger, well-established funds over smaller, regional ones.

The Portuguese market heavily depends on foreign capital, representing a risk given the intense global competition for investment funds. This reliance on external capital is a significant challenge for local developers and investors.

In the current climate of high interest rates, debt investments have become more attractive than equity due to the higher yields achievable with lower risk.

Looking ahead, there is optimism about the long-term prospects of the Portuguese real estate market. Innovation and sustainability, along with accelerating licensing and adopting new building methods and materials, are key. Ideological issues from the past often hinder this evolution, which both Portugal and its housing market need.

We must focus on developing new real estate products to meet growing demand across various sectors. Hospitality and tourism are performing exceptionally well, driven by strong tourist demand. Logistics remains resilient, and new markets, such as data centers, are emerging due to Portugal's excellent connectivity. Other sectors like student accommodation and self-storage are also driven by strong underlying fundamentals and demand.

Portugal is well-positioned for growth when interest rates stabilize, and global conflicts subside. We can expect more transactions and investments as investors adjust their strategies to new economic realities. This will enable Portugal to capitalize on its strengths, retain human capital, and talent, and position itself ahead in the global market.