Portuguese Banks Slash Repossessed Home Prices to Revive Market

Portuguese lenders are offering thousands of repossessed homes at reduced prices after investment in real estate fell to the lowest in a decade. Banco Comercial Portugues SA (BCP) is offering discounts of as much as 12 percent.

Portuguese banks are expected to sell about 10,000 houses and apartments this year, or 22 percent of total sales, compared with about 6,000 homes last year, said Manuel Alvarez, regional director of broker Re/Max Portugal.

“Banks need to get rid of their real estate assets and to do this, they need to create demand,” said Walter Fabrega, broker Jones Lang LaSalle Inc.’s (JLL) head of capital markets in Portugal. “Demand has to be created through big discounts.”

The thousands of soured assets being sold highlight the difficulties indebted homeowners have faced since Portugal sought a 78 billion-euro ($100 billion) bailout from the European Union and the International Monetary Fund in 2011. The latest discounts are expected to attract new investors, helping the market to recover, brokers said.

“After a long waiting period, we have finally started to clearly identify demand for value-added and distressed assets from funds with opportunistic money,” Jones Lang said in a report last month. “This tendency will continue and will increase during 2013.”

Investment in Portuguese real estate declined 38 percent in 2012 from the previous year to 125 million euros, the lowest in the last decade, according to Jones Lang. Prices declined for a second straight year in 2012, losing 2.2 percent, according to Confidencial Imobiliario, which collects data on the Portuguese property market.

‘Necessary Move’

Portuguese real estate had its worst performance in decades in 2012 after investment in commercial property dropped by 50 percent from the previous year, Eric van Leuven, managing partner at Cushman & Wakefield Inc. said in January.

“This move by the banks is necessary for the real estate market in Portugal to recover,” Re/Max’s Alvarez said. “Without the discount, many people wouldn’t be able to buy.”

Banco Comercial, Portugal’s second-largest publicly traded lender, is selling more than 700 repossessed homes, offices and warehouses with discounts of as much as 12 percent below their market value to individuals who complete the purchase by the end of May. It and state-run Caixa Geral de Depositos carry out monthly real estate auctions across the country.

“By offering properties at competitive prices, Banco Comercial has helped keep the real estate market in Portugal liquid and resilient,” Miguel Maya, an executive board member at Banco Comercial Portugues, said in an e-mail.

Officials at Banco Comercial, Caixa Geral and Banco Espirito Santo SA (BES), Portugal’s biggest publicly traded bank, declined to say how many real estate assets they each plan to sell this year.

‘Golden Visas’

The Portuguese government is also trying to attract foreign buyers to the country’s property market. It announced last year it would grant non-EU citizens who invest more than 500,000 euros in real estate special resident permits, or “golden visas.”

“This is an intelligent move that is likely to attract new investment into the property market,” said Alison Buechner Hojbjerg, an agent at Quinta Properties, a real estate agency in the Algarve, Portugal’s southern tourist region.

The government forecast Portugal’s economy will shrink 2.3 percent in 2013, the third straight year of contraction, before recovering next year. Non-performing mortgage loans to individuals rose to 2.1 percent of total home loans in January from 1.9 percent in the same period a year earlier, according to Portugal’s central bank.

To contact the reporters on this story: Henrique Almeida in Lisbon at halmeida5@bloomberg.net; Anabela Reis in Lisbon at areis1@bloomberg.net

To contact the editors responsible for this story: Jerrold Colten at jcolten@bloomberg.net; Andrew Blackman at ablackman@bloomberg.net.

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