Zome CEO: Housing Crisis Solution Lies in Rehabilitation, Not New Construction
In response to Portugal's ongoing housing crisis, a prominent real estate industry leader has asserted that the focus should shift from new construction to the large-scale rehabilitation of existing buildings. Carlos Santos, the CEO of real estate firm Zome, stated in a recent analysis that urban rehabilitation presents a more sustainable and economically viable path to balancing the housing market. He noted a clear and growing demand for renovated properties, particularly in urban centers where the supply of new homes is severely limited.
The investment thesis for rehabilitation is supported by official data from the Portal da Habitação (Housing Portal), which indicates that more than 60% of homes in Portugal were constructed before 1990. This vast stock of older buildings, according to Santos, holds enormous potential for modernization. He explained that the rising costs of land and new construction have made renovation projects increasingly competitive. 'Many buyers now give more value to modern comfort, energy efficiency, and the quality of finishes—attributes that, many times, only emerge from a rehabilitation intervention,' Santos observed.
Public policy has begun to align with this market trend. The Instituto da Habitação e da Reabilitação Urbana (IHRU), a key government body, has already facilitated the renovation of over 3,000 housing units and has a stated goal of reaching more than 5,800 by 2028. Santos emphasized that to achieve rehabilitation at scale, a robust framework of public support is essential, focusing on fiscal, financial, and technical assistance. He cited existing fiscal incentives, such as the three-year IMI (property tax) exemption for renovated properties, a reduction in IMT (property transfer tax) for buildings acquired for renovation, and a reduced 6% VAT rate for works carried out in designated Áreas de Reabilitação Urbana (ARU), as critical instruments that must be preserved and potentially expanded.
The financial rationale for investors is further strengthened by the increasing market importance of sustainability. Santos pointed out that a property's environmental performance is now a central factor in its future valuation. 'Buyers and investors are increasingly attentive to sustainability criteria,' he said, noting that certified energy-efficient properties attract greater demand and appreciate at above-average rates. This trend suggests that integrating sustainable solutions is not only an environmental responsibility but also a sound financial strategy.
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Despite the clear opportunities, the rehabilitation sector faces significant structural challenges. Santos identified a critical shortage of qualified labor, including specialized engineers, architects, and construction workers, as a primary factor that delays projects and drives up costs. Another major impediment is the difficulty in accessing favorable financing. 'Many banking institutions still look at rehabilitation with more risk than new construction, requiring higher equity or less flexible terms,' he stated. This conservative stance from lenders can stifle otherwise viable projects.
The complexity of property ownership in historic areas, often fragmented among multiple heirs, can also paralyze decision-making and stall renovation efforts. Overcoming these hurdles, Santos argued, requires a concerted effort involving professional qualification programs and new financing models tailored to the specific risks and timelines of rehabilitation projects. He concluded that while new construction will continue to play a role, urban rehabilitation is the most efficient engine for increasing housing supply in high-demand areas.
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