State Property Sales Increase While Profits Decline in Portugal's Real Estate Sector
The Portuguese government has intensified its efforts to manage the national housing crisis by increasing the sale of public properties, yet the financial returns from these activities have seen a notable downturn. According to the 2024 annual report from Parpública, the state's primary holding company, the government's real estate strategy is yielding mixed results, a development being closely watched by investors and market analysts.
The policy, driven by the administration of Prime Minister Montenegro, aims to convert unused or abandoned state-owned buildings into residential housing, a direct response to the country's pressing accommodation shortage. This initiative has led to a significant increase in transaction volume, with Parpública's main real estate subsidiary, Estamo, reporting property sales of €9.1 million in 2024. This figure represents a more than tenfold increase from the €0.8 million recorded in 2023, signaling a strong political will to liquidate state assets.
This heightened activity contributed to an 11% growth in turnover for the state's property management arm, reaching €75.62 million. The total value of the public real estate portfolio also appreciated by 7%, now valued at approximately €1.5 billion. This growth was supported by capital injections and financing obtained through the European Union's Recovery and Resilience Plan (PRR), which has been a key funding mechanism for strategic government projects.
Despite the positive momentum in sales and asset valuation, the profitability of the state's real estate operations has declined. The consolidated net profit for the segment was €45.52 million, an 18% decrease compared to the previous year. The report largely attributes this shortfall to the diminished financial performance of Arco Ribeirinho Sul, another state-controlled entity involved in urban requalification. This discrepancy highlights the challenge of balancing the social objective of providing housing with the financial goal of generating revenue from public assets.
A key objective of the government's housing policy is the creation of affordable rental units. A prominent example is the redevelopment of the former Quartel do Cabeço da Bola in Lisbon, which is being converted into affordable homes. The project has been allocated €21 million from the PRR and is scheduled for completion by mid-2026. This project is part of a broader strategy to leverage state-owned land to directly intervene in the housing market and alleviate price pressures.
The government has also announced its intention to sell a portfolio of state-owned buildings in 2025 that are deemed unsuitable for residential conversion. This move is expected to attract private developers and investors, potentially unlocking new opportunities in commercial or mixed-use projects. However, the government's plans have faced some execution challenges. The report noted that the planned subscription of a €33.7 million real estate sub-fund, named 'Miguel Bombarda,' which was intended to be part of the National Building Rehabilitation Fund, did not proceed as scheduled, illustrating the complexities of implementing such large-scale financial and real estate operations.
Joaquim Cadete, president of Parpública, has overseen this period of strategic realignment. While the holding company's overall profit fell, the real estate segment remains a significant part of its portfolio, representing 13% of its consolidated assets. The performance of its fund management subsidiary, Fundiestamo, remained stable, with a net profit of €499,000 in 2024. The fund manages a portfolio valued at €285 million, primarily composed of public assets.
The current policy landscape indicates a continued focus on utilizing public real estate to address social needs while also seeking to generate state revenue. The government's actions will likely increase the supply of property available for private investment, particularly through the planned sales of non-residential buildings. However, the declining profitability of state-run real estate ventures suggests that investors should proceed with careful due diligence and a clear understanding of the market's underlying financial health.
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