Portugal is experiencing a serious housing crisis, which is mainly caused by a lack of supply relative to demand; high housing prices at a time of a breakdown in purchasing power; escalating inflation and rising interest rates. The answer to this challenge has resulted in several solutions, one of which is the conversion of services/trade-related real estate into housing.
The conversion of shops, warehouses and offices into houses – namely to combat the supply problem in the residential market has become an international trend, which investors operating in Portugal have followed. There are several factors that explain this propensity:
- Serious stock problem in the domestic residential market, with little supply, housing prices continue to rise and the purchase of this type of real estate comes out, at the outset, cheaper.
- Increase in empty stores and warehouses due to the rise of e-commerce.
- Work from home or a hybrid model left many offices unoccupied.
Simplex’s approval made the conversion of commercial real estate into real estate for housing easier, in order to increase the supply of houses on the market.
The legal regime of horizontal ownership has been modified and, according to the decree-law no. 10/2024, of 8 January, the Assembly of Condominium Owners does not have to be consulted on this matter.
There are, however, two basic rules to consider with regard to the conversion of offices/shops into housing:
- The City Counsil must be consulted beforehand and verified, after the completion of the works, whether there are the necessary conditions of habitability.
- If the work requires aesthetic or architectural changes in the common parts of the building, the approval of the condominium will be mandatory.
This new decree promotes housing while simplifying administrative acts. Until now, it was necessary to obtain the unanimously consent of the resident’s assembly . But, with this decree-law, any fraction that is not housing can be changed for housing purposes without the need to ask permission from the condominiums. This applies to all types of non-residential fractions, provided that they present conditions of habitability.
The conversion of commercial real estate and services to housing has advantages and disadvantages. Get to know them.
Advantages:
- Specificity and unique characteristics of the buildings, resulting in high aesthetic value and unusual pieces.
- Liquidity of the residential market. The structural imbalance between supply and demand in the residential market continues to be felt, which ensures a relatively fast flow of projects.
- Price lower than the properties for housing, and the fact that it is possible to reconvert the space to the buyer’s custom and according to their taste.
- Increased housing alternatives in the real estate market.
- Offering a differentiated product, with special characteristics and with the potential of a more contemporary and modern appearance.
- The advantage for cities is the adoption of a strategy that will allow the rehabilitation of unoccupied buildings, for example in areas that are still in the consolidation phase.
Disadvantages:
- Challenges inherent in the rehabilitation of an existing building with a view to changing its use: higher construction costs and high volatility, which is felt more in large urban centers.
- Costs of adapting networks and building infrastructure suitable for housing.
Investment Opportunity Here!
Article by Isabel Meireles by Leilosoc dated 20 February 2024.
