Investing in real estate yields 11 times more than bonds and double than the stock market

The frenzy around the real estate sector is so much - not just nationally but also out there - that there's been talk about a phenomenon called "dry gunpowder." In other words, the funds are, in many cases, excessively liquid because they can not invest due to a lack of product supply. And what explains all this? The high profitability that real estate assets currently offer compared to other financial investments, such as bonds and shares.

"At the moment, investing in real estate has a better risk / return ratio than financial investments, and in Portugal this profitability is particularly attractive," said Cushman & Wakefield's new director of investment, Paulo Sarmento, quoted by Expresso.

To be better understood, according to data from the MSCI company disclosed by the consultant, investing in real estate yields almost 11 times more (11.4% in 2017) than the European market for public debt bonds (0.9% in 2017 according the S & P index) and almost double (6.5% in 2017 according to the Eurostoxx index) of the stock market.

"We have a situation where the relative returns of real estate compared to other types of investment are much more favorable. Of course, in 2007, which was the last great year of investment in real estate in Portugal, we also had these high yields, but the interest rates were higher than now. That is, the investment in real estate is very attractive compared to the stock market and bond and today even more because the comparative return is greater, "explains the person in charge.

Has real estate always yielded more?

Historically, housing investment in Portugal has almost always outperformed financial markets, writes the weekly, based on a study by US Federal Reserve economists entitled "The return rates for everything, 1870-2015."

Even before the subprime crisis in 2008, stock returns were 5.71% and bonds were 1.64%, but for those who invested in housing, profitability was 7.19%. Then, summed up the newspaper, everything changed. First with the subprime and then with the arrival of the troika, but at the time all types of investment were yielding very little. According to data released by Cushman & Wakefield in 2007, the return on real estate (also released by MSCI) was 12.2% in 2007 and the following year fell sharply to 2.7% and then to 0.2%, the lowest point of the last 10 years.

In this way, and according to Paulo Sarmento, Portugal, which for many years has been on the low side of other European markets, such as the United Kingdom, Germany or France, is now at an advantage because now these countries are already at higher prices and the comparative return on Portuguese assets is more attractive.

And even with the high price increases registered in the last two years, not only in housing, but also in land, buildings to rehabilitate or sell, as well as shopping centers or offices, costs in Portugal compared to those in London or Paris, are much lower.