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Lack of space in the capital coupled with the stabilization of rents in the real estate market has prompted promoters to choose to reconvert apartments into leased offices.
Since the Local Lodging boom began in 2008, small property owners are returning in increasing numbers to traditional long-term rentals. Numerous factors are pushing this trend. “AL” offerings have reached glut conditions in some central urban areas. Excessive offerings and limited demand push down prices. Over the last ten years, Local Lodging enrolments in Lisbon have soared from less than 3,000 to almost 50,000. In addition, Local Lodging can prove to be demanding work. Outsourcing tasks such as cleaning, marketing and maintenance can eat into profits. In contrast, long-term rentals require only a minimum involvement on the part of landlords.
In the neighbourhoods most pressured by tourism, it will be possible to open new Local Lodging Establishments (“AL”). However, according to the rules that the capital’s municipal council wants to see approved, new registrations will be dependent on a special authorisation. “AL” licences will be valid for five years, after which they will have to be renewed. Currently, seven historical areas face restrictions.
The new regulatory restrictions implemented since October of last year have failed to slow demand for central Lisbon properties. While new Local Lodging applications dropped by 60%, foreign investors continue to seek out and buy property in historical districts as real estate sales soared by 38% over the period. While the “AL” sector is still significant, there are clearly other factors driving the market as well.
The Vila Nova de Gaia Municipal Council has passed regulations to limit Local Lodging establishments and prevent the dislocation of long-term residents from historic neighbourhoods. The city centre and the entrance to the bridge D. Luís I are two of the target areas for the new restrictions. These measures follow on the heels of similar actions taken in Lisbon and other municipalities around the country.
In the past six months, almost 2,000 “AL” enrolments have been wound up. Many owners have stopped letting but failed to cancel their registrations due to capital gains tax liabilities. In the first quarter of 2019, new “AL” sign-ups fell nationally by 40% and by 60% in Lisbon. These numbers are likely to be understated. In total, the capital currently counts with 18,000 Local Lodging Establishments. Nationwide, there are approximately 83,000. 2020 could prove to be a year of mass exodus.
The Lisbon Municipal Council has prepared regulations which delimit the “’containment areas” to Local Lodging according to the law that came out last year. To the five neighborhoods that have been suspended since October 2018 from new holiday lets registrations – Bairro Alto, Madragoa, Castelo, Alfama and Mouraria – will be added two more: Graça and Colina de Santana.
Tourism brought nearly €14 billion to Lisbon in 2017, approximately 20% of the region’s total wealth. The sector is responsible for 182,000 jobs, as estimated in a report from Deloitte and the Lisbon Tourism Association.
The distraction of holidaymakers and the lack of security at some “AL” flats have led to a rise in thefts at Local Lodging establishments, mainly those located in the “Baixa” district of downtown Lisbon. In response, law enforcement (“PSP”) has started a prevention program with the owners called “Blue Lock”.
The water regulator advocates that establishments used for local housing should pay for water as “non-household” users. The increase is already in place in several councils. However, there are other centres, such as Lisbon, where the municipality has reimbursed the extra charge.