Portugal property: Redevelopment to give new life to old Porto

Porto – or Oporto as it is sometimes known – on the mouth of the river Douro has, since the Romans in the fourth century, been an important port and commercial centre. In the early 15th century, its shipyards launched Prince Henry the Navigator’s expedition against the Moors, as well as subsequent voyages of exploration. It was also in Porto that King João I married Philippa, daughter of John of Gaunt, in 1387, sealing the world’s oldest diplomatic alliance still in force, the Treaty of Windsor.

Today the city, which reputedly lent its name to Portugal, has become synonymous with port wine, a trade that has been spearheaded by British shippers since the 18th century. (Their original port lodges still dominate views of Vila Nova de Gaia, across the Douro.) Still an active commercial centre, Porto is one of five cities on the Iberian peninsula with global city status, while its rich history, reflected in the medieval cobbled streets, florid baroque churches and neoclassical granite architecture of the historic centre, has earned it Unesco World Heritage status.

For all its charm, many of the mansions and palaces in the centre of Porto have long been run down, becoming homes for the less salubrious sections of society. “This is largely due to tenancy laws passed in the 1920s,” says Jose Luís Kendall, owner of K&A, which specialises in prime real estate. “Rents were controlled, so that landlords did not receive sufficient income to make necessary repairs and renovations, and could not evict tenants. Other properties sit empty, their owners unwilling to rent on these terms or to sell.” Elsewhere, mansions have been turned into offices or public buildings, with their grounds sold off to commercial developers.

The upper classes, meanwhile, migrated from the centre of town to the cooler climes of Foz, a parish on the Douro estuary where formerly they had built summer houses. By the 1930s, Foz had become a fashionable residential area, with grand properties along the tree-lined promenade spreading into the hills behind. Many period houses remain, especially in gracious Old Foz, along with a sprinkling of art nouveau properties, follies, contemporary homes, and even the odd modernist apartment block by the Pritzker prizewinning architect, Eduardo Souto de Moura.

With its rocky shoreline, blue flag beaches and vibrant restaurant scene, Foz remains one of the most exclusive and sought-after residential areas of Porto, where a new apartment can be purchased for an average of €2,500 per sq metre. An upmarket new-build, 300 sq metre apartment here, with terraces and three-way views over the river, ocean and 16th-century fortress, including air-conditioning, underfloor heating and underground parking for three cars, is currently available through K&A for €1.2m.

“It is much more convenient to live in Foz than in town,” says Joana van Zeller, whose family owns vineyards in the Douro Valley, and who is selling her four-bedroom house on a 400 sq metre plot for €950,000 (K&A). “It is quieter, easier to park, and there is much more space.” With British, French and German schools nearby, the area is also popular with expat families.

A variety of measures, however, are lined up to encourage central Porto to recapture its residential cachet. In 2004, City Hall created Porto Vivo, the Society of Urban Rehabilitation, which aims to renovate, repopulate and rejuvenate inner-city Porto (the Baixa district) as well as the historical centre. This has been facilitated by last year’s changes in rental legislation, with procedures for revising rental values, compensation and conditions whereby the landlord may terminate the lease. These changes finally allow owners to sell or finance necessary renovations, while the release of properties has led to redevelopment projects, beginning with areas such as Carlos Alberto and Cardosas (the latter is a €84m scheme, funded by public and private investment, including an upmarket hotel in the former Palacio das Cardosas).

“The mentality is changing,” says António Magalhães, owner of Predibisa estate agency, which represents properties both in Foz and in the city centre. “Young people are beginning to value their heritage. There is more tourism, and the resulting infrastructure improvements, along with the creation of car parks, have made the city centre more accessible. New bars and restaurants have also brought life to the commercial centre which, until three years ago, was deserted at night.” Predibisa is offering a selection of properties in the Cardosas redevelopment: 52 new apartments concealed behind 19th-century facades, surrounding a new praça of 19 shops and restaurants are on sale for about €200,000 for a 93 sq metre apartment, with studios available from €90,000.

At the same time, a number of tax incentives have been implemented to encourage private investors in the central urban regeneration areas (ZIP and ACCRU), while EU funds are being made available by the government to promote restoration for lettings.

One developer who has seized on these opportunities with enthusiasm is Rita Corrêa Figueira, of F2is, who moved from Lisbon to Porto three years ago. “We specialise in old buildings: restoring façades and all original details such as azulejos, wood panelling, wrought ironwork and granite architectural details,” she says. Among her projects is the restoration of the 17th-century Condes de Azevedo Palace, a stone’s throw from the ancient cathedral in the Old Town. It will be transformed into 19 residential apartments with a garden and 25 parking spaces. Off-plan prices range from €180,000 to €525,000 for apartments between 95 sq metres and 190 sq metres, with work due to be completed towards the end of 2014.

“Porto represents a rare real estate investment opportunity, since market prices do not reflect its real value in the short and medium terms,” says Corrêa Figueira. “Downtown is set to become one of the most elegant and expensive places to live in the city.”

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Buying guide

● Non-EU residents investing €500,000 in property are eligible for a “golden visa” residence permit

● Porto has an excellent airport that is a 15-minute drive from town

● Property prices in Porto have dropped 20-30 per cent since the peak of 2008-2009

● All properties are freehold

What you can buy for . . .

€1m: A 500 sq metre four-bedroom property in Foz

€2m: A palatial quinta and 20 acres in the Douro Valley, 15 minutes from Porto

€5m: A mansion and annexes (of about 2,000 sq metres), plus garden, on Avenida Montevideu, Foz