Lisbon
We've written a lot about property bubbles in recent weeks - how the bubbles in London and Sydney are bursting, Hong Kong's has just seen the record price paid per square foot (Twice in the same day) and Monaco is building into the Mediterranean Sea to satisfy the huge demand from frustrated millionaires. A bit like Monaco, one of the problems for Lisbon's house buyers is that central Lisbon is relatively small. According to Bloomberg.
In central Lisbon's property market, sellers are kings. The Portuguese capital's real estate boom is entering a new phase as a shortage of prime property in the city center is prompting some buyers to bid above the asking price for the last available units.

"There's a big gap between supply and demand," said Luis Tilli, a real estate agent at Lisbon-based HomeLovers, which is selling a three-bedroom, 236 square meter (2,540 square feet) refurbished duplex in the historic quarter of Chiado for 2 million euros ($2.38 million). "It's reached a point where some investors offer to pay above the asking price just so they can close a deal."

"There are a very limited number of buildings located in the center of Lisbon to purchase," said Jose Cardoso Botelho, head of Vanguard Properties, a real estate firm controlled by French-Swiss investor Claude Berda that's bought 10 buildings in Lisbon since it began investing in the city last year. "We've started looking for building plots on the outskirts of the city now, but it hasn't been easy."
For most people are concerned, Lisbon has probably slipped under the housing bubble radar. As Bloomberg explains, however, the foundations for the current bubble date back to 2012.
Lisbon's property market revival began after the previous government eased long-held rent controls and started offering residence permits in 2012 to non-European property buyers, mostly from China. Portugal's tax-friendly regime for foreign residents and a tourism boom that led to the conversion of hundreds of buildings into short-term rental apartments and hotels have also helped fuel demand.
The last time we wrote about Lisbon property was in November 2014 in "Dear Portugal, Meet Your New Landlord - China". As we noted back then.
...at a property auction in Lisbon, Portugal last month, about 90% of the bidders for the government-owned apartments and stores on offer were Chinese. They ended up acquiring more than two-thirds of the 45 properties, with one money-launderer investor noting "Lisbon is cheap if you compare it with other cities".

1-in-4 homes bought by foreigners in America in 2014 were by Chinese and Portugal is already at 1-in-5.
While prices have risen by more than a third during the last five years, there is a classic squeeze taking place in Lisbon's historic centre.
Average home prices in the central historic neighborhoods of Baixa, Chiado and Avenida da Liberdade were at 6,367 euros per square meter in the first quarter, according to a study by property appraiser and consulting company Prime Yield.

Home prices in the city rose 35 percent from 2012 to 2016, when they reached the highest since at least 2007, according to Confidencial Imobiliario, which collects data on the real estate sector. In Lisbon's historic center, property prices increased 26 percent in the first half of 2017 while the number of deals fell 34 percent from the same period a year earlier, a sign of a shortage of housing stock.

"It's the first time that Lisbon has a shortage of homes to satisfy investor demand," said Lima. "Home buyers need to realize it's impossible for everyone to live in Avenida da Liberdade," he said, referring to a boulevard in Lisbon lined with gardens, ornately tiled sidewalks and luxury shops that's considered the local Champs-Elysees.

The country is expected to attract a record 3 billion euros in property investment this year, mostly from foreigners. That's up from 1.3 billion euros in 2016, according to broker CBRE Group Inc.
The shortage of prime Lisbon property is so acute that Madonna struggled to find a property when she decided to move to the Portuguese capital to support her son's adopted son's career ambitions. David Banda has been picked to play in the junior squad of Portugal's most famous club, Benfica. Bloomberg continues.
Fueling the demand are the likes of rock star Madonna, the latest of a handful of celebrities to show an interest in a city that's often compared to San Francisco because of its steep hills, trams and red suspension bridge. But central Lisbon's housing stock is much smaller than in other European cities such as Madrid, London and Paris, and it's quickly running out, according to Luis Lima, head of Portugal's Real Estate Professionals and Brokers Association.

Even the "queen of pop" has showed some frustration in her quest to find a home in the southern European city. In June, the 59-year-old Madonna visited a hilltop palace in Lisbon as part of her search for a home in the city, according to Sotheby's International Realty. Four months later she shared a picture of herself riding a horse on a beach with a caption on her Instagram account that read: "Can't find a house in Lisbon but damn... sure can find a horse!"
It's the same story we hear in London, Sydney, Auckland, Vancouver and many more. Local people are priced out of the market and efforts by politicians to reverse the trend have generally been futile, as the Bloomberg piece makes clear.
As housing stocks dwindle and prices rise, Lisbon residents are finding themselves being priced out of the real estate market in the city center...The Lisbon City Council plans to offer affordable housing to low- and middle-income residents in the city center, where a growing number of units have been snapped up by foreign investors. Under the plan, as many as 7,000 new homes with monthly rents between 250 euros and 450 euros will be made available. "We must stop the exodus from the city center of residents who can't afford the rising real estate and rental prices," said Romao Lavadinho, president of the Association for Lisbon Tenants. "There are parents moving in with their children and children moving back into their parents' home."
Even stringent Chinese capital controls haven't slowed down Lisbon property prices...perhaps only the bursting of the central bankers bubble can achieve that?