14 January 2020
English
Property prices in Portugal increased by 10.3% in the third quarter of 2019. Comparing with the time when the real estate market was at its lowest value in June 2013, the valuation to date has reached a rate of 55%.
The property market in Portugal is developing and very dynamic, reaching peaks that a few years ago would not have been possible. However, there is some doubt as to whether these figures will be maintained in 2020.
The Portuguese real estate market, like any other market, is governed by price variations. By assessing the changes in the figures we can see that it is all the greater the greater is the demand. This is also due to the increase in tourism, an increase in new building licenses and an increase in real estate supply compared with previous years.
The evolution of the real estate market has helped the Portuguese economy a lot. It has generated profits for the owners, there are more job offers in the branch, thus creating private investments. The Portuguese State has also benefited from the tax side and, after a few years of crisis, the construction business has grown again. There are many rehabilitation programmes and some areas that were abandoned have been renovated also improving local trade.
On the other hand, the high figures not only affect the centre of the cities, forcing local people to move to the peripheries, but these too are already being affected by the rise in prices. The year-on-year rise in house prices in early 2019 was over 15% in the municipalities on the periphery of the cities of Lisbon and Porto. In the suburbs of Lisbon, there are cases of 25% increases.
Despite the fact that the Portuguese real estate market has had a very positive growth and has benefited the country's economy, the high values of the properties and the growing increase have been an obstacle for many families looking for a home. The prices of property in Portugal are becoming too high for households with lower incomes, both at the level of property purchase and, even more so, in the rental sector. Over the last five years, property market prices and wages have diverged by 32.2%.
That said, it is expected that current figures may slow down this year as the number of buying and selling and building licences also fell slightly at the end of the previous year. This is due to the exponential increase in property prices in relation to household incomes, in amounts unaffordable for many families.
Since Portuguese households' incomes are not very high, properties will stay in the market for longer, leading to a reduction in prices that are currently high, thus balancing property prices in Portugal versus Portuguese households' income.
There are several important factors that have driven up property prices to maintain values in the future. Interest rates on loans have fallen and conditions are more affordable, and in addition there are many foreign investors and buyers. Last year a percentage of the properties acquired were by foreign buyers in Portugal.
The main nationalities are French, British and Brazilian.
The regions where there has been most investment by foreigners are located in the metropolitan areas of Lisbon and Oporto. Local housing has also grown considerably, but our government measures this year point to penalties for this sector, which has developed exponentially.
In addition to local accommodation, there may also be penalties for those on "Gold" visas and foreigners who are not habitual residents. This could decrease the revenue of this market. As an option for not penalising this sector, the best solution would be to implement conditions that would increase the supply and increase household incomes.
Related articles
