The rise in interest rates and the increase in inflation halted the upward cycle of the Portuguese property market, but the increase in house prices opened doors for new buyers. Despite home sales falling over the past three quarters, prices have not fallen; they have only seen a slowdown in their growth trajectory. The latest data from the National Statistics Institute shows a 20% drop in the number of homes sold in the first three months of this year and a slowdown in price increases to 8.7%. Property owners, who have seen their properties increase in value in recent years, are taking advantage of this context and moving without fear of interest rates. It is this niche that is driving home buying and selling, to the point where industry players are pointing to a rebound in sales in the second quarter of the year.

As Paulo Caiado, president of the Association of Real Estate Professionals and Companies of Portugal (APEMIP), points out, the market has “a very significant number of national buyers, whose acquisition is used in the sale of their home”. This is currently “most of the market.” And he explains, “What happens is, given the valuation that properties have had, whoever sells a house gets a financial contribution that they never thought they would have to deal with with a new purchase, and this means that for many of these people: the financing ends because it doesn’t have that much meaning, since they have a portion of their equity that comes from the profit from the sale.” In these cases, rising interest rates are not a barrier to acquisition.

Also in the higher segments, the increase in the cost of money does not stand in the way of the completion of acquisitions. And this is another part of the market that remains dynamic. According to Paulo Caiado, there is still a lot of demand for real estate focused on the top segments, which is why, within the scope of the rise in inflation and interest rates, this segment has not shown any sort of withdrawal at any time. . Patrícia Barão, responsible for the residential area at JLL, also assures that “there remains a huge demand for homes with higher values”.

The same cannot be said about families with many bills to pay. The high price of houses, largely due to the lack of supply, and the rise in interest rates keep these Portuguese away from the housing market. The result is an “inevitable reduction in the number of transactions,” says Ricardo Sousa, CEO of Century 21. As Beatriz Rubio, CEO of Re/Max explains, the market slowdown started at the end of the first half of 2022, when they started the the first effects of the conflict in Ukraine, the energy crisis and the gradual increase in prices and inflation. When we reached 2023, “we could only expect a cooling,” emphasizes the responsible person. But like the various real estate players Dinheiro Vivo has contacted, Beatriz Rubio adds that “we saw in the second quarter of the year that there was already some recovery”.

Insufficient measures

The reduction in the effort to access home loans from 3% to 1.5%, which takes effect at the end of this month or the beginning of October, should make more buying operations feasible, admits Marco Tairum, CEO of Keller Williams in Portugal. However, this is just one of many variables that the country needs for the majority of Portuguese to be able to buy a home. According to Marco Tairum, providing households with access to credit requires “income growth via the country’s economic growth, reduction of the tax burden and housing policies that address what is currently the biggest problem in the sector, namely the lack of supply of new homes”. Ricardo Sousa even says that the measure of the Banco de Portugal “is not enough. The big challenge is on the supply side and implies an exponential increase of housing solutions up to 250,000 euros.”

And there is no doubt in the sector that the shortage of supply has kept house prices high. The values ​​have proved resilient, showing only a slowdown in the rate of increase, says Patrícia Barão. In Marco Tairum’s analysis, all indicators point to a continued slowdown, but not to a decline. “We will see smaller overall increases,” he said. Now, in a context of reduced purchasing power and some political instability, “this limits the number of transactions, as already happened in the first half of the year and we hope to see this in the second half of the year”.
It is certain that uncertainty remains about the behavior of the housing sector in the country this year, after reaching record sales of almost 168 thousand homes in 2022 and a transaction value of 31.8 billion euros. Beatriz Rubio expects “a more dynamic and less anxious second semester than the first,” though she admits it will be “guaranteedly challenging months.” Francisco Bacelar, vice president of the Association of Real Estate Agents of Portugal, recalls that the behavior of the Portuguese will be in line with the rise in interest rates, which limit the possibilities of access to credit, in other words: “we can take some expect sales decline. For Ricardo Sousa, this second half of the year will be marked by a decrease in the number of transactions, an increase in the average time it takes to sell properties, stabilization of prices and the search for houses to rent by those who are not meeting expectations. the necessary conditions to access credit.