The news is not encouraging for those considering buying a home and taking advantage of a fall in prices due to the current economic situation. The market is already beginning to show signs of slowing, a move that could worsen in the latter part of the year and into 2023, but there is no sign of a decline in value, brokers say. Eventually, stabilization may occur in some parts of the country. Which is also not liquid, given the high demand from Portuguese families and the scarcity of supply, in addition to the great interest of foreigners in Portugal.
The latest data from the National Statistics Institute illustrates the loss of momentum in the housing market. In June this year, there was a 7.6% drop in the number of transactions, which had not happened since February 2021. Bank ratings for home loans also fell for the third month in a row in August. The Bank of Portugal also noted that mortgage lending recorded the first slowdown in nearly two years in August. “These are signs of some cooling of the market on the demand side,” acknowledges Beatriz Rubio, CEO of Re/Max. All because the cost of living has skyrocketed and Euribor rates continue to rise.
Still, real estate operators are optimistic. Paulo Caiado, president of the Association of Real Estate Professionals and Companies of Portugal (APEMIP), believes this year will be “not significantly different from 2021”, although he admits that “the second semester will be marked by some number of transactions”. Ricardo Sousa, CEO of Century21, points to the possibility of a slowdown in sales in the last quarter of this year and into 2023.
For now, the sector has record numbers and a slowdown is not synonymous with braking. In the first six months of the year, more than 87 thousand homes were sold (an increase of 14% compared to the same period in 2021), for a total value of more than 16 billion euros (+31%). Patrícia Barão, responsible for the residential area at JLL, recalls that the rationale for the company has not changed: “The high demand scenario remains given the limited supply”.
missing houses
What worries the sector is the lack of new construction, as the market is completely dominated by the sale of used homes (new homes accounted for only 18% of total transactions in the first half of the year). “The uncertainty lies in the impact of the economic context on supply,” emphasizes Beatriz Rubio. The significant rise in construction costs and interest rates, with a direct impact on home loans, could prompt developers to adapt their projects, which will “affect the flow of available supply even more,” says Patrícia Barão. In this scenario, a possible fall in prices becomes difficult.
In June, there was a 7.6% decline in the number of homes sold, which has not happened since February 2021, according to statistics from the INE.
In the first half of this year, with the consequences of the war in Ukraine and rising inflation, buying a home became 13.2% more expensive than in the same period of 2021. According to Beatriz Rubio, the difference between supply and demand is so great notorious that even the likely reduction in demand in the current economic context will not be enough to impose a price cut”.
For Paulo Caiado, the cost of prime housing in Lisbon, Porto and Algarve will not change and the new promotions will face construction and material costs that must be reflected in the final sale value. In fact, the head of JLL admits that the price hike for new construction could push prices up by 5% by the end of the year. Ricardo Sousa, on the other hand, considers it possible that a stabilization phase will come in this last quarter of the year and in 2023, if the macroeconomic context continues.
Francisco Bacelar, president of the Association of Real Estate Agents of Portugal (ASMIP), also admits that prices have slightly adjusted due to the drop in demand, but recalls that the country has witnessed a growing interest from foreigners. Brazil, the UK, France and the US continue to give the market a strong boost, says Patrícia Barão. “Portugal has acquired an enviable position and credibility internationally as a country to live and invest in, attracting clients from new countries, without a great tradition of buying a house in Portugal, as is the case in the United States. States, which is our customer today. number one”, reveals Ricardo Sousa.
It’s not the troika
A reversal in the market, due to the default of the banks of families who have bought a house with credit, mainly in the last five years (the ones most affected by the rise in interest rates), is in fact no expected scenario real estate operators. “The situation is different from what we experienced in 2009, when the Troika intervened. Unemployment is now much lower, the mismatch between supply and demand of housing is very large, the level of savings has not been that high for a long time , defends Paulo Caiado says banks have learned from past experience and will not be interested in “the increase in defaults and the consequent sale of undervalued assets due to bad loans.”
For Francisco Bacelar, “recent credits were granted with much more discretion” than in the past, providing some assurance. However, the agents unanimously agree that the government and banks should create mechanisms to protect families. And everything points to this happening. Tomorrow, the government will present the proposal for a state budget for 2023, which will include measures to soften the Portuguese effort with the increase in house payments. On the table is the option to extend the debt repayment period and suspend the repayment commission.
Source: DN
