Official data for the Portuguese housing market in 2022 is not yet known, but forecasts from sector brokers point to another record year. Nearly 170,000 homes will have been sold, representing a transaction volume of around 31 billion euros. Again, these are historical values, which translates into a 2.6% increase in the number of housing transactions and an increase of almost 11% in invested capital. But the rise in interest rates on home loans and the rise in the cost of living are putting a brake on the upward trend in demand.
The situation has weighed heavily on the portfolios of Portuguese households for months and no improvement is expected. Real estate agents, however, firmly reject the possibility of a real estate bubble.
The forecasts for the slowdown in house sales are unanimous among the operators contacted by Dinheiro Vivo. This year, the market should “cool down a bit in the number of transactions,” says Marco Tairum, regional director of KW Portugal, an opinion supported by Beatriz Rubio, CEO of Remax, who anticipates “a decline in demand, driven by rising inflation and interest rates”.
The president of APEMIP (industry association), Paulo Caiado, also admits “some slowdown in demand due to the deterioration of household purchasing power”. Signs of a reversal of the market’s growth cycle appeared as early as the summer and worsened in the final period of last year. In the third quarter, the National Institute of Statistics (INE) revealed a 3.2% chain break in the number of transactions. Official data for the last three months of 2022 is not yet available, but Century 21 has already revealed a 4.8% drop in its operations over this period compared to the previous quarter.
This picture of withdrawal is only now beginning to permeate house prices. Last summer, property values rose by 13.1% (the latest INE statistics). However, Century notes a 5.1% drop in the average value of the trades it brokered in the last three months of 2022. Still, most brokers are skeptical about the sharp drop in prices.
For Beatriz Rubio, with the expected drop in demand in 2023, it is expected that there will be “a stabilization of prices and eventually a pullback in some areas”. Marco Tairum believes more “in a stagnation”, although “there may be regions where there will be a slight correction”. Rui Torgal, CEO of Era Portugal, recalls that “the factors that contribute to the current value of houses will remain a reality: shortage of supply, construction costs, lack of labor, difficulties in permitting procedures and strong foreign demand and investment” . To that extent, it foresees a “deceleration in price growth”. Patrícia Santos, CEO of Zome, describes a heterogeneous scenario: “What we observe is an increase against falling rates of house prices. In some areas, such as Lisbon, Porto, Leiria, Braga, Loures, Vila Nova de Famalicão, there are a stabilization trend and, in others, price increases such as Cascais, Almada, Gondomar”.
In this context, real estate advisors do not foresee any risk of a real estate bubble. “The demand for real estate exceeds the supply, both from Portuguese and foreigners,” emphasizes Patrícia Santos. As a result, “pressure on prices in areas of higher demand should persist in the short and medium term”. Marco Tairum also rules out a scenario of overvaluation of real estate in the country. According to him, there are three factors limiting this possibility: the debt burden is much lower than that of the financial crisis; the demand base is diversified in terms of nationalities, objectives and financial situation; and we’re at an all-time low in terms of supply. As Zome’s CEO says, the number of newly built homes has decreased by 78% in the past decade compared to the previous decade.
Sónia Santos Pereira is a journalist for Dinheiro Vivo.
Source: DN
