The effects of the rising cost of living and rising interest rates are already holding back the momentum of the Portuguese real estate market. With less disposable income and rising bank financing costs, the Portuguese are starting to postpone the purchase of new homes.
The statistical picture of housing construction in the fourth quarter of 2022 is clear. Between October and December, months in which the highest number of transactions usually take place in the year, more than 38,500 homes were sold, 16% less than in the same period of 2021.
And it’s necessary to go back to the fourth quarter of 2017 to observe a smaller number of acquisitions. These indicators will be the first evidence of a turnaround in the market, which is already being felt in other European countries.
The value of transactions in the last three months of last year thus reached 7.4 billion euros, a volume that reflects a decrease of 10.5% compared to the fourth quarter of 2021, which was reported yesterday by the National Statistical Institute ( INE) announced.
This decline in real estate activity was accompanied by a slowdown in house price growth in the country. In the fourth quarter of last year, the house price index registered a year-on-year increase of 11.3%, the lowest rate of the year, and a decrease of 1.8 percentage points compared to the previous quarter.
The economic situation began to be felt acutely and not only among the Portuguese. International demand also slowed in the last stretch of last year. According to data from INE, households bought 32,847 homes in the last three months of 2022, a year-on-year decline of 16.4%, after investing 12.4% less, bringing in a total of €6.2 billion.
During this period, 2616 homes were sold to international buyers, of which 1336 to citizens of the European Union and 1280 to investors from other countries. These figures represent a year-over-year decline of 20.6% in total acquisitions by foreigners.
Indicators for the summer period already pointed to a slowdown in house purchase operations. Now the publication of housing market statistics in 2022 has dispelled the doubts.
As INE progresses, the 2022 fiscal year presented two different realities. In the first six months of the year, the market grew 14.1% in sales and 30.7% in value.
There is an inversion in the second half of the year, following the European Central Bank’s decision to end negative interest rates and raise policy rates. In total for the second half of 2022, the number of transactions decreased by 9.6% and the transaction volume by 1%.
Year of new records
Despite the market slowdown, 2022 was – unsurprisingly – a record year for Portuguese real estate. Almost 168 thousand houses were sold, an increase of 1.3% compared to the previous year, and the transaction volume reached 31.8 billion euros, 13.1% more, thanks to another historic price increase.
Buying a house was 12.6% more expensive last year, an increase of 3.2 percentage points compared to 2021. According to INE, it was “the highest average annual change in the available range”.
The institute also notes that between 2018 and 2022, the value of homes sold increased by 50.6%, well above the increase in the number of transactions, which increased by 11%.
Portuguese households bought 145,515 houses, representing 86.7% of total sales, the highest record since 2019. The number of transactions corresponds to an increase of 2.7% compared to 2021. The Portuguese invested 27.3 billion, a increase of 13.2% (85.8% of the total traded volume).
Of the total of nearly 168,000 homes traded last year, 10,722 were purchased by foreign citizens, an increase of 20.2% compared to 2021. These buyers invested 3.6 billion in the purchase of these homes, 25.3 % more.
Sónia Santos Pereira is a journalist for Dinheiro Vivo
Source: DN
