Poor property sales market in Portugal boosting lettings
The property rental market in Portugal is surging due to strong demand as the country’s sales market remains downbeat, according to the November Portuguese Housing Market Survey.
Activity in the lettings market is benefiting from the continued fallout in the sales market and letting transactions are set to increase further, says the report from the Royal Institution of Chartered Surveyors and Confidencial Imobiliário.
In terms of property sales respondents reported a continued fall in demand, supply, and prices. Sales activity declined at the fastest pace since the survey began in September 2010 as the National Price balance fell from -64 to -70, while the National Confidence index remained stable at -60, just above the lowest level on record.
House price declines continue to be driven by falling demand. The reports says that rising supply is not presently an issue, with new vendor instructions falling consistently this year.
Until September, new home prices had been falling less sharply than prices for existing homes. However, the November survey provides additional evidence that developers are now becoming less resilient to market conditions. Indeed, new home prices are now falling more rapidly than existing homes.
But the lettings market continues to benefit from the fallout in the sales market. Tenant demand and new landlord instructions continued to increase further, albeit at a slower pace than last month, as did letting transaction expectations.
However, rents are falling quite sharply and rent expectations turned increasingly negative. The report says this could reflect an excess of rental stock on the market but there is also anecdotal evidence of a mismatch between the type stock offered and that in demand.
The regional data tends to be more volatile than the national data, but during November, respondents in the Algarve saw the sharpest house price falls while those in Lisbon saw the sharpest falls in rents.
‘Although sales volumes in the housing market continue to fall, volumes in the lettings market are rising as households who cannot access mortgage finance are opting for rented accommodation instead,’ said RICS senior economist, Josh Miller.
Given the deteriorating macro economic backdrop with unemployment at 12.9% and the tightening in credit conditions already underway, the lettings market is likely to continue experiencing high volumes of activity for the time being,’ he added.
CI spokesman Ricardo Guimaraes points out that December is the deadline for the Portuguese Government to change the lease law, which should improve market confidence, especially regarding the default risk from tenants.
‘This is moving agents’ expectations. At the same time, the most commented topic remains the financial wrangling between potential buyers and banks, as well as the amount of houses directly sold by financial institutions, which is having a negative effect on prices,’ he explained.
