Demand and tight supply keeps Portuguese property market strong
Robust demand and tight supply is being seen across the property market in Portugal with momentum close to the record high recorded in September 2017, the latest housing survey shows.
A similar level of activity and demand is being seen in the lettings market although there was a slight moderation of growth in the Algarve, according to the Portuguese house market report from the Royal Institute of Chartered Surveyors and Confidencial Imobiliário.
The report predicts that prices could rise by 5% over the next 12 months, up from the 4% forecast in September and over a five year period the forecast is for growth of closer to 6%. But in Oporto they are expected to rise more.
Across the sales market new buyer enquiries continued to increase at a headline level, as a modest decline in momentum in the Algarve was offset by a pickup in Oporto in October 2017, the report shows.
Respondents reported a slight tightening of supply across each region. Against this backdrop price and sales expectations over the next three months remained bullish, though moderated slightly from the recent cyclical highs seen in the September survey.
‘The persistent mismatch between increasing demand and decreasing new listings continues to exert upward pressure on house prices,’ the report says and a net balance of +43% of respondents reported increasing house prices in October, down slightly from the record +54% which reported price increases in September.
The national confidence index, a composite indicator encompassing near term price and sales expectations, fell to +36, from +41 in September as price expectations moderated slightly in Lisbon, as did sales expectations in Oporto.
Tenant demand eased slightly from September but remained firmly positive on a month on month basis. The pace of decline of landlord instructions remained little changed from September.
Against this backdrop, rental growth remained at a solid rate and the report says is expected to continue to do so over the next three months. Expectations for volumes, which were expected to decline in the September survey, are now expected to remain more or less unchanged at current levels
‘The residential market is benefiting from an increase in new lending activity. This is allowing prices to come back to pre-crises levels. The residential price index is now less than 1% below the maximum observed in 2010,’ said Ricardo Guimarães, director of Confidencial Imobiliário.
‘Market confidence is high, because this movement is not only debt based, it is also supported by rising demand namely for tourism properties and short term rental properties,’ he added.
RICS chief economist, Simon Rubinsohn, pointed out that the Portuguese economy continues to be one of the strongest growing in Europe with GDP expansion accelerating in the third quarter of the year.
‘Consumers have seen real incomes increase as inflation remains subdued and the unemployment rate at near decade lows. After years of deleveraging, households have been able to increase spending, helping to underpin the recent strength in the housing market,’ he added.