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Housing market growth has stalled in Portugal, latest analysis shows

House price inflation has continued to ease in Portugal with the latest sales market activity report showing that enquiries and transactions were unchanged in February 2019.

However, in the lettings market, demand has accelerated in Lisbon, Porto and the Algarve, according to the data from the Royal Institution of Chartered Surveyors (RICS) and Confidencial Imobiliário.

Across the sales market, the new buyer enquiries indicator held steady over the month at a net balance of -5% compared to -4% previously. But it marks five months since a positive reading has been posted. I

n terms of agreed sales, respondents reported no change relative to January but looking ahead, sales expectations are marginally positive for the coming three months, although the net balance of 10% represents a slight softening on the 21% in January.

The flow of new sales instructions coming to the market continues to deteriorate, and the report says that this has been an ongoing theme over the past two years. That said, the Algarve has seen a slight pick-up in each of the past two months, while listings in Lisbon and Porto remain in decline.

With activity seemingly losing impetus over the past six months, the pace of house price growth continues to moderate. In February, a net balance of 13% of contributors cited a rise in prices, the most modest reading going back to February 2016.

Even so, prices continue to rise to at least some extent in all three regions covered by the survey. Going forward, a net balance of 34% of survey participants expect prices to rise at the headline level over the next 12 months.

In keeping with the generally flatter market tone of late, the National Confidence Index, an amalgamated measure of near term price and sales expectations, slipped to eight, down from 15 previously.

In the lettings market, tenant demand growth accelerated for the third successive month, with a net balance of 36% of contributors reporting an increase, up from 21% in January. As a result, rents continued to rise and are seen posting further growth over the coming three months.

‘Market participants comment that buyers are anticipating the impact of new constructions to come on price levels. Some expect that the arrival of new houses will push prices up, despite its effect on the balance between supply and demand,’ said Ricardo Guimarães, director of Confidencial Imobiliário.

‘At the same time, for others, price increases in central locations is an opportunity for secondary markets, where investment is starting to be seen. More widely agreed on is the idea that all new public measures oriented to the rental marker are squeezing rents higher and reducing the number of houses to let,’ he added.

According to RICS chief economist, Simon Rubinsohn, employment growth, although still healthy, has softened a touch over recent quarters, and this seems consistent with the steadier trend coming through in the housing market. ‘While expectations from survey participants remain positive, it does now appear that growth in market activity will be more moderate going forward,’ he said.