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Further deterioration in Portuguese property sales but rental market more resilient

The latest Portuguese Housing Market Survey from the Royal Institution of Chartered Surveyors and Confidencial Imobiliário shows that the National Confidence index fell from -53 to -60 and the National Price balance improved marginally from -65 to -64, but remains deeply negative.

Price declines continue to be driven principally by falling demand, the report says. ‘Indeed, rising supply is not presently an issue, with new vendor instructions falling consistently this year,’ it adds.

Until September, developers had generally been less negative than agents. However, the October survey provides further evidence that developers are now becoming less resilient to adverse market conditions and for the second consecutive month developers reported roughly similar price expectations and falls in prices.

The survey’s coverage has now been extended to the rental sector, which appears to be benefiting from ongoing weakness in the sales market. At the national level, demand for rented property and new lettings instructions both increased sharply, though rents declined. Respondents expect further falls in rents but continued strong rises in lettings volumes.

At the regional level, house prices and rents are falling across Lisbon, Porto and the Algarve, but the sharpest falls are being recorded in the latter. However, rental transactions are also expected to increase fastest in the Algarve.

‘Although sales volumes in the housing market continue to fall, volumes in the lettings market are booming at the moment. This is because households who can not access mortgage finance are opting for rented accommodation instead,’ said RICS senior economist, Josh Miller.

‘Given the deteriorating macro economic backdrop and tightening in credit conditions that is already underway, the lettings market is therefore likely to continue experiencing high volumes of activity in the near term,’ he said.

CI Spokesman, Ricardo Guimaraes said that the survey has extended its coverage to the rental market, after much anecdotal evidence from agents indicating this sector of the residential market is beginning to emerge from the crisis.

‘Tight credit conditions are pushing both households and home owners to the rented sector. Households can’t access mortgage finance to purchase a house and therefore home owners in most cases can’t sell their house. This is resulting in sharp increases in both the demand for and supply of rented accommodation,’ he explained.