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Portuguese property market still slowing

Price falls have slowed down in Lisbon but gathered momentum in Porto and the Algarve, the April housing market survey from the Royal Institution of Chartered Surveyors and Confidencial Imobiliário shows.

Real estate agents are experiencing much sharper price declines than developers but overall the market is very depressed, it also shows.

The national activity index fell a further six points in April to –32, while the national confidence index declined by two points to –53.

The April survey also shows that price declines are being driven by falling demand. It says rising supply is not an issue with new vendor instructions actually declining since last December.

However, the national picture masks some regional variations. New instructions are now actually rising in Porto and the Algarve, but these regions combined have less impact on the national reading than Lisbon.

Also, although price falls continued across all three regions covered in the survey, Lisbon, Porto and the Algarve, there was a marked deceleration in Lisbon, while elsewhere, price declines gathered momentum.

Finally, regional trends in price expectations reflect that of prices. Expectations are least negative in Lisbon and most depressed in the Algarve.

CI spokesman Ricardo Guimaraes said that overall, developer’s and agent’s expectations are being influenced by increasing inflation, rising interest rates, tight credit constraints and the International Monetary Fund/European Union bailout.

‘However, some respondents expressed optimism about the IMF/EU deal. It may improve confidence among international investors, leading in turn to a more favourable credit climate,’ he added.

‘The Portuguese housing market can be characterised by falling prices, falling activity and depressed confidence. This is set against a wider economic backdrop of accelerating inflation (4%), elevated unemployment (11.1%) and a shrinking economy that was -0.7% in the first quarter of the year,’ said RICS senior economist, Josh Miller.

‘Unsurprisingly, these factors are weighing heavily on the demand side of the equation. Supply, either in terms of rising new vendor instructions or excessive building, is not presently an issue,’ he added.