Property market in Portugal brightens after weak end to 2018

The residential property market in Portugal had started the year with a positive outlook after weakening at the end of 2018, the latest housing market survey shows.

In the lettings market, rental expectations also turned marginally positive in January while in the sales market, new buyer demand held more or less steady, having declined in December, according to the report from the Royal Institution of Chartered Surveyors (RICS) and Confidencial Imobiliário.

But it points out that it is now four months since the last positive reading was posted for the new buyer enquiries indicator and newly agreed sales were flat at the headline level during January.

The picture was seen across all the regions covered by the index; Lisbon, Porto and the Algarve but going forward, sales expectations did improve compared to December, and respondents in each area are now expecting to see some growth.

The strongest improvement was seen in the Algarve, while sentiment picked-up only slightly in Lisbon and Porto while the volume of new sales instructions being listed on the market continued to decline, with the surveys indicator remaining in negative territory for a 23rd successive month.

The report says that this lack of supply appears to be one factor underpinning prices, despite relatively subdued demand trends at present. Indeed, a net balance of +17% of respondents reported a rise in prices over the period, although momentum appears to have faded over the past six months.

In terms of the outlook, a net balance of +43% of contributors anticipate prices at the headline level will be higher in a year’s time. At the five year horizon, contributors now expect prices will increase by an average of approximately 2% per annum.

The regional data shows medium term projections are now pretty even across Lisbon, Porto and the Algarve. The national confidence index, a combined measure of near term price and sales expectations, recovered to +15, following a reading of minus four in December.

In the lettings market, tenant demand increased at a slightly stronger pace than in the previous report as the net balance improved to +21% from +10%, while landlord instructions fell again.

Rents continue to be driven higher as a result, although expectations for rental growth going forward are now more modest in comparison to a few months ago.

‘’Buyers are getting more cautious and sensible about prices. A comment from a respondent suggests that current global market sentiment is pointing to the near future being marked by stabilization and consolidation,’ said Ricardo Guimarães, director of Confidencial Imobiliário.

‘The same agent adds that vendors are seeing their houses taking longer to sell, showing that, very often, asking prices are much higher compared to the effective closing prices in each location. This is confirmed by Confidencial Imobiliário´s information system that shows a 22% price gap between demand and supply,’ he added.

According to RICS chief economist, Simon Rubinsohn, the January survey results show a recovery in market expectations, even if momentum is more subdued than this time last year.

‘Sentiment is now consistent with the still positive macro backdrop, despite downside risks. Indeed, the economy expanded by a solid 2.1% last year and, although growth may lose a bit of impetus, the outlook still remains reasonably bright,’ he concluded.