Property market in Portugal recovering closer to pre-economic crisis levels

Residential property prices in Portugal are recovering, getting closer to their pre economic crisis level, according to the latest real estate index, with demand and sales growing.

But the number of new instructions are falling and have now declined for ten months in a row, says the January 2018 housing market survey from the Royal Institution of Chartered Surveyors and Confidencial Imobiliário.

The data also shows that each region covered by the survey, Lisbon, Porto and the Algarve, has seen new instructions decline consistently in recent reports. However, the lack of new instructions does not appear to be holding back activity too much at this point in time.

When broken down, respondents in Lisbon and Porto reported solid growth, although a slightly negative trend was returned in the Algarve.

Looking ahead, near term sales expectations improved in the latest results, posting the strongest reading since March 2017, with all areas anticipated to see an increase in sales volumes.

A headline net balance of +44% of contributors reported an increase in prices over the period, with this reading virtually identical to those posted in each of the last four months. As such, this measure continues to point to a firm rate of house price inflation.

Going forward, respondents envisage headline prices rising by around 4% over the next 12 months and expectations in Porto have now overtaken the other regions, although only narrowly, with growth of closer to 5% anticipated.

In the lettings market, tenant demand rose once more, while the flow of landlord instructions coming to market deteriorated further. Consequently, rents continue to be squeezed higher, and this trend is expected to persist over the coming months.

Over the same period, the number of new lease agreements being taken out is anticipated to see little change.

‘Prices are recovering and, at a general level, are getting closer to pre-crises values. This is true from a national and regional perspective. Nevertheless, in some markets, especially Lisbon, it is clear that price trends are disconnected from household’s income recovery,’ said Ricardo Guimarães, Ci director.

‘This is starting to cause concern for real estate agents, who mention the difficulty in finding houses for sale at prices compatible with domestic and traditional demand,’ he added.

Simon Rubinsohn, RICS chief economist, pointed out that the Portuguese economy recorded another solid rate of expansion during the final quarter of last year, with growth coming in at 0.7%.

‘This equates to an average annual rate of 2.7% in 2017, the firmest rise in GDP since the year 2000. Recent evidence points to 2018 starting off on a similar footing, with this solid momentum likely to provide a favourable backdrop for housing market activity going forward,’ he explained.