The Portuguese real estate market had an outstanding performance in 2023, with a record-breaking sales volume of €1 billion in the first half of the year, according to a report by Cushman & Wakefield. This represents a 35% increase compared to the same period in 2022, and a 15% increase compared to pre-pandemic levels in 2019.
The main driver of this growth was the strong demand for residential properties, particularly from foreign buyers. Portugal has become a popular destination for people looking for a stable and attractive market, with favourable tax and residency schemes like the Non-Habitual Resident (NHR) and Golden Visa programs. UCI Portugal, a mortgage lender, reported that foreign buyers accounted for 25% of total sales in 2023, with the majority coming from France, the UK, Brazil, and Germany.
The most sought-after region was the Lisbon metropolitan area, where the median property price was €1,929 per square meter (sq. m) in November 2023. This represented a 15.2% increase year-on-year. The Algarve, the country’s main tourist destination, followed with a median price of €2,009 per sq. m, up by 17.6% year-on-year. The North, the Center, Alentejo, the Azores Islands, and Madeira also saw double-digit price increases, reflecting the broad-based recovery of the market.
However, the supply of new properties remained low as the construction sector faced challenges such as rising costs, labour shortages, and delays in licensing. INE reported that the number of licenses for new construction only increased by 3.1% in the first three quarters of 2023, while the number of dwelling completions rose by 1.6% in the same period. This created a gap between demand and supply, putting upward pressure on prices and rents.
Despite some uncertainties related to the evolution of the pandemic, inflation, and interest rates, the outlook for the Portuguese real estate market in 2023 is optimistic. JLL, a global real estate services firm, expects the market to have the best year ever in terms of sales transactions, with an estimated 168,000 units sold and a sales volume of €30-31 billion. The firm also forecasts that prices will continue to rise, albeit at a slower pace, as the market reaches a more balanced situation.
The booming real estate market in Portugal has its pros and cons. On the one hand, it provides a boost to the economy, which grew by a robust 6.7% in 2023, following a 5.5% expansion in 2021 and an 8.4% contraction in 2020. The market also generates employment, tax revenues, and foreign exchange inflows for the country. On the other hand, the market may pose risks such as overheating, affordability issues, social inequalities, and environmental impacts. Some critics argue that the market is driven by speculative and opportunistic motives, rather than by genuine needs and preferences of the local population. They also claim that the market contributes to the gentrification, displacement, and homogenization of the urban fabric, eroding the cultural and historical identity of the cities.
To ensure that the real estate market develops in a sustainable and inclusive manner, balancing the interests of investors, residents, and society at large, the Portuguese government and relevant stakeholders need to act. Some of the measures that have been proposed or implemented include regulating the short-term rental market like Airbnb to limit its negative effects on the housing supply and neighbourhood quality, promoting the social housing sector to provide affordable and adequate housing for low-income and vulnerable groups, diversifying the product offer to cater to different market segments and needs like student accommodation, senior housing, healthcare, and agribusiness, and incorporating environmental, social, and governance (ESG) criteria in the design and management of real estate projects to enhance their sustainability and resilience.
The Portuguese real estate market is one of the most dynamic and attractive markets in Europe, and it is expected to maintain its momentum in the coming years. However, it is also important to monitor its evolution and address the challenges it faces to ensure that it contributes to the well-being and prosperity of the country and its people.
Source:cushmanwakefield.com, idealista.pt, globalpropertyguide.com, theportugalnews.com, cbre.pt