Lisbon, November 24, 2023 – The Portuguese residential property market has been on an upward trajectory but is now facing potential challenges. Recent developments in housing credit, inflation, and monetary policy are signaling a crossroads for the market. Here’s what you need to know:
1. Overvaluation and Pandemic Resilience:
Since 2018, the Portuguese residential market has shown signs of overvaluation, and even during the pandemic, house prices continued to surge, with a staggering 12.6% increase in the first quarter of 2022 compared to the same period last year. However, this remarkable growth may be reaching its limits.
2. The Bubble Trouble:
S&P Global Ratings issued a report in January, sounding the alarm for Portugal’s housing market. The prediction is a 4.4% decline in house prices in 2023, following a robust 6.8% rise in 2022. If this forecast holds, it will be the most significant fall compared to other European countries.
3. Factors at Play:
Housing Credit Changes: The recent adjustments in housing credit, including increased interest rates and new age limits, pose a risk of reducing house prices in the country. As financing conditions evolve, demand may wane, leading to price corrections.
Inflation and Real Income: High inflation and reduced real income are impacting borrowing capacity. Rising financing costs due to monetary policy normalization further dampen demand for residential real estate.
Investor Attraction: Despite challenges, residential real estate remains attractive for portfolio diversification by investors.
4. Moody’s Outlook:
Moody’s, the credit rating agency, suggests that house prices in Portugal could fall by as much as 3% in 2023. While this correction is less severe than in some EU countries, it underscores the need for vigilance.
5. Stability Amidst Uncertainty:
The Portuguese market has demonstrated resilience throughout 2022, even amidst global uncertainties like the war in Ukraine. However, as interest rates rise, the risk of a price correction looms.
6. What Lies Ahead?
Moody’s experts anticipate that house prices will stabilize at 1% to 3%. The challenge lies in balancing market dynamics while ensuring affordability for buyers.
In conclusion, Portugal’s housing market is at a crossroads. While the recent surge in prices has been impressive, caution is necessary to prevent a bubble burst. Investors, homeowners, and policymakers must navigate these shifting tides to maintain a healthy and sustainable real estate sector.
source:theportugalnews.com, portugalbusinessesnews.com, bing.com, idealista.pt
