The latest index from the Royal Institution of Chartered Surveyors (RICS) and Confidencial Imobiliaro has cast a very interesting light on the Portuguese real estate market. Like countries such as Spain, where expats and the holiday industry are extremely influential, Portugal has suffered in light of the 2007/8 economic downturn. Thankfully, demand for real estate in Portugal is increasing but the headline figures could be heavily influenced by a lack of suitable stock.
Headlines from the latest index
The RICS index covers Lisbon, Porto and the Algarve which should give a general oversight of the market as a whole. The headlines from the latest index show:-
• Increased demand for property in the first three months of 2017
• A lack of suitable property for sale
• Concerns about a two-month fall in the number of properties listed
• More demand for the rental market
• A continuation in the steep decline of landlord instructions
• Supply concerns in the rental market
Even though real estate in Portugal is continuing to recover there are now serious concerns that prices could be pushed higher due to increased interest from buyers but also a lack of suitable properties for sale. We have seen similar issues in countries such as the UK, which can give a misleading impression on underlying property prices, but if there is no supply and demand continues to grow then there will be ever increasing competition for those properties available.
Expectations for the future
Overall there was some encouraging feedback from real estate agents with a net balance of 36% recording an increase in new buyer enquiries with Lisbon leading the way. At the same time the number of properties for sale continues to decline, with the Algarve hit particularly hard. Over the next 12 months in general, real estate agents believe that property prices nationwide will rise by around 4% which is certainly encouraging.
The national confidence index is also positive with a net figure of +38 although this has fallen slightly from last month’s figure of +43. Perhaps the most encouraging element of this latest survey is the expectation that house price inflation will average 5% over the next five years. When you bear in mind how difficult the real estate market in Portugal has been since the 2007/8 downturn, and the economic concerns, this will be seen by many as an extremely positive result.
The likes of Spain and Portugal have for many years now attracted more than their fair share of expat property investment. In light of the 2007/8 downturn these two countries in particular saw a massive sell-off from the expat community to the extreme detriment of coastal property markets. This not only left properties empty but many developments were shelved or delayed due to a lack of demand. This knock-on effect impacted property development companies in Portugal with a number of them going out of business. However, it does look as though buyers are returning, property prices are moving higher and confidence is rising.
The lack of suitable property for sale has been a big problem for the industry over the last 12 months and helped to squeeze prices higher. If these higher prices tempt potential sellers to list their properties then this would reduce competition and potentially soften expected house price rises. Then again, an increase in number of properties listed would improve liquidity and hopefully avoid a potential mini boom and bust scenario where prices are squeezed higher due to supply concerns and then all of a sudden supply increases.
On balance the next 12 months could be very interesting for real estate in Portugal!