The year 2022 was an atypical year, marked by several challenges in the global economy and also in the real estate sector in Portugal. There was activity, dynamism and business, growing side by side with uncertainty, given the upheaval that the War in Ukraine brought, in a post-pandemic scenario. Inflation soared, interest rates began to rise and families’ purchasing power and savings dropped, but even so, the country remained attractive and a privileged destination for investment.
The Real Estate Sector has given a good response to the crises and experts believe that its resilience will remain in the new year. After a dynamic 2022, and in some cases breaking records for home sales and real estate transactions, 2023 looks ahead as a challenging year, but also one of growth. Portuguese families will not find life easier in terms of prices for buying a house, although a correction and adjustment to the mismatch between supply and demand is expected, a problem that still remains to be solved.
There will certainly be a retraction or postponement of home buying intentions, especially for those who depend on bank credit. With no income compatible with the values practiced in the big cities, the solution is to bet on the outskirts or in some areas of the interior. In turn, foreign investment should remain consistent, with some nationalities standing out, such as the North Americans.
Evidenced by relevant figures in the sector, globally the year 2022 was a “very positive year, marked by demand being much higher than supply, despite the increase in interest rates and inflation”. House prices rose in 2022 and the trend was seen in almost all of Portugal, as houses became more expensive in 17 district capitals. Taking into account the quarterly and annual variation, the prices of houses to buy in Portugal rose by 2.8% and 5.9%, respectively.
Given the rise in interest rates on housing loans and the lower purchasing power, due to the high inflation that is being felt, the demand for houses may decrease and, consequently, pave the way for the cooling of the real estate market. According to a recent analysis by the Financial Times (FT), the risk of a downturn in house prices is different in each country, but almost all countries should experience a general slowdown in 2023.
It is likely that there will be a slowdown in demand and a stabilization in prices, which will not be homogeneous, especially if we compare the big cities with the more peripheral areas. But this is effectively a slowdown and not an abrupt drop, not least because the factors that have contributed to the higher value of houses will continue to be a reality: shortage of supply, construction costs and lack of manpower.
These aspects will undoubtedly influence more the credit-sensitive domestic buyer. No major changes are expected in terms of demand and interest from foreign buyers. For the Portuguese, those dependent on credit, it is essential that there is an increase in wages and that this accompanies the increase in inflation and allow families to maintain their purchasing power. In this case, yes, the option will be to go outside the big cities, many even to the periphery, which is already seen as “expensive” at the moment, and look for second hand used solutions in more remote locations.
Several specialists also underline the need to solve the bureaucracy and time spent in licensing processes. They end up delaying new construction and rehabilitation projects, making it difficult to have a greater supply to meet market needs. Also, this new construction must be more sustainable, in the sense of not depending so much on energy and construction methods that are currently less available and that threaten the harmony of the planet as a whole. “The construction sector, from the construction phase to the period of use of the houses, has a responsibility with regard to the environmental impact”, we can read on the Portal for Sustainable Construction (at https://www.csustentavel.com/). Solutions must be sought at this level, making construction more accessible and harmonious with the Environment, so that there may be better and more options for a greater number of people.
These are some of the considerations given by several leading specialists in the real estate sector in Portugal. Despite the more timid start, in 2023 house prices and rents are expected to continue to rise. Believes point, however, to a possible reduction in the number of transactions, especially in the domestic market. Overall, for the foreign market, the view that Portugal is good and is recommended continues to prevail. We couldn’t agree more!
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