6 January 2019
Last year was defined by record sales, but also by increasingly speculative prices. Industry leaders believe that during 2019, prices will fall to more realistic levels.
After alarms concerning housing prices sounded last year, the market is expected to stabilise in 2019. 2008 represented a record year not only for the number of transactions but also for prices. While 2017 was said to have been "the best year ever," 2018 saw those records broken once again, to the point that several experts began drawing attention to the possibility of the existence of a real estate bubble. However, several market players contracted by SOL were unanimous in their forecasts for the coming year: "After the excesses of the past year, the market is preparing to settle down, there are property owners who are already open to the idea of lowering the price they are asking for their home,” says Ricardo Sousa.
The CEO of Century 21 recognises that in some of Portugal’s major cities, notably Lisbon, "speculative and quasi-irrational prices" were becoming increasingly evident, due to "an excess of optimism on the part of property owners who believed they could sell their properties at certain prices.” However, Ricardo Sousa believes that the scenario has changed: "The overwhelming majority of property owners are now open to lowering their prices by up to 10%," as sales times have been increasing.
Nevertheless, the executive believes that the coming rebalancing will have a greater impact on the market for existing homes, starting in the second half of the year. His explanation is simple: "A series of new construction projects are in the pipeline and will inevitably force the price of existing homes down. However, most are not yet finished, and the effects will only be felt starting in the second semester," Mr Sousa told SOL.
That change, according to the executive, will largely respond to the needs of the middle class. "So far, we have only been talking about the need for social housing and luxury homes, while the overwhelming majority of the Portuguese fall in the middle," he said.
Until the new homes start to come on the market, Ricardo Sousa believes that many families will continue to be forced to move to the suburbs, both for buying and renting. "Until supply has fully readjusted, we will continue to see a huge gap between supply and demand in the market. This is causing families to move to peripheral areas of the city, which is occurring throughout the country,” the executive stated.
The head of the Portuguese Association of Realtors and Real Estate Agents (APEMIP) also believes that prices will fall this year. "I have repeatedly said in various public forums that housing prices will not, and cannot, continue to rise forever. It is natural and possible that we will begin to see corrections to housing prices because prices can only increase to justifiable levels, where there is still demand at those prices" he told SOL.
However, Luís Lima also noted that the excessive housing prices are not found all over the country. "Portugal is a country with significant regional asymmetries, including in the real estate market. We can say that there are areas of Lisbon, Porto and the Algarve that are in the midst of 'small real estate bubbles,' but we can’t extend that to all of Portugal, because it is not true.” As such, Mr Lima believes that the price corrections will be limited to the major urban centres. "This deceleration can be seen, for example, in the parishes of Lisbon where [new] Local Accommodations have been suspended, but prices will continue to rise in other areas. It is only natural that little by little, we will witness price corrections in areas where they those prices have risen above desirable levels," the executive concluded.
However, with or without a real estate bubble, the truth is that the market is riding high. Figures speak for themselves: last year the number of transactions increased by between 15% and 20%, according to APEMIP.
From January to September 2018, 132,270 homes were bought and sold, 19% more than in the same period of the previous year, with the third quarter accounting for 45,935 transactions. The market for existing has gained an increasing share due to the lack of new homes coming onto the market.
According to the latest data, housing prices in Portugal rose by 6.6% during the fourth quarter of last year, and the price per square meter is already above 2,100 euros, according to Idealista’s price index.
According to the report, every region in the country saw a quarterly increase in housing prices. However, the study highlighted the North, where prices rose by 9.2%, followed by Alentejo (+5.8%), Lisbon (+5.2%), Central (+5%), Madeira (+2.8%) and the Algarve (+1.6%).
Lisbon continues to be the most expensive region, with the price per square meter reaching 2,847 euros. Prices reached 2,064 euros/m2 in the Algarve, with the North (1,704 euros/m2) and Madeira (1,597 euros/m2) coming in third and fourth place in the ranking.
The Centre (1,083 euros/m2) was still the least expensive region, followed by the Alentejo (1,166 euros/m2).
Lisbon still leads the ranking of the most expensive districts at 3,262 euros/m2, followed by Faro (2,064 euros/m2) and Porto (1,919 euros/m2). The lowest prices are in Guarda (609 euros/m2), Castelo Branco (694 euros/m2) and Bragança, where the square meter costs 697 euros.
Election year to have an impact
Regarding 2019, Luis Lima admitted that the coming election is bringing some uncertainty to forecasts. "There is always some economic, social and political instability that arise and may have repercussions in the market." However, the executive added that he hoped that the real estate sector would continue to grow, albeit at a potentially slower pace. Such a deceleration would be, in his view, "natural in economic cycles and will also reflect the absence of supply on the market to meet the needs of most households."
On the other hand, APEMIP’s president is now more optimistic about the rental market. "By the end of 2018, I was very frustrated by the Government's inability to act effectively with regard to the rental market, but at the end of the year we were awarded a 'surprise' that, finally, effective measures will be taken to boost affordable and long-term rental contracts, giving me some hope for the rental market this year," Mr Lima told SOL. The executive, however, added a caveat: given the serious housing problems in certain areas of the country, "the measures will not be a miraculous cure for the 'disease'. They can bring some security to property owners and can boost supply in the market."
Original Story: Sapo Online
- Sónia Peres Pinto
Translation: Richard Turner