70,000 New Homes Needed to Stabilise Housing Market

2 June 2018

The estimate comes from representatives of the real estate construction and mediation sectors, who believe that new construction necessary to halt the rise in housing prices.

Renting a home in Portugal’s major urban centres is becoming more and more of a headache. And buying is not necessarily the answer. Housing prices are high because of strong demand, but it is not just that. In the opinion of representatives of the real estate construction and mediation sectors, there is another factor that, although less apparent, is having a profound effect on the real estate market: the lack of new construction.

“We have already submitted a study to the Portuguese government [which says] that around 70,000 new homes are needed to attain equilibrium in the housing market. Prices are growing because there is a lot of demand and little supply,” Luís Lima, president of the Portuguese Association of Realtors and Real Estate Agents (APEMIP), told Dinheiro Vivo. The 70,000 needed homes are for the country as a whole, but “more than half are in Lisbon and Porto, where more than 50% of demand is concentrated.”

Arguing that the lack of homes can only be resolved by an increase in supply, Mr Lima stated that he does not doubt that it is necessary to invest “in new construction urgently.” “There are a number of areas, which are sometimes on the edge of areas that need some rehabilitation but have a lot of land where we can build on what we need, which is mainly for the middle class and the young.”

Reis Campos, the president of the Association of Civil Construction and Public Works Industries (AICCOPN), shares this estimate, stating that “we are talking about numbers on the order of 60 to 70,000.” Although there is some evidence of a recovery in new construction, the extent of the construction still falls well below the requirements, as calculated by the two associations. Mr Campos noted that more than 100,000 homes were built per year at the beginning of this century, but that figure fell sharply after the financial crisis.

“In 2011, just 17,000 homes were built. During 2013-2015 we averaged about 7-8,000 new dwellings per year. In 2016 and 2017, there was a more significant increase in the number of homes,” he noted. In 2015, more than 8,000 homes were built, and this number nearly doubled in 2017, a year in which, he says, about 14,000 homes were built. “In the first four months of 2018, we had 21% [more than in] 2017. That is, if this were to continue, we could be talking about 17-20,000 new housing units this year, he stressed.

Foreigners are betting on the middle class

The Portuguese Association of Real Estate Developers and Investors (APPII) believes that the “great window of opportunity that real estate developers should be aware of is the search for housing by the Portuguese middle class.” Hugo Santos Ferreira, the executive vice president of APPII, does not doubt that one of the “big trends” this year is new construction outside urban centres and the middle class.

“People who think that it is only the Portuguese middle class that is in the market looking for residential real estate are mistaken. We are seeing a new wave of middle-class foreign investors, who, following the upper classes, or even public figures, are now also seeking a permanent or temporary residence in Portugal,” he said. “Among these citizens of the foreign middle class are many French, but also people from Northern Europe, like Icelanders, Scandinavians and Norwegians.”

The executive believes that we are witnessing a return to projects outside the major urban centres, stating that “it has been common in recent months” to note the interest of “several developers and real estate investors, national and even foreign, for new locations that are not only limited to prime areas.”

There is interest, for example, in such areas as Alta de Lisboa, Telheiras and Lumiar, as well as Carnaxide and Seixal.” 2018 will be marked by a return of projects destined for buyers outside of the high segment, aiming to appeal to a wider audience. This trend is of the utmost importance and will greatly contribute to returning the housing market to equilibrium, which is for everyone and which, if so, will certainly bring us a more sustainable and long-term market,” he concluded.

Original Story: Dinheiro Vivo – Ana Laranjeiro

Translation: Richard Turner