Houses on the Outskirts Of Lisbon As Expensive as Those in Porto’s Centre
26 January 2018
The price of the square meter for dwellings located in Odivelas is already higher than that of the city of Porto. Loures and Amadora also are coming close. Pressure and scarcity in Lisbon are leading an even more significant number of families to seek homes in the periphery.
House prices are continually rising in Portugal. The trend is affecting different areas of the country to a greater or lesser extent, but it is beginning to weigh more heavily on the peripheries of the country’s two main urban centres, Lisbon and Porto. In some areas of the periphery of Lisbon the average prices for homes already nearing or even surpassing the prices in the city of Porto. An example of this is Odivelas, where costs are already higher than in the northern metropolis, and Loures and Amadora, which are also coming close.
The data supporting these findings come from information on bank housing valuations for the concession of residential mortgages. Although this type of measure is not entirely accurate, the indicator represents a reasonable approximation of trends in Portuguese real estate prices. It is on the basis of this assessment that banks determine the amount of funding they are willing to lend towards home purchases.
“Bank valuations usually track the banks’ willingness to lend money, or not. Banks are currently interested in lending for residential housing. Therefore, the assessment values have risen to keep up with market prices,” Luis Lima, president of the real estate association APEMIP, explained.
According to data provided by the National Statistical Institute (INE), the average home valuation showed a continuation of the previous growth trend. At the end of 2017, home valuations rose 5% on average to reach the highest level since May 2011, at 1,150 euros per square meter.
The prices seen in both the Lisbon Metropolitan Area and Porto are increasing in tandem. In the first case, the real estate costs returned to April 2011’s highs at the end of 2017, at 1,392 euros per square meter. In Porto, prices, in the same period, reached 1,113 euros per square meter, on average.
Within each of these regions, price rises have been very different, with the peripheral municipalities of Lisbon and Porto dominating the trend. An example of this is the increases seen in Odivelas and Amadora, near the capital, and Matosinhos, near the city of Porto, of often called Invicta. In the first two municipalities, housing valuations increased by more than 16% in the last year, while in the third municipality the increase was more than 12%.
This degree of price growth means that the price of the houses in Odivelas is already higher than in the city of Porto. In Loures and Amadora, they are already close to that value. The price of the square meter of properties located in Odivelas is being evaluated by the banks at 1,661 euros/sqm, while it amounts to 1,599 euros in Porto. In Loures and Amadora, prices are 1,560 and 1,494 euros, respectively.
Price Increases in Portugal
How can this approximation in prices be justified? It is a result of the diversion of demand from large urban centres, where price pressures are more acute, to other regions with lower prices. “In the centre of the big cities, it is currently challenging for Portuguese families to afford a home. So, they go to the peripheries, which is where they can buy,” Luís Lima explained, adding that, “as the stock in the centre of the cities is scarce and prices are already high, people are turning to the peripheries.”
Houses in the city of Lisbon were assessed at the end of 2017 at 2,141 euros per square meter, the highest recorded value in the data provided by the INE (beginning in early 2011).
The pressure from tourism and investors has exhausted the availability of houses, particularly in Lisbon, a development that has been extensively commented upon. In the case of the peripheral areas, the president of APEMIP noted that “only now are prices in these areas returning to pre-crisis levels.”
The trend is expected to continue
Regarding the future direction of real estate prices, Mr Lima believes that the upside is now relatively limited. He believes, however, that the periphery should remain a major alternative for home buyers in the Lisbon Metropolitan Area.
“I do not think there is any room to grow much in the centre of the city because prices have risen to such an extent. So, housing valuations are not expected to grow much further,” the executive stated, referring to the property market in Lisbon. Regarding the periphery, Mr Lima believes that “as long as a stock of houses continues to be available in these regions, prices should continue to rise,” adding that “prices started at a much lower level in the peripheries.”
Considering the current level of prices, APEMIP’s representative believes they “are already reaching their limit” in the city centres and certain other zones. “There is no chance of continued healthy growth. I do not think we’re going to experience a real estate bubble because the country is not all on the same level. We still have areas in the interior where investments have yet to arrive. I mean areas like Beja, where the number of transactions can be counted with one’s fingers,” he concluded.
Original Story: Economia Online
Graph: INE
Translation: Richard Turner