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Housing Prices Increase Throughout Portugal, With Steep Rises in the Peripheries

21 June 2018

In 80% of the 278 municipalities analysed by the Confidencial Imobiliário housing price index, prices have risen by more than 10% in the first quarter of this year.

For investors in real estate, Portugal is no longer limited to just Lisbon and Algarve, with the rest of the country as a mere backdrop. Housing prices rose in the first three months of 2018 in every county on mainland Portugal, with Odivelas, Leiria and Oeiras among the leaders of the pack. It was the second consecutive quarter of generalised increases, but the order of magnitude of the increases shows that the areas that are attracting buyers are already extending to the peripheries of the big cities.

The data, based on Confidencial Imobiliário’s residential price index, show that Cascais and Lisbon were once again the two municipalities with the highest year-on-year increases, both at the end of 2017 and at the beginning of 2018. However, they also show that while in the last quarter of last year only these two municipalities and the Algarve made it into the top 15 of the highest valuations, now the Algarve has ceded its place to other regions.

The entrance of Porto into the top of the ranking can be largely explained by the fact that the rise in housing prices has begun to widen to areas of the city besides the historic centre. This widening has seen significant increases over the last several quarters.

The geographical diversification did not begin this year but is becoming more pronounced, justified by the fact that there has been a resumption in domestic demand for “traditional” housing. “Up to 2017, the demand for real estate was highly motivated by investor interest in tourism and the luxury market,” Ricardo Guimarães, director of Confidencial Imobiliário, stated. This dynamic helped spread market dynamism outside of the historic centres. The resurgence of housing credit and the increase in demand for housing by local families is also influencing the current price trend.

“The most significant structural change is the in the emergence of more peripheral municipalities,” says Ricardo Guimarães, who sees a new trend in the market that lessens the focus on tourism while returning its attention to traditional housing. “Some alternate regions are beginning to show up on the radar of potential buyers and renters.”

This explains why areas such as Vila Nova de Famalicão or Odivelas, which figured among the areas with the most significant price rises, areas considered to be markets driven primarily by local demand.

The data, in addition to showing the general appreciation, also show that the increases gained in strength. In the last quarter of 2017, the Confidencial Imobiliário housing index reported annual increases of 0.5% to 20% in the 278 counties of mainland Portugal for which statistics are available. However, in the first three months of this year, annual growth rates ranged from 3% to 35% and the number of counties with average house prices rising by more than 10% rose to 80%.

Nevertheless, comparisons with figures from 2007, the year in which credit started to tighten, and prices began to fall, shows that market valuation still has a way to go. While it is true that in some areas prices are already above pre-crisis levels, but this is not yet the case for much of the country. According to data from Confidencial Imobiliário, prices in 91% of counties remain below pre-crisis levels.

Lisbon and Cascais are both back in the black, with valuations on the order of 50.5% and 39.6%, respectively. Loulé, Odivelas and Oeiras are also back to pre-crisis levels, together with Sesimbra, Monchique, Vila do Bispo and Faro. In Porto, despite the price increases (initially very much localised on the historic centre), prices are still pre-crisis levels (-2.2%).

“If we look at average prices, we are still below 2007 levels,” says Ricardo Guimarães, adding that there are, however, regions where housing prices have “risen to levels” that exceed the reach of Portuguese families.

Original Story: Diário de Notícias – Lucília Tiago

Translation: Richard Turner