Housing Prices Lead 40% of Prospective Buyers to Give Up on or Postpone Purchase

14 September 2018

Among those who do eventually buy, more than half end up giving up on their initial criteria for a home, a study by Century 21 revealed.

An approximately 100-square-meter, renovated, existing flat with three bedrooms, two baths, storage and garage located in a safe area in, or near, the city centre with easy access to transportation links and services. It’s the ideal home for most of the people in Portugal who are looking for a property to live in. On average, those buyers are willing to pay about 140,000 euros for such a property. The existing supply of homes on offer in the market has an average asking price of around 174,000, and most of those are further out of the city centre. This imbalance is leading 40% of prospective buyers to give up on or postpone buying a home. Almost 60% of those who do buy end up buying a home that is below the standard of their original criteria for choosing a home.

These are some of the results of a study by Century 21 using Portuguese Housing Observatory, which, in a survey of 810 people, sought to measure the expectations, motivations, behaviours and trends of buyers and sellers in Portugal, and the gap between peoples’ dream homes and the property they are willing to settle for in the end.

First, home sizes are where the distance between the two begins to be felt. The average buyer is looking for a one-hundred-square-meter home, which is not the norm for the existing supply. The study concluded that the housing market is lacking in homes measuring between 91 and 120 square meters. The number of rooms in the home another.  The supply of homes with one to three bedrooms is lower than the existing demand.  At the same time, homes with more than three bedrooms account for 26% of the available stock while only 17% of buyers are looking for similarly sized homes.

The factor which is leading ever more buyers to give up on their plans turns out to be the price. At a national level, the average sales price of a home is €173,252, €34,000 more than the average of what buyers are willing to pay (€138,623).

This difference is even more pronounced when considering the metropolitan areas of Lisbon and Porto. In this case, the average price stands at around 192,344 euros and 171,538 euros, respectively, but prospective home buyers expect to pay no more than 171,5834 euros in the Lisbon area and 137,587 euros in Porto. The distance is even greater in the Algarve: sellers are asking for an average of 193,125 euros, 62,417 euros more than the average of what buyers are willing to spend. The study also found that a third of the homes on sale had prices ranging from 200,000 to 700,000 euros, while only 13% of buyers were interested in buying a home in that range.

This has led many prospective buyers to either give up their plans to buy a home or lower their expectations of what their home should be. 40% of prospective buyers end up giving up on or postponing, while another 60% drop some of their initial requirements.

Those weakened criteria include the size of the home, 26.9% end up opting for a smaller home than they had hoped and the state of the home, 23.6% give up on their intent to build a new home or buy a home that had already been renovated. Lastly, 23.2% of prospective buyers end up choosing a home that is outside of the area in which they originally hoped to settle.

Ricardo Sousa, the CEO of Century 21 in Portugal and Spain, told DN/Dinheiro Vivo that the real estate agencies can often find solutions that satisfy both parties. However, he noted that the length of time it takes to buy a home is increasing and now stands at an average of around 12 months.

While buyers usually have to give up on some of their expectations for their ideal home, the data demonstrates that buyers and sellers are aligned in some ways. For examples, 61.2% of buyers are looking for apartments and 60.2% prefer existing properties as opposed to new builds. Here buyers are in agreement with what the market has to offer. 80.4% of the properties available are used but refurbished, and 63.8% are for apartments.

Preference for buying

Most Portuguese own their homes and that preference is not about to change. According to the study, 98.7% prefer to own their own home rather than renting. This preference results from the belief that owning property is an investment in the future (58.1% of respondents), while others see renting as a waste of money (27.1%) or as expensive as buying (21.3%).

The 10% who prefer to rent also face difficulties in the current market. 75% of prospective renters are looking to pay a monthly rent of up to 500 euros, however, just 61% of the homes on offer are in this price range (the national average).

In a more general analysis of the market, Ricardo Sousa stressed that despite the “strong market recovery” observed from 2015 onwards and the constant string of positive growth indicators, “an excess of optimism is leading some people to make decisions that may prove to have been wrong a few years from now.”

Original Story: Diário de Notícias – Lucília Tiago

Photo: José Mota – Global Imagens

Translation: Richard Turner