OECD Wants of Dangers of Rising Housing Prices in Portugal

20 February 2019

Housing in Portugal has suffered from “intense pressure” in recent years. The Organisation for Economic Co-operation and Development (OECD) stated that rising housing prices was one of the principal problems facing the Portuguese economy, in a report published this week. The institution led by Angel Gurria acknowledged that Portuguese real estate market has its “back to the wind,” leveraged by tourism. Mr Gurria added that supply in the market is still unable to keep up with current demand, leading to serious potential problems.

The boom in tourism coupled with policies for attracting foreign investment, such as golden visa and non-habitual resident programs, have triggered rapid growth in the demand for housing in Portugal, especially in Lisbon, Porto and the Algarve. The OECD notes, however, that “the growth in the supply of housing has not kept pace,” a legacy of the “construction crash” that accompanied the financial crisis. In the years from 2007 to 2014, annual investment in housing fell by more than 50%, the organisation recalled.

In its report, the Economic Survey of Portugal 2019, the OECD noted that the rapid growth of tourism boosted the Portuguese economy in the years immediately following the crisis. It added that the sector has been the centre of multiple economic and financial activities, and a vital part of Portugal’s exports. However, by helping to attract so much attention to Portugal, the phenomenon has led to a rapid increase in housing prices, threatening any gains to the present.

The OECD is worried that the rise in tourist accommodation prices, and the consequent pressure on housing rents, is beginning to threaten the sector’s competitiveness.

Ever more expensive homes

“In recent years, there has been a steady increase in the supply of tourist accommodations. The number of beds increased by 23% between 2013 and 2017 – a third of this growth has to do with the greater availability of individual rooms in local homes, “the OECD said in the report, adding that “in Lisbon, Airbnb more than doubled its supply of rooms between 2015 and 2017,” even as total tourist demand clearly continues to exceed the current level of supply.

That scenario is causing “significant growth in the price of tourist accommodations,” while contributing to “upward pressure on rents” and other costs in Portugal. This means that housing is increasingly expensive for Portugal’s inhabitants, in addition to visitors coming for work or pleasure.

The OECD believes that the trend may even threaten the “competitiveness of the tourism sector in Portugal” and motivate “political interventions to limit its expansion.”

Original Story: Idealista

Photo: Ricardo Resende / Unsplash

Translation and editing: Richard Turner