The Crazy Price of Homes in Lisbon

1 July 2018

Prices keep on going up, pushed by increasing demand. As supply fails to keep up with this trend, the result is reflected in the current price of homes. The prospect is not encouraging: houses will become even more expensive.

The growth of tourism and the explosion of local tourist accommodations in Portugal’s principal cities has led to an increase in housing prices. According to the latest data released by the National Institute of Statistics (INE), prices increased by 12.2% in the first three months of the year compared to the same period last year, reaching the highest value on record. Prices have been increasing for 18 consecutive quarters house prices are increasing, and the trend has been accelerating over the last five.

The numbers speak for themselves: a few years ago, a house that cost 80,000 euros can now already exceed €200,000 – a good deal for people who bought a property at that time, but not so much for families who are looking to buy now.

Jornal i checked a number of real estate websites and found a 24-square-meter studio for 285,000 euros. In this case, the price of each square meter has reached almost 12,000 euros, well above the figures announced by the INE. However, one can also find a studio at lower prices: 150,000 euros, though it is even smaller at 18 square meters. There is also a 60 square-meter one-bedroom flat for €400,000; the prices vary depending on their location and their state of conservation.

Let’s take a look at the numbers. The average price per square meter runs at roughly 8,000 euros per square meter in Chiado, €3,500 at Avenidas Novas – almost the same as in the Parque das Nações, where prices exceed 3,200 euros per square meter.

The average price per square meter of all the houses sold in Lisbon – whether new, rehabilitated or used – reached 2,438 euros, well above the INE’s figures for the fourth quarter of 2017. The parish that includes Chiado has one of highest costs per square meter, 3,333 euros according to the INE, a price that is much lower than it found in practice. In Benfica, according to INE, the cost is 1,932 euros, in Penha de França, 1,995 euros and Avenidas Novas, 2,835 euros.

The same thing is occurring in Porto. In practice, average prices exceed 4,200 euros per square meter in Foz and 4,000 euros in the Aliados – again, above the figures published by the statistics agency, where the price per square meter is listed as 1,307 euros. In parishes where the most expensive areas such as Foz and the historic centre are included, prices per square meter have reached 1,955 euros and 1,512 euros respectively.

Mismatched prices

According to Ricardo Sousa, the CEO of Century21 Portugal, domestic demand in Portugal ranges around 138,000 euros. Most people are looking for two- or three-bedroom flats, with sizes between 70 to 120 square meters and prices ranging from 75,000 to 150,000 euros. The average real estate transaction at the firm at a national level is 148,000 euros, but in Lisbon and Porto, the average value of the transactions carried out by Century21 exceeds 200,000 euros.

“The residential real estate market is experiencing good times, with domestic demand becoming more active, especially in the middle and lower-middle income segments. The international segment is following a similar trend, with international consumers currently focusing on the demand for real estate up to 300,000 euros,” the executive told Jornal i.

According to Mr Sousa, “the combination of these factors is driving the recovery of the real estate market throughout the country. However, supply is becoming increasingly insufficient for house sizes and prices in the current demand profile. In this sense, we view the emergence of more rehabilitation projects and new constructions, mainly directed at the middle and lower middle segments, with optimism.”

The prospects are not encouraging for people who are thinking of buying a home now. Ricardo Sousa believes that we will continue to see a greater gap between supply and demand, especially in domestic demand, where income is not keeping up with the rise in housing prices. “This situation is boosting the peripheral markets of the main cities, with the shift of demand to these areas, which have values that are more in line with the purchasing power of the Portuguese,” he adds.

Meanwhile, ERA – which sold 12,000 properties worth 1.55 billion euros last year – says that the average price of the properties sold nationwide was around 129,000 euros. However, in Lisbon, the average price of properties sold was around 182,000 euros, and 112,000 euros in Porto.

“Since 2016, the real estate sector has been recovering from the economic and financial crisis and is now in a phase of expansion for some of the market segments and consolidation for the players that have grown over the past year,” João Pedro Pereira, member of the board at ERA Portugal, stated.

The executive believes that this scenario will not undergo significant changes in the coming times. “The situation is favourable to Portugal. Real estate should continue to attract foreign investment, not only due to tourist demand but also to a favourable political and economic climate. In fact, we are seeing examples of the growing demand coming from markets such as France, the UK and Brazil,” he noted.

Original Story: Jornal i – Sonia Pires Pinto

Translation: Richard Turner