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Brussels Considers the Real Price Of Homes in Portugal to be “Undervalued”
8 March 2018
However, the European Commission believes that prices should be monitored carefully, in case price growth continues unabated.
The European Commission (EC) believes that the recovery in housing prices in Portugal in 2016 and 2017 corresponds to a “correction of previously low values.” This increase could affect domestic demand in a market continues to grow, and where the average price per square meter rose nearly 2% at the end of last year.
In its report on Portugal, released yesterday within the scope of the “European semester winter package,” Brussels stated that it believes that the “risks linked to the renewed dynamism in the housing market currently seem to be under control.” However, the EC warned that if the current pace of real house price growth in Portugal continues unabated in the medium term, the monitor will require closer monitoring.
The EC stated that the increase in housing prices are “mainly restricted to tourist areas,” and that housing costs are “still recovering, in general, from the downturn.” According to the Commission’s report, the “concentration of price increases in tourist areas, including residential property conversion projects, suggests that the real estate market is currently driven mainly by external demand and tourism.”
The Portuguese real estate market is booming. The real estate agencies are seeing record sales and profits, a sign of the sector’s health. This, in turn, is a reflection the improvement in the Portuguese economy, but also of the greater ease of access to bank financing and the growing demand from international buyers. The numbers speak for themselves: the three largest real estate companies – Remax, Era and Century 21 – sold more than 82,000 properties in 2017. Even more significant is the amount involved in these operations: sales exceeded five billion euros.
The agencies’ opinion on the matter is unanimous: the external market has given a significant boost to the sector as foreigners account for an increasing percentage of the total number of transactions.
According to the document, the price increases in 2016 and 2017 “occurred after a long period of decline and is currently seen more as a correction of past devaluations rather than an accumulation of new imbalances.” In addition, “domestic factors seem much weaker, as the stock of mortgage lending is still declining.”
In the European Commission’s view, real house prices are still “undervalued”, but rapid price increases are already affecting domestic demand and “may aggravate the issue of affordability.”
According to data provided by the National Statistical Institute (INE), in the third quarter of last year, the average price per square meter of family housing sold in Portugal stood at 912 euros. This represents a rise of 1.8% over the previous quarter. In its report on Portugal, released yesterday within the scope of the “European semester winter package,” Brussels considers that the “risks linked to the renewed dynamism in the housing market currently seem to be under control.”
Original Story: Jornal i – Magalhães Afonso
Translation: Richard Turner