Fitch. Housing Affordability Expected to Worsen in Coming Years in Portugal

15 January 2019

Foreign buyers and a limited supply of new homes should lead to further increases in housing prices.

The financial rating agency Fitch is forecasting that housing affordability in Portugal will deteriorate moderately over the next two years, according to a report released today.

“We expect housing affordability to be challenging for buyers in Lisbon and Porto, where prices are increasing rapidly,” said Juan David Garcia, senior director of Fitch Ratings, in a report on the real estate market.

‘Housing affordability’ is an indicator that measures the population’s ability to buy a home.

“We expect that the capacity to buy a home nationally will deteriorate moderately over the next two years,” the executive said, adding the effect will be worse in large cities, where wages are growing more slowly than housing prices.

Also, Fitch indicated that comparatively wealthy foreign buyers are contributing to the increasing prices by going after the limited supply of new homes.

The credit rating agency recalled that housing prices in Lisbon and Porto increased by 20% to 22% in the second quarter of 2018, compared to the same period the year before, more than double the increase in prices nationally (+9%) in the same period.

In the same report, Fitch also forecast that the ratio of past due loans to total home loans from banks will stabilise at around 5%, down from a high of 7% in 2014.

“Fitch expects the total amount of home loans will stabilise in 2018 before growing in the next two to three years, reversing the seven-year contraction since 2011,” the report said.

For Europe as a whole, Fitch forecast that housing price increases will slow down in most countries as the housing affordability diminishes and economic growth slows.

Original Story: Dinheiro Vivo / Lusa

Photo: Global Imagens

Translation: Richard Turner