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House Sales Increase by 30%, with a Good Part of It Paid in Cash

 

14 August 2017

2017 will be the best year for the real estate market since 2010. Increased bank credit, local housing, golden visas and low bank deposit rates are propelling prices

 

Real estate sales increased by 30% in the first six months of this year. That translates to around 80 thousand houses bought and sold – definitive numbers will be released this week by APEMIP. If this trend continues, 2017 will be the best year for the real estate market since 2010. Increased demand from foreign investors, the ‘rush’ in local housing and the low returns on bank deposits are factors that explain the boom. And the fact that a good deal of the sales is being paid in cash.

“I can say that the first semester was very positive, with a growth of more than 30%, above my forecast for the whole year, 25% -30%,” Luis Lima, president of the Association of Realtors and Real Estate Agents of Portugal (APEMIP), confirmed to Dinheiro Vivo. “I have some concern over budgeting issues in the second half of the year, but I am optimistic now that a new departmental Secretary of State for Housing has been created.”

Behind the good numbers is the loosening of credit for home purchases and the growing demand for real estate by foreigners, including the increasing issuance of golden visas. But there are also other more recent factors: the increase in purchases of existing houses for renovation, the transformation in local housing and historically low deposit rates which have led many Portuguese nationals to invest their savings in buying homes using lesser amounts of, or no, housing loans.

During the first six months of 2017, 32.799 billion euros were deposited to bank accounts; In 2016, by this time, 3.681 billion more had been deposited. The difference was even greater in 2015: 3.833 billion more had been deposited to savings accounts.

“Mortgage loans are now used as a supplement in the purchase of homes and not to finance 100% of the purchase. In addition, investment in real estate currently has a higher rate of return than bank deposits and a lower risk. That is why many Portuguese prefer to invest their savings in real estate, either for their own housing or as an investment, to rent,” says João Pedro Pereira, executive director of ERA Portugal.

“The real estate sector is seen as being safe. The purchase of a home with the buyer’s own funds is a phenomenon that we have seen for about a year and I believe it will continue to grow along with an increase in the number of houses sold, ” Luís Lima added.

Ricardo Sousa, a director at Century 21, believes that credit growth is stronger in the mid- and mid-low segments and assumes that low interest rates on deposits are the major culprits for accentuating “our ownership culture”, especially at a time in which “real estate returns are higher than other alternatives in the market”.

“This phenomenon has occurred because of very low interest  rates on deposits, currently close to zero, and there is a normal tendency to redirect savings to the purchase of housing that, over the long term, is always more profitable than time deposits, ” says Beatriz Rubio, CEO of Remax, who also added that “there are nationals from 49 different countries buying houses in Portugal, most of whom do not use bank loans,” both factors that help to explain the faster increase of sales compared to credit.

Luís Lima also believes that cash purchases are only held down by “the insecurity of the Portuguese,” but assumes that the phenomenon will intensify even because “in the next two years nothing will stop the dynamism in the Portuguese real estate market.”

Original Story: Dinheiro Vivo – Ana Margarida Pinheiro

Translation: Richard Turner