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Increase in Housing Prices Accelerates and Should Rise 6% This Year, Slowing down in 2018.

3 August 2017

The Portuguese housing market is recovering at a rapid pace, fuelled by an improved national economy, a lack of supply, strong demand from foreign buyers and low interest rates. Housing prices are expected increase by 6% this year, but inflation should cool down in coming years. Standard & Poor’s expects an increase of 4.5% in 2018 and 3% in each of the following two years.

The rating agency’s research focused on the news that residential real estate transactions in the first quarter of 2017 increased 19.4% year-on-year, after increasing by 18.5% in 2016. Demand has been concentrated on existing houses, while activity in the new construction market has been recovering very slowly. In this segment, transactions rose only 0.9% in 2016 and 1.9% in the first quarter of 2017.

House prices rose 7.6% in 2016 and 7.9% (y-o-y) in the first quarter of 2017, compared to the same period the year before, according to the National Institute of Statistics. Existing homes saw a price increase of 9.2% in the first quarter, while prices of new homes grew by 4.2%. Still, according to the US financial rating agency, the Portuguese residential market remains relatively cheap compared to other countries, with affordable prices and special incentives that continue to attract foreign buyers.

Given that the Portuguese economy is experiencing strong growth momentum – with GDP accelerating to 2.8% annually and steady job creation supporting consumer spending – and interest increase at a more moderate pace towards the end of the decade.

Other actors in the Portuguese real estate market agree with this scenario. They reject the existence of a real estate bubble in Portugal, arguing that the market will grow at sustainable prices, around 3%, over the coming years.

Original Story: Idealista

Translation: Richard Turner