Rental Costs Soar by 20% in Lisbon and Porto

9 July 2018

The lack of housing for rent is driving price rises and decreasing the time that housing stays vacant.

There exists a pre- and post-2015 rental market. That year marked the beginning of a cycle of year-on-year increases in rental prices which, in the case of Porto, translated into a 20% increase in the first three months of this year. It’s the steepest rise in the last seven years, well above the figure for Portugal as a whole (13%), placing the northern city at the same level as Lisbon.

Despite the inflation in rental costs, the time between one tenant moving out and another moving in is getting smaller. When the financial crisis began and Portugal’s banks stopping providing credit, living in a rented home was an attractive option. Even so, according to data that Confidencial Imobiliário provided to DN/Dinheiro Vivo, in 2013, a property owner in Porto would have to wait for an average of five months before finding a tenant. In Lisbon and Sintra that figure fell to three months. These days, some homes are rented before going online or are rented less than 48 hours after doing so.

In the first three months of this year, homes stayed vacant for less than two months, on average. This period, as measured by the Ci Residential Information System, applies almost across the board, whether it’s in Lisbon or Porto or peripheral areas such as Matosinhos, Maia, Amadora and Oeiras.

People dealing directly with the market have first-hand experience with the changes.  Carlos Martins has seen the changes in the market up close. Five years ago, Mr Martins began managing several properties owned by his family. “About three years ago I needed about five months and several visits to find someone to rent a two-bedroom flat (T2) that we own in Queluz. Now we have another one, in the same place, for rent,” he says. The homes are both of a similar size, but the difference is that this time the apartment is still under construction “and I already have several people interested in renting it.” The price has also changed: three years ago, Mr Martins charged 350 euros, now he’s asking for €550.

Mr Martins also has a three-bedroom flat in Graça (Lisbon), where he is asking for around 1,000 euros/month. “At this moment I already have several interested parties who meet all the conditions we are looking for,” he said.

Too much demand, too little supply

In the north, the situation is largely the same. Filipe Balsa, of Remax Pro, notices the mismatch between supply and demand on a daily basis. As an example, he cited a very recent case of a person from Lisbon who called him on the same day a one-bedroom flat in the Bonfim area was listed. “He was looking for a house for his daughter who is moving to Porto to study and took the flat without ever having seen it,” he told DN/Dinheiro Vivo, added that many homes are rented in less than 48 hours.

“The demand is so high that I have people calling and asking the owners of the houses I have for sale if they’d accept renting them, often offering to pay six to 12 months in advance,” he said.

Luís Costa is experiencing a situation that also neatly illustrates the situation that the market is going through. He owns a two-bedroom flat that is now vacant, following an eviction – “the tenant was there for two years. The rent was 250 euros but they were 12 months behind” – in Póvoa de Santo Adrião. Mr Costa says that his mobile never stops ringing. “Some neighbours heard that the flat is vacant and many of them are calling me to let me know that they know people who are interested in renting it,” he says.

This rush – largely driven by a mismatch between supply and demand – has pushed prices beyond the norm in Portugal, as shown by the Rental Index’s figures for the first quarter of this year.

Between January and March 2018, that index registered a year-on-year increase in prices of 13%, the largest rise since 2014. Rental costs in Porto helped power the rise, registering the highest increase in the last seven years (20%), up 4% compared to the end of 2017.

The trend in Porto started in 2015 and the city already has registered three consecutive quarters where rents grew by double-digits, year-on-year. In Lisbon, double-digit increases began in 2016, peaking at 22% at the beginning of 2017. The city has now seen two consecutive quarters with increases of around 20%.

Original Story: Diário de Notícias – Lucília Tiago

Photo: Gonçalo Villaverde / Global Imagens

Translation: Richard Turner