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Supply shortage drives rise in house prices

14 July 2017

Lack of housing supply remains one of the main factors influencing rising prices in a scenario of rising demand.

According to the latest Portuguese Housing Market Survey, a monthly survey conducted by Confidencial Imobiliário (CI) and RICS with real estate agents and developers, respondents anticipate an increase in home prices of around 4% in the next 12 months, with expectations over a five-year horizon even stronger, with average increases of 5% per year expected.

“Real estate agencies see the shortage of supply as the main constraint on their business and the main factor determining the evolution of prices. This situation should dominate trends in the coming months “, explains Ricardo Guimarães, director of Ci.

On the other hand, “prices are beginning to rise broadly across Portugal, and increases are not restricted to the main cities, which may induce a turning point in the market. That is, this can boost the development and financing of new homes, thus reducing the mismatch between supply and demand. But it will take time,” says Ricardo Guimarães.

In May, the pressure on supply again intensified, with the number of homes for sale falling in the last two months, with the Algarve region reporting the most significant decline. At the same time, agreed sales continued to rise for the 16th consecutive month and demand from new buyers also maintained solid growth, with Lisbon as the region with the most significant increase in demand. In terms of sales, all three regions (Porto, Lisbon and Algarve) saw an increase in transactions. This trend is expected to continue in the coming months.

Demand also continues to grow in the rental market, although it registered a slight slowdown in May. On the other hand, supply continues to fall sharply, an imbalance that, as in the buying and selling market, has maintained the expectation of rising prices.

Original Story: Público – Imobiliário

Translation: Richard Turner