In this article, our Corporate Member Mercator - PortugalMäklarna provides an overview of the economic development of Portugal in recent years and link it to the coming development of the Portuguese housing market. The article shows a stable market underpinned by healthy demand which is partly driven by Portugal continuing to be viewed as a country that offers "high quality of life and social stability" by foreign investors, which makes the Portuguese market a continued good market from an investment point of view.
Market report Portugal, January 2020
The Portuguese economy
Since the peak of 2017, when GDP growth was 2.8 %, the Portuguese economy has had a slightly declining trend. Growth for 2019 is expected to be 1.9 %. The corresponding figure for 2018 was 2.1 % and the estimated growth for 2020 is estimated at 1.7 %. State debt remains unchanged at a high level: 119.8 % of GDP. The sitting government has a stated goal of reducing the state debt to below 100 % during the current term, but in light of political promises, such as salary increases for government employees, etc, it is uncertain whether this goal can be achieved. Private consumption declined at the end of 2018 and then leveled off in 2019. The confidence index weakened somewhat during the second half of 2019, and both private consumption and housing loans declined slightly during the latter part of 2019.
The slightly declining exports and industrial production are expected to be balanced in the future by a continued dynamic service sector with a relatively high private consumption and a healthy unemployment rate. Public investment will remain at a historically low level. The next two, three years of economic development are expected to consist of a declining growth rate, but still above the EU average at the end of the period.
The Portuguese Real Estate Market
In 2019, the housing market continued to develop favorably, with a general price increase of about 9 % on an annual basis. Of course, there are great local variations. For example, housing in Porto, which usually is lagging after development, has seen a price increase of 16 %. The corresponding figure for Lisbon is 11.5 %, Cascais 8.5 %, and the Algarve 7.3 %.
The number of homes sold during the first three quarters of 2019 - compared with the same period in 2018 - decreased from 137,900 to 132,200. However, sales volume increased from EUR 17.9 billion to EUR 18.7 billion. Foreign buyers account for about 8 % of the number of homes and about 13 % of the sales volume. French account for 21 % of these, followed by English at 18 %, Brazilians at 18 %, Germans at 9 % and Chinese at 7 %.
The pace of new construction has increased since the crisis years. The annual rate is approximately 24,000 housing units, which is low in relation to the population. The pipeline for new housing has increased, which means that the supply should increase in the coming years.
In 2019, foreign investors accounted for 78 % of the total € 3.5 billion invested in real estate (commercial, hotel and residential) in Portugal. Of the investment, housing projects accounted for approximately EUR 1.0 billion. The market's assessment is that the level of activity should remain at the same level even in 2020.
The main reasons given by foreign investors for investing in real estate in Portugal are that they believe that the country offers "high quality of life and social stability". Portugal is also considered to continue to have good potential from an investment standpoint.
The housing market in 2020
Most indicators point to a continued stable housing market, however, with a slowdown in the rate of increase in prices. Sales volume is expected to come in on the same level as last year. We will continue to have a segmented housing market where foreign and national buyers overlap to a small extent. Price increases are predicted to land at around 3-4 percent overall in the entire country, though with a large local spread.
The new and refurbished housing supplied to the market will, over time, create a greater balance between demand and supply, which guarantees a healthy real estate market. Even considering relatively large price increases in recent years, housing prices in, for example, Lisbon are lower than most other major cities such as Madrid, Barcelona, Amsterdam, and Berlin. Thus, there is a reason to see a well-located home in Portugal as a continued safe investment.
Buying property in Portugal
It is important that the investment in a home is a good and positive experience. The large local variations that occur in the price picture usually have an explanation. Mercator - PortugalMäklarna has a unique insight and understanding of the local housing market, and can thus create security in the purchase of a home in Portugal.
For more information, contact Mercator - PortugalMäklarna:
Peter Billton
CEO Mercator-PortugalMäklarna
