Outlook positive for property market in Portugal with recovery beyond main regions
Property prices in Portugal are continuing to rise but sales are growing at a slower pace, although transactions are expected to increase in all regions over the next three months, the latest index report shows.
Supply pressures are expected to intensify as new listings coming to market edged further into negative territory in June, according to the monthly report from the Royal Institute of Chartered Surveyors (RICS) and Confidencial Imobiliário.
It points out, that alongside this, the pace of growth in sales and new buyer enquires moderated, but remains positive nonetheless. In the lettings market, solid tenant demand is being met with a continued decline in new landlord instructions. Across the sales market, contributors once again noted an increase in transactions, however, the pace of growth softened in the latest results. Regionally, the loss of momentum appeared to be mainly concentrated in Lisbon, whereas activity indicators in Porto and the Algarve posted similar readings to last month.
Looking ahead, sales are projected to increase in all regions over the next three months although, in Lisbon, near term expectations moderated once again following a similar trend as in the previous two reports. Meanwhile, demand growth lost a little impetus in the latest results with a net balance of just 16% of respondents citing an increase in new buyer enquiries compared to 36% in May. The trend was most visible in Lisbon where demand grew at the slowest pace since December 2016.
Overall, new sales listings fell further in June, for a third successive month, with a decline reported in all three regions. The shortage of properties coming onto the market continues to underpin prices. Indeed, prices increased firmly at the headline level once more, albeit the pace of inflation eased in Lisbon but held steady in Porto and the Algarve. Alongside this, near term price expectations remain firm in all areas.
The report puts price growth projections for the next 12 months at just over 3%, while over the next five years contributors expect house prices to increase by 5% on average per annum. The national confidence indicator, an amalgamation of near term price and sales expectations, edged down from 38 in May to 29 in June but still points to solid momentum expected across the housing market going forward.
In the lettings sector, although near term rent expectations have softened a touch from last months elevated reading, the outlook stands firm. This is a consequence of a steady rise in tenant demand and new landlord instructions continuing to decline.
‘The figures confirm there’s a new phase in the residential market. Not too long ago, prices were increasing only in main locations, namely the cities of Lisbon and Porto. Furthermore, this movement was specific to historic centres, moved by refurbishment dynamics,’ said Ricardo Guimarães, Confidencial Imobiliário director.
‘Across other parts of those cities and, even more, in the other locations, prices were stagnating or in decline. Now, all markets are recovering and the positive trend is becoming widespread,’ he added.
RICS chief economist Simon Rubinsohn pointed out that the rate of unemployment fell to 9.4% across Portugal in May, the lowest since 2008. ‘Firm job creation, elevated consumer confidence, and a strengthening recovery across the euro area as a whole, should all help to sustain momentum in the Portuguese economy and housing market,’ he explained.