The lack of supply in Portugal is one of the factors that should be taken into account so that housing prices do not fall in the near future, even in an uncertain scenario and an expected decrease in sales. For those who want to take this step, the advice is simple: if the bank doesn’t give you that much, lower your expectations, choose a smaller house or a little further from the center.
Rising interest rates, reduced purchasing power, restrictions on mortgage loans. The perfect storm is brewing for homebuyers. For now, the main real estate chains in Portugal are not feeling the impact. But no one excludes that in the coming months there will be a break or, at best, “stabilization” of the number of transactions.
“The market will cool down. This is normal,” sums up Ricardo Guimarães, director of Confidencial Imobiliário. The consultant estimates that 37,900 homes were sold in Portugal between June and August, down 8% from the first quarter.
However, Century 21 executives Keller Williams (KW) and Era assure CNN Portugal that the company’s results, through at least August, are up year-over-year, in double digits. But they do not hide the fact that the coming months may bring changes in the balance sheets.
“The market is stable, there is no panic. It is only natural that there could be a slight reduction from now on,” says Rui Torgal, CEO of Era Portugal. Ricardo Santos, head of Century 21 in Portugal, argues that “market stabilization is inevitable.”
At KW, says Eduardo Garcia i Costa, “growth remains very strong, but has slowed over the past four months.” “There is a lot of confidence that demand will decrease. The big uncertainty is what will happen to the proposal,” he adds, given the current context.
There are several warning signs in the market. In August, according to the Bank of Portugal, the number Bank ratings downgrade for third month in a row and Home loans register first slowdown since October 2020.
And if between April and June In Portugal, 43,607 houses were sold. (up 4.5% year on year), “in June, for the first time since February 2021, there was a decrease in the number of transactions“, INE warned.
The warning signs come as no surprise to the real estate sector, not least because the past few years have been exceptionally strong. “The market has grown a lot in the last two years. Any correction that could happen now is not surprising. If I didn’t fix it, it would be weird,” notes Gonzalo Nascimento Rodriguez, real estate finance consultant.
Will housing prices fall? Do not count on it
If there are fewer sales, home prices will eventually fall. This will be the first thought of those who evaluate the purchase in the current context. But the best thing would be to “pull the horse out of the rain”: despite the uncertainty, houses will not become cheaper.
And there are three factors that explain this outlook for the future: lack of supply, declining returns on deposits are encouraging more Portuguese to invest their savings in real estate, and the interest of foreigners is growing. From April to June, foreigners bought 2,783 houses in Portugal, representing 6.4% of the total number of transactions.
Then the law of supply and demand makes its contribution. Only 39,000 homes were listed for sale in Portugal during the summer, the lowest in 15 years, according to Confidencial Imobiliário. Before the pandemic, there were about 60 thousand.
“I expect that the reduction in demand will not be enough to reduce prices,” says Ricardo Guimarães. Homes may cost less, he says, but they won’t stop following the trend.
And the numbers so far help to confirm this: in the second quarter of 2022, according to INE, houses were 13.2% more expensive than a year ago. Real estate agents say the average transaction value is also higher. “The gap between supply and demand, even with such a small reduction, will not cause a slowdown in prices,” emphasizes Rui Torgal da Era.
The market is not expecting an increase in new construction, not least because rising material costs are making these investments less and less attractive to companies. Thus, the potential impact of uncertainty caused by rising inflation and interest rates is masked. The logic is simple: if there is not enough supply, there is more pressure on prices, which means there is less opportunity for them to fall due to uncertainty.
I want to buy a house. How to adapt to climbs? low expectations
Rising interest rates affect the amount that households can borrow from banks. If interest weighs more on the total pie, and without changing the effort rates, there is only one solution left: to pay the same maximum fee, they must reduce the amount actually allocated for the purchase, which must leave even more aggregates out of reach. to loans. .
“If they’re going to pay more for a loan, they can only pay less for a house,” sums up Gonzalo Nascimento Rodriguez, real estate finance consultant. And how do you do it when prices are still high? Lowering expectations. This is something that is already happening with clients who are increasingly intimidated when looking for real estate networks.
“People may even put off the decision to buy a house. But there is a limit. What we see is an urgent need for people to distance themselves from major urban centers,” explains Paulo Caiado, President of the Association of Real Estate Professionals and Companies of Portugal (APEMIP). In Lisbon, the search takes place, for example, in places like Sobral de Monte Agraço, Torres Vedras or Lourinhao.
In addition to increasing the search radius, it also reduces the size of the house. “We’re refocusing your preferences,” says Century 21’s Ricardo Souza.