Portuguese property market: hurricane weathering!

 

In the midst of the pandemic storm, the immovable industry has held an optimistic tone. While increased uncertainty and restrictions led to the postponement of decisions on home purchases, prices decreased marginally and continued to rise by about 8% in 2020.  real estate in qatar

In the midst of the pandemic storm, the immobilization market kept its optimistic tone. Although increased uncertainty and constraints caused home purchasing decisions to be postponed, prices only marginally decreased and rose by about 8 percent in 2020. Usually, there is a delay between GDP movements and the immovable market and the sector will cool down slightly in 2021. This will, however, be a temporary moderation. EU funds from the next generation will play an important role in improving the immovable market.

171,800 homes were sold in 2020, about 10,000 less than in 2019. Virtually every reduction was concentrated in Q2, which was characterized by a strict 45-day lockdown. Thus, though the first half of the year saw 9 500 lower domestic sales than the same time last year, the sector resumed operation in the second half of the year and the number of transactions was similar to that for the previous year.

The resilience of the industry was also evident in the price trend. By 2020, they grew by 8.4%, only 1.2 pps lower than in 2019, offering stability in the downturn in growth following the 2018 high.

The decline in sales of second-hand homes has been concentrated, although sales of new homes have remained virtually steady. This has contributed to a marked decrease in second-hand price growth of 8.7% (1.4 pp below 2019), while new housing prices (+7.4%) decreased in comparison to 2019 by just 2 decimal points.

Portugal: sales and costs at home

The resilience of the industry partially reflects a lag between changes in the broader economy and on the property market and steps to reduce the effects of the pandemic, preventing a rapid decline in unemployment and household income. Indeed, the unemployment rate rose by just three decimal points to 6.8%, and the disposable income of households increased by 1% over the entire year. 1 Moratoria have, meanwhile, provided households a relief and stopped forced sales: 17.8% of home purchasing loans were affected by 2020, and 14.2% of household credit debtors. In addition, housing demand was supported by accommodating financial conditions. Finally, the postponement of the end of the Golden Visa scheme has also helped the market. 2 Despite limits on mobility, a little over 1,000 visas were awarded in 2020 for investments totalling some EUR 590 million (equivalent to 2.2 percent of the value of all property sales in 2020).

On the supply side, the supply of housing continued to increase in 2020 and helped to reduce price pressure. Building was actually the only sector that succeeded in recording growth in activity in 2020 (+3.2 percent). New homes have slowed, but have continued to rise at over 20%. However, the issuance of new building permits slowed in 2020 (+3.2%, well below 19% in 2019), indicating a residential development slow-down.

The available data is still very small for 2021 to date and could be distorted by the strict lockout imposed between mid-January and mid-March. But the available data show that the demand for real estate is slightly less booming, both in prices and in sales. According to Confidencial Imobiliário results, in the first two months of the year prices saw a substantial slowdown, which increased by 2.7% on an annual basis in February (versus growth rates of around 5 percent at the end of 2020). Meanwhile, estimates indicate a slower decline, from 6% annual growth at the end of 2020 to 5.7% in February.

Following this start to the year when demand was limited by lockdown, sales in the coming months may well recover. However, we expect sales to experience a minor setback over the year, which would lead to price slowdowns. The prediction would rely largely on changes in economic support measures in the face of the pandemic. In particular, much would rely on the unemployment and the consequent loss of household income with the withdrawal of steps to support jobs and the end of credit moratoria, even if demand continues to be enjoyed by the accommodating conditions in the ECB's monetary policy.

On the other hand, prices can also decelerate because non-residents are less and tourism is still weak (a sector that has provided a major boost to the housing market in recent years).

3 In addition, the lower rate of licenses issued for new buildings indicates that a decline in the rate at which new homes enter the market could moderate the fall in prices.

In summary, we foresee a temporary blip in the real estate market. Control of the pandemic would allow Portugal's economic activity to recover sustainably in the next few quarters. In addition, the funds that Portugal is set to obtain under the Next Generation EU programme, both through residential development and through the rehabilitation of existing properties, may provide an incentive to the immobiliary sector (remind the EU has stated that the renovation of buildings is a priority for the ecological transition).

1. The rise in disposable income is mainly attributed to interventions to help households in the face of the COVID-19 crisis and represents the increase in the salaries in the public sector and in the national minimum wage. 2. The Golden Visa system (which provides residency permits for investment in Portugal to non-residents) should have ended in Lisbon, Porto and the Algarve, but it has been postponed until 31 December. 3. According to Associação do Alojamento Local em Portugal (Portugal Local Owners Association), between 10% and 15% of owners of holiday rentals in Lisbon and Porto have moved to long-term housing. The Portuguese Tourism Board also says that the number of tourist accommodations reported decreased by 50% in 2020.