Bank warns of real estate market downturn

According to Novo Banco, property values in Portugal will "slow down", with the bank believing there should be a "moderation in the number of transactions". According to the bank, monetary and financial conditions are becoming more restrictive and this situation is likely to worsen at the end of 2023 as Novo Banco expects two new base interest rate hikes by the European Central Bank (ECB). This situation is expected to affect the real estate sector, and "there will be a slowdown in the number of transactions and a slowdown in prices," the bank says in a report idealista.

"If inflation stays above the 2% target, the American Federal Reserve (Fed) and, above all, the ECB, are expected to continue raising benchmark interest rates," Novo Banco points out in the report. Specifically, at least two new key interest rate hikes are expected in the eurozone, the bank says.

This macroeconomic context has implications for Portugal.

The purchasing power of families will also be further constrained. "Private consumption is expected to be negatively impacted by higher interest rates and debt service, but should benefit from lower inflation," the paper said. This is because the annual change in consumer prices is expected to be around 2%, although the average annual change will close the year at nearly 5%.

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