Shortage of real estate and its paradoxical effects on the market

The residential real estate market in Portugal is feeling the side effects of the current macroeconomic situation, which is characterized by rising interest rates, high inflation, and a loss of purchasing power. The result is a market with "a very high level of demand for housing solutions, which contrasts with an increasingly acute shortage of properties and even more inadequate financial options for the Portuguese," reports Century 21 Portugal in a statement.

According to the words of the CEO of the real estateagency, Ricardo Souza

“The huge shortage of real estate is starting to create paradoxical effects in the market, such as the constant rise in the average property price to unaffordable levels for most Portuguese families.” “If we only look at what is happening with the apartment segment, which is the most sought-after housing on the national market, we see that the average price of sold apartments in the Century 21 Portugal network was around 209,000 euros in the first quarter and about 215,000 euros in the second quarter,” he adds.

Century 21 Portugal reports in a press release about the results of the first half of 2023 that during this period their revenue amounted to over 41.5 million euros, which is 9% less than the 45.8 million euros earned in the first six months of 2022. The total transaction volume involving the network exceeded 1.713 billion euros, which is 5% less compared to the same period (1.807 billion euros).

However, comparing the first and second quarters of the year, the Century 21 Portugal network recorded growth in all performance indicators:

• Revenue increased by 12% from 19.5 million euros to 21.9 million euros;
• The volume of transactions increased by 9% from 821.5 thousand euros to 891.7 thousand euros;
• The number of sales increased by 3%.
• The number of rental transactions has increased by 0.3%.

“The results of the first six months of 2023 turned out to be more positive than we expected, primarily due to the positive dynamics of key performance indicators already in the second quarter. The main reason for the decline in sales is the rise in interest rates, which significantly reduces the purchasing power of the Portuguese. Consequently, the decrease in the value of real estate that the Portuguese can afford under the new interest rate conditions, combined with the supply of housing solutions that increasingly do not match the purchasing power needs of Portuguese families, leads to an inevitable reduction in the number of transactions,” explains Ricardo Souza.

What kind of real estate do the Portuguese buy?

According to data from Century 21 Portugal, the most sought-after types of real estate among families are 2-bedroom and 3-bedroom apartments.

It is worth noting that the average property price was €198,531 from January to March and increased to €209,128 in the following quarter.

As for the rental market, the agency completed 2,285 transactions in the first half of the year, which is 75 less than last year. However, average prices increased by 13.6%, from 992 euros in the first half of 2022 to 1,127 euros.

The decrease in the number of international transactions "was due to the perception abroad of legislative instability caused by public debates and measures from the Mais Habitação program," explains Century 21 Portugal. "Another determining factor is also the lack of real estate offerings below 400,000 euros in regions with the highest concentration of international demand," it continues.

Ricardo Souza believes that "Portugal can still regain its appeal by the end of the year," but warns: "The real estate market in Spain is becoming an alternative for this international segment and continues to compete with Portugal."

What to expect from the second half of the year?

According to Century 21 Portugal, "there are many risks threatening the global economy that continue to persist," and "there are far fewer risks in the Portuguese residential real estate market today."

However, the sharp rise in interest rates is leaving its mark. Here are a few trends that, according to the real estateagency, will prevail in the coming six months:

• decrease in the number of transactions;
• increase in the average time to sell real estate;
• stabilization of real estate prices;
• increase in demand for rental