Real estate shortages are beginning to create paradoxical effects in the marketplace

The residential real estate market in Portugal is feeling the side effects of the current macroeconomic situation, marked by rising interest rates, high inflation and loss of purchasing power. The result is a market with "a very high level of demand for housing, which is at odds with the increasingly limited availability of real estate and even more inadequate to the financial capacity of the Portuguese," Century 21 Portugal said in a statement.

CEO: "The huge real estate shortage is starting to create paradoxical effects in the market"

According to Ricardo Sousa, CEO of the real estate agency, "the huge shortage of real estate is beginning to create paradoxical effects in the market, such as the constant increase in the average cost of real estate to levels already beyond the means of most Portuguese families."

"If we only look at what is happening with the segment of apartments, which are the most sought-after housing solution on the national market, we see that the average value of apartments sold in the Century 21 Portugal network was around 209 thousand euros in the first quarter and around 215 thousand euros in the second quarter," he adds.

Century 21 Portugal reports that they earned more than 41.5 million euros in the first six months of 2023, down 9% from 45.8 million euros in the first six months of 2022. The total volume of transactions in which the network was involved exceeded 1.713 billion euros, 5% less than in the same period last year (1.807 billion euros).

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

• Revenue increased by 12%, from 19.5 million euros to 21.9 million euros;
• The volume of transaction intermediation increased by 9%, from €821.5 thousand to €891.7 thousand;
• The number of sales increased by 3%;
• Rental transactions rose 0.3%.

"The results for the first six months of 2023 were more positive than we expected, especially due to the positive evolution of the main performance indicators in the second quarter. The main reason for the decline in sales is the increase in interest rates, which significantly reduces the purchasing power of the Portuguese. As a result, the reduction in the value of real estate that Portuguese people can purchase due to the new reality of interest rates, combined with a housing supply increasingly less in line with the purchasing power of Portuguese families, leads to an inevitable reduction in the number of transactions," explains Ricardo Sousa.

Preferences of the Portuguese in residential real estate

What kind of housing do the Portuguese buy? According to Century 21 Portugal, the most sought-after property types for families are T2 and T3. They note that between January and June there were 8,402 sales transactions, 1,402 fewer than the same period last year.

It should also be noted that the average property value was €198,531 from January to March, and increased to €209,128 in the following quarter.

As for the rental market, the intermediary made 2,285 transactions in the first half of the year, 75 less than in the same period last year. However, average prices rose by 13.6%, from €992 in the first half of 2022 to €1,127.

Decrease in demand from foreign buyers

Demand from foreign buyers is decreasing. In the first six months of the year, the share of national transactions in the agency's operations amounted to 85%, while the share of international transactions amounted to 15%. There were 1,260 transactions made by clients from other countries, which indicates a negative dynamics compared to 1,764 transactions for the same period last year.

Americans accounted for nearly 5% of the total number of transactions, followed by customers from France, the UK, Brazil and Spain.

The decrease in the number of international transactions “was caused by the perception created abroad, the instability of legislation caused by public debate and the measures of the Mais Habitação program”, explains Century 21 Portugal. “Another determining factor is also the lack of real estate offers below 400 thousand euros in the regions with the highest concentration of international demand,” he continues.

Ricardo Sousa believes that “Portugal could still regain attractiveness by the end of the year,” but warns, “The Spanish real estate market has become an alternative for this international segment and continues to increase its competitiveness compared to Portugal.”

Forecasts for the second half of the year

What to expect from the second half of the year? According to Century 21 Portugal, “there are many risks that threaten the global economy and continue to persist”, while “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 will prevail in the next half of the year:

• Reducing the number of transactions;
• Increase in the average time to sell a property;
• Stabilization of real estate prices;
• Increased demand for rentals.