Real estate: paradoxical consequences due to housing shortage

The residential real estate market in Portugal is feeling the collateral effects of the current macroeconomic situation, characterized by rising interest rates, high inflation and loss of purchasing power. The result is a market with "a very high demand for residential solutions that contrasts with an even stronger real estate shortage and a supply that does not match the financial capacity of the Portuguese," Century 21 Portugal said in a statement.

The real estateagency's CEO, Ricardo Sousa, said "the huge shortage of real estate is starting to create paradoxical effects in the market, such as the constant increase in the average price of real estate to levels already unaffordable for the''the majority of Portuguese families'. "If we only look at what is happening with the apartment segment, which is the most sought-after residential solution in the national market, we see that the average value of apartments sold in the Century 21 Portugal network amounted to around 209 thousand euros in the first quarter and around 215 thousand euros in the second quarter," he adds.

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

When comparing the first and second quarters of the year, the Century 21 Portugal network registered growth in all operational indicators: revenues increased by 12% from 19.5 million euros to 21.9 million euros; intermediary transactions rose by 9% from 821.5 thousand euros to 891.7 thousand euros; the number of sales increased by 3%; rental transactions recovered by 0.3%.

"The results for the first six months of 2023 were more positive than we expected, primarily due to the positive development of the main operating indicators already 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. Consequently, the decline in the value of real estate that can''to buy Portuguese, due to the new reality of interest rates, combined with a supply of residential solutions increasingly less in line with the purchasing power of Portuguese families, leads to an inevitable reduction in the number of transactions,' explains Ricardo Sousa.

What kind of houses are the Portuguese buying?

According to Century 21 Portugal, the most sought-after property types for families are T2 and T3, the study found that between January and June, there were 8,402 sales transactions, 1,402 fewer than in the previous six months.

It should also be noted that the average''Property values stood at €198,531 in January-March and then rose to €209,128 in the following quarter.

What about the rental market?

The agency completed 2,285 transactions in the first half of the year, 75 fewer than the previous year. However, average values rose significantly by 13.6% from the €992 recorded in the first half of 2022 to €1,127.

Demand from international buyers is slowing.

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 clients accounted for 15% of the total transaction volume - there were 1,260 transactions with clients from other countries, which is a negative 28% compared to the same''period of last year.

Americans accounted for almost 5% of the total number of deals, followed by clients from countries such as France, the UK, Brazil and Spain.

The decrease in the number of international transactions "was due to the perception created abroad about the legal instability caused by the public debate and the measures of the Mais Habitação program," Century 21 Portugal explains. "Another determining factor is also the lack of real estate offers below 400 thousand euros in the regions with the highest demand from foreign buyers," he continues.

Ricardo Souza believes that "Portugal could still return to the level of attractiveness by the end of the year," but warns, "The property market in Spain has become 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 that threaten the global economy and still prevail, with the residential real estate market in Portugal now much less exposed to risks." However, the sharp rise in interest rates is leaving its marks. Here are some of the trends that will prevail in the next half of the year: a decrease in the number of transactions; an increase in the average time to sell a property; stabilization of property prices; and an increase in rental demand.