Revisiting cost levels. The sector endorses but warns: debt growth and delinquencies may increase and pose the risk of a new immobile bubble

Real estate agencies and advisory firms foreshadow a possible increase in family debt or a new property bubble, but emphasize the importance of the measure, especially for young people.

The revision of the solvency calculation for obtaining a mortgage loan, announced over the weekend by the Bank of Portugal (BdP), is generally perceived positively by real estate operators. However, real estate agencies and advisory firms, speaking to ECO, warn of possible consequences, such as possible over-indebtedness of families, increased default risk or even a new property bubble.

In his commentary for ECO, Century 21's CEO, Ricardo Sousa, notes that he has already supported this revision "since the beginning of the year". "In an environment of negative interest rates, the procedure of modeling solvency with values above the recommended rate is key because an increase in interest rates is inevitable," he notes.

The head of JLL also draws attention to the need for there to be "risk sharing between families and financial institutions", although "no return to pre-2018 conditions is expected". In this way, it is possible to conduct a "risk-related analysis" for a particular family to "guarantee its viability and liquidity at a certain point", she points out.

Miguel Mascarenhas, head of Imovendo, is more cautious and notes that "a solvency revision in a mortgage loan can have risks and consequences that should always be carefully considered".

"Why now?". This question comes from the chairman of the Association of Professionals and Real Estate Intermediation Companies of Portugal (APEMIP), who believes that "when banks agree to expand the scope of solvency for those who apply for a mortgage loan, it means that they trust the value of real estate because it is the guarantee they have when someone cannot meet their payment obligations." According to Paulo Caiado, "everyone wins" if the central bank's decision leads to an increase in real estate transactions. "The state benefits because it collects more taxes, and all people in general benefit because the economy becomes more active and there is a greater economic flow that benefits everyone," the APEMIP chairman tells ECO. However, "it is necessary to ensure that there is no excess risk", in particular with regard to the debt of families, he emphasizes, noting, however, that BdP data show that in the first half of this year there were no significant changes in overdue loans, which means that "that fear about the difficulties that could have created interest rates for many families has fortunately not had the level of impact as expected."