"Re-review of payment barrier. The sector approves, but warns that debt and non-compliance may increase, risking image immobilization."

Real estate agencies and consulting firms are warning about the potential increase in family debt or the emergence of a new real estate bubble, but they emphasize the importance of measures, especially for young people.

The revision of the effort degree calculation for obtaining a mortgage loan, announced over the weekend by the Bank of Portugal (BdP), is generally viewed positively by real estate operators. However, agencies and consulting firms surveyed by ECO warn of potential consequences, such as possible excessive household debt, an increased risk of default, or even the emergence of a new real estate bubble.

“It makes perfect sense to reconsider the macroprudential recommendation,” said Clara Raposo, Vice Governor of the Bank of Portugal, in an interview with Antena 1 and Jornal de Negócios, noting that there is a “desire” to make a decision this year so that more families have access to credit.

The level of effort, according to BdP, corresponds to the "share of the family's income allocated to repaying the loan," which is aimed at "measuring the family's ability to meet the obligations taken on by the loan." Currently, the BdP's recommendation is that the level of effort should not exceed 35%.

In his comment for ECO, Century 21 CEO Ricardo Souza reminds that he has been advocating for this revision "since the beginning of the year." "In the context of negative interest rates, the procedure for modeling the degree of effort with higher values than the benchmark rate has been fundamental, as the rise in interest rates was inevitable," he notes.

However, according to Ricardo Souza, given that the Euribor is at 4%, "an additional strain of 3% significantly increases the level of effort and deprives many families and young people of the opportunity to obtain a mortgage." "Revising the conditions for accessing mortgage loans would be a beneficial measure if it allows a greater number of families to avoid being deprived of the opportunity to apply for a mortgage," says Patricia Baran, head of the real estate department at the consulting firm JLL.

"All measures aimed at simplifying access to credit and purchasing real estate are positive and are always supported by us," says the CEO of Era Portugal. "In fact, the assessment system that was implemented to calculate the level of effort was conservative and hindered access for many families. Thus, this specific measure is certainly positive, but I believe it will have little effect in isolation," admits Rui Torgal.

“When we assess the tax burden when buying a home, particularly the stamp and transaction taxes, we understand that the most straightforward way to simplify access to home purchases is through direct taxes related to transactions.

At the same time, the head of JLL emphasizes the need for "risk distribution between families and financial institutions," although "a return to the conditions that existed before 2018 is not anticipated." Thus, it is possible to conduct a "related risk analysis" for a specific family in order to "ensure its viability and liquidity in situations where obligations taken at a certain point arise," she notes.

The head of Imovendo, Miguel Mascarenhas, is more cautious, pointing out that "changing the degree of effort in mortgage lending can pose risks and consequences that must always be carefully considered." While in the short term this may stimulate the construction industry, support the economy, and increase demand for real estate, revising the degree of effort could simultaneously lead to "excessive debt among families, a potential increase in the risk of default, rising interest rates due to increased default risk, and consequently a negative impact on financial stability," he argues.

The head of Imovendo also believes that in the long term, the BdP measure could contribute to the emergence of a new real estate bubble and the continued rise in interest rates. "For a healthy real estate market, it is important that housing loans are accessible while also ensuring stability," Miguel Mascarenhas stated in an interview with ECO.

"Why now?"

The question is posed by the president of APEMIP - the Association of Professionals and Companies in Real Estate Mediation in Portugal, who believes that "when banks agree to broaden the scope of efforts for those applying for a mortgage, they demonstrate their trust in the value of real estate, because that is the guarantee they have when someone cannot meet their payment obligations."

For Paulo Caiado, "everyone wins" when a central bank's decision leads to an increase in real estate transactions. "The government wins by collecting more taxes, and people as a whole benefit because the economy becomes more active, resulting in more economic flows that benefit everyone," says the president of APEMIP in an interview with ECO.

"Nevertheless, it is necessary to ensure that this does not lead to excessive risk," especially regarding household debt, he emphasizes, noting, however, that BdP data shows there were no significant changes in problematic loans in the first half of this year, which means that "the fear of the difficulties that interest rates could pose for many families, fortunately, did not have the level of impact that was anticipated."

“When banks agree to broaden the scope of efforts for those applying for a mortgage, they demonstrate their confidence in the value of real estate, because that is the collateral they have when someone cannot meet their payment obligations; it is the property that serves as the guarantee,” Paulo Caiado, President of APEMIP.

From the side of Confidencial Imobiliário, CEO Ricardo Guimarães considers the measure "very desirable," although "it would have been better if it had been adopted earlier." "It will particularly help young people," who have been "the biggest victims" of "the cycle of imbalances in the market," especially the rise in rents and interest rates, as well as the level of effort, he emphasizes.

The head of one of the largest databases in the industry emphasizes the importance of a rule established by the central bank in 2018, which assesses income under a hypothetical scenario of a three percentage point increase in interest rates, due to the presumed "stress on families or inability to meet obligations." Currently, he explains, "this stress certainly exists, but defaults are minimal because families have been tested" against the scenario of rising interest rates. Now the rule is "outdated" because it is not "very reasonable," considering that the Euribor is at 4%, to add another 3% of effort and premium.

“Everything related to the revision of this rule is about reducing this tension and the possibility of gaining access. I would say that it is even a necessity, not only because of the market situation that complicates access, but also because the premises that underpinned its implementation are no longer confirmed, considering the medium-term forecasts for the beginning of a decline in the upward trend of Euribor and the stabilization of inflation,” concludes Ricardo Guimarães.

Finally, RE/MAX Portugal says that it is "currently analyzing the possible direct and indirect consequences" of the announced BdP measure.