The sale of homes is decreasing by21% in the beginning of2023 - prices are decreasing

** *The housing prices in Portugal have slowed down again to8.7% between January and March2023. The purchase of real estate by foreigners is becoming increasingly significant.*

Consequences of rising interest rates and inflation

The trends in the housing market in Portugal are becoming evident. Property sales in Portugal have once again declined at the beginning of this year, dropping by 20.8% compared to the same period last year. This marks the third consecutive quarter in which the National Institute of Statistics (INE) has recorded a decrease in housing transaction volumes. As a result, housing prices also slowed down in January-March, increasing by 8.7%, which is 2.6 percentage points lower than in the previous quarter.

In January-March 2023, 34,493 residential properties were sold.

This corresponds to a decrease of 20.8% compared to the same period last year (a decrease of 16.0% in the previous quarter) and a decrease of 10.5% compared to the previous quarter," explains INE in a bulletin published on Thursday, June 22. The reduction in housing sales has impacted investment, as the total amount of housing transactions reached 6.9 billion euros, which is 15.2% less than in the same period of 2022.

The decrease in housing sales has led to a reduction in demand for supply.

What influenced housing prices. In the first quarter of 2023, housing prices slowed to 8.7% compared to the same period last year, which is 2.6 percentage points lower than in the previous quarter. "This is the weakest annual price growth since the second quarter of 2021," notes the institute. Compared to the previous quarter, housing prices increased by 1.3%.

How have prices for new and used housing evolved?

The sale of residential properties decreased between January and February 2023 for the third consecutive quarter, and there is a "growing amplitude" of this decline from quarter to quarter. During this period, fewer new and used homes were sold, and price growth also slowed down:

• Used homes: 27,523 units were sold (79.8% of the total), which is 23.4% less than in the same period last year. Here, prices slowed down and amounted to 9.7% (in the previous quarter, the growth was 12.7%).
• New homes: there were 6,970 transactions for new housing, which is 8.3% less than in the first quarter of 2022. Prices for new homes increased by 5.7% in the first quarter, which is 1.4 percentage points lower than in the previous period.

Of course, the amount of funds invested in these deals has also decreased this quarter.

The sale of used homes resulted in a cash flow of 5.0 billion euros, which is 18.2% lower than in the same period last year.

Who buys the most houses in Portugal?

As before, families made the majority of housing purchases in our country at the beginning of 2023, accounting for 84.9% of the total (29,280 residential properties). However, they bought 22.6% less than in the same period of 2022, and 10.9% less than in the previous quarter. The total sales of housing to families amounted to 5.8 billion euros (83.9% of the total), which is 17.3% less compared to the same period last year.

Where do the buyers of these houses come from?

In the first quarter of 2023, home purchases were primarily made by buyers residing in our country.

• Buyers with tax residency in our country decreased by 21.9% compared to the same period last year, totaling 32,001 units (92.8% of the total number, the lowest share since the first quarter of 2019);
• Buyers with tax residency in the European Union: there were 1,269 transactions, which is 11.6% less than last year;
• Buyers with tax residency in other countries: the number of transactions increased by 9.1% and reached 1,223 units.

This means that, although buyers residing in Portugal still hold more weight, the share of foreign buyers is becoming increasingly significant.

Where the most houses are sold in Portugal

The sale of housing at the beginning of 2023 is not evenly distributed across different regions of the country. There are regions that attract more families and investors for purchasing homes, particularly the northern region, which has even surpassed the number of houses sold in Greater Lisbon, according to INE data.

• The Lisbon metropolitan area: 9,761 homes were sold here, accounting for 28.3% of the total number of transactions. This is "the lowest sales level in this region since the fourth quarter of 2016," says INE. In terms of investments, a total of 2.8 billion euros was allocated (about 40.6% of the total);
• North: there were 9,924 transactions, accounting for 28.8% of the total. The purchase of homes in the northern region of the country resulted in a cash flow of 1.6 billion euros (23.5%). Within this region is the Metropolitan Area of Porto, where 5,343 homes were sold for around one billion euros;
• Center: 7,654 homes were sold, accounting for 22.2% of the total. These transactions resulted in a turnover of approximately 938 million euros (13.7% of the total);
• Algarve: 3,080 homes were sold here at the beginning of 2023, accounting for 8.9% of the total. These transactions amounted to approximately 947 million euros (13.8%);
• Alentejo: in this region, 2,577 houses were purchased (about 8.9% of the total), resulting in a turnover of approximately 295 million euros (4.4%);
• The autonomous region of Madeira: there were 898 transactions made here (2.6% of the total). Approximately 195 million euros were invested in the Madeira region at the beginning of 2023 (2.8%);
• Autonomous Region of the Azores: only 599 residential properties were sold, accounting for 1.7% of the regional share. As a result, 87 million euros (1.3%) were invested in housing.