Home sales are down 21% in early 2023 - and prices are slowing down

House prices in Portugal fell again to 8.7% in January-March 2023. Home purchases by foreigners are becoming more important.

Consequences of rising interest rates and inflation

are already becoming visible in the housing market in Portugal. Housing sales in Portugal fell again earlier this year, down 20.8% year-on-year. This is the third time in a row that the National Institute of Statistics (INE) has noted a decline in the number of housing transactions, which continues to intensify. As a result, house prices also fell between January and March, increasing by 8.7%, 2.6 percentage points less than in the previous quarter.

"From January through March 2023, 34,493 residential units were sold

which is a decrease of 20.8% (change of -16.0% compared to the previous quarter) and a decrease of 10.5% compared to the previous period," says INE in a bulletin published on Thursday, June 22. Fewer homes sold led to less investment, as total housing transactions amounted to 6.9 billion euros, down 15.2% from the same period in 2022.

A decline in home sales results in less demand for supply, which affects home prices. In the case of the first quarter of 2023, home prices fell 8.7 percent from the previous period, down 2.6 percentage points from the previous quarter. "This is the least significant annualized price increase since the second quarter of 2021," the institute notes. At the same time, home prices were up 1.3% from the previous quarter. New and ex-home sales: what's the price change?

Home sales declined from January through February 2023

for the third consecutive time, and there has been an "increasing amplitude" of this decline with each quarter. Fewer new and former homes were sold during this period, and price growth also slowed:

• Former homes: 27,523 units were sold (79.8% of the total), down 23.4% from the previous period of 2022. Here, prices fell to 9.7% (up 12.7% in the previous quarter);
• New homes: there were 6,970 new home transactions, down 8.3% from the first quarter of 2022. New home prices rose 5.7% in the first quarter, down 1.4 percentage points from the previous period.

Of course, the capital driven by these transactions declined in the quarter. Ex-home sales totaled €5.0 billion, down 18.2% from a year earlier.

Who buys the most houses in Portugal?

Once again, families make the majority of our nation's home purchases in early 2023, accounting for 84.9% of the total (29,280 residences). However, they bought 22.6% less than in the same period of 2022 and 10.9% less than in the previous quarter. The value of homes sold to families amounted to 5.8 billion euros (83.9% of the total), down 17.3% compared to the previous period.

From what countries do buyers of these homes come from? In the first three months of 2023, home purchase transactions were made by buyers residing primarily in our country:

• Customers with a fiscal address within Portugal: down 21.9% year-on-year, with a total of 32,001 units (92.8% of the total, the lowest share since statistics began in the first quarter of 2019);
• Buyers with a fiscal address in the European Union: the total number of transactions was 1,269, down 11.6% from last year;
• Buyers with a fiscal address in other countries: the number of transactions increased by 9.1% to 1,223 units.

This means that while buyers residing in Portugal continue to have a larger share, the activity of foreign buyers is gaining more weight in the overall statistics.

Where the most houses are sold in Portugal

Home sales in early 2023 are not evenly distributed across different regions of the country. There are regions that are attracting more families and investors to buy homes, including the Northern Region, which even exceeded the number of homes sold in Greater Lisbon, as INE data shows:

• Lisbon metropolitan area: 9,761 homes were sold here, representing 28.3% of the total number of transactions. This is “the lowest number of sales in this region since the fourth quarter of 2016”, says INE. In terms of investment, a total amount of 2.8 billion euros was allocated (about 40.6% of the total);
• North: there were 9,924 transactions, representing 28.8% of the total. House purchases in the northern region of the country amounted to 1.6 billion euros (23.5%). Inside this region is the Metropolitan Region of Porto, where 5,343 homes were sold for around one billion euros;
• Center: 7,654 deals were completed, representing 22.2% of the total. These transactions generated around €938 million (13.7% of the total);
• Algarve: 3,080 houses were sold here at the beginning of 2023, representing 8.9% of the total. The total value of these transactions amounted to around 947 million euros (13.8%);
• Alentejo: 2,577 houses were sold in this region (about 8.9% of the total), attracting about 295 million euros (4.4%);
• The Autonomous Region of Madeira: 898 transactions were made here (2.6% of the total). Some 195 million euros (2.8%) were committed at the beginning of 2023;
• The Autonomous Region of the Azores: there were only 599 transactions, representing 1.7% of the total. As a result, 87 million euros were invested in housing (1.3% of the total).