'House sales in Portugal: prices to fall by 2% in the next 2 years.'

The search for houses to buy in Portugal is slowing. And Euribor will remain high until at least 2025, according to Bankinter estimates.

Home sales are declining in Portugal. Consequently, the number of mortgages being processed is also decreasing due to high interest rates. This slowdown in demand is already having an impact on house prices for purchase, which are stabilizing.

What could happen in the future? Bankinter predicts that house prices in Portugal should rise by 1.6% in 2023. They also predict that prices could fall by 2% in 2024 and 2025 as Euribor rates should remain high.

The majority of families in Portugal turn to mortgages when buying a house.

i''The variable interest rate has the greatest weight in the total volume of contracts (almost 90%). However, these household budgets face high Euribor rates that increase mortgage payments.

The problem is that Euribor rates should remain high in the coming years

According to Bankinter's latest forecasts, these rates will develop as follows:

• Euribor 12 months: the rate should reach 4.10% in 2023. It will then drop slightly to 3.90% in 2024 and to 3.40% in 2025;
• Euribor for 3 months: the rate should''to reach 3.70% in 2023, 3.40% in 2024 and 2.90% in 2025.

The bank thus assumes that mortgage payments won't rise in the coming years, but also won't fall significantly until at least 2026. This means that high interest rates will continue to slow demand for home purchases and mortgages, which will affect prices despite a limited supply of homes.

In this context, Bankinter forecast a clear slowdown in house price growth in 2023 (+1.6%) compared to growth last year (+12.7%). They also assume that house prices in Portugal will fall in the next two years: by 2% in 2024 and 2% in 2025.

The main uncertainty now is when the European Central Bank will start to reduce''base interest rates, which had an impact on the decline of Euribor and the change of this situation. However, this decision also depends on the sustainability of the European economies. On this issue, Bankinter estimates that the Portuguese economy will grow by about 2% in the next 2 years and anticipates that employment will remain stable. Nevertheless, they believe that inflation in Portugal will remain "tight" (4.6% in 2023, 3.4% in 2024 and 2.8% in 2025), due to the recovery in oil prices, some food products that are not declining and the less positive effects of government benefits on the demand side.