Rising housing prices and increasing demand among Portuguese: facts and figures

The housing crisis in Portugal is a long-standing issue, but today it is at the forefront after the government of António Costa decided to intervene in the market with a package of measures addressing housing - which is causing a lot of debate and is under public discussion until tomorrow.

The lack of housing supply for purchase is a structural problem that has contributed to the rise in housing prices in recent years, so much so that in 2022 a record annual increase of 12.6% was recorded.

However, high prices and the current situation characterized by high inflation and rising interest rates did not hinder the sale of 167,900 residential properties in 2022, which became the highest figure recorded by the National Institute of Statistics (INE) - despite a slowdown at the end of the year.

It is the Portuguese who are the main participants in real estate transactions taking place in Portugal, although foreign investors are increasingly active in purchasing residential properties in Portugal (and they spend significantly more money on these deals), and their share of home purchases in Portugal has never been as high as it was last year.

According to the latest data from INE, published on Wednesday, March 22, the Portuguese purchased 157,178 residential properties last year (93.6% of the total number of transactions), with deals amounting to 28.2 billion euros (89% of the total value).

In 2022, the most housing was purchased by Portuguese people in Lisbon, the North, and the Center of the country, according to statistical data.

It is also true that foreign investors were more active in the housing market last year, starting to take an increasing share compared to the Portuguese.

If the number of transactions made by the Portuguese increased by only 0.3% in 2022 compared to the previous year, the number of transactions made by foreigners grew by 20.2%, reaching 10,722 residential properties - which accounts for 11.4% of the total sales, the highest figure since the INE began recording statistics.

The value of residential property sales made by foreigners also increased by 25% in just one year, reaching 3.6 billion euros.

These figures indicate that foreigners tend to buy much more expensive properties, mainly luxury homes.

It is precisely buyers residing outside the European Union who purchase property in Portugal at higher prices, averaging 406,267 euros - twice as much as the Portuguese.

Following them are buyers residing in the EU, who pay an average of 279,063 euros for housing (+56% compared to the Portuguese).

Buyers living in the country purchase housing for an average of 179,201 euros, according to INE data for 2022.

This means that both Portuguese and foreigners contributed to the development of the housing market in 2022, which reached historic sales.

However, the data also indicates that the consequences of the war in Ukraine, rising interest rates, and inflation began to manifest towards the end of the year, with a noted decrease in both the number of transactions and the value across all fiscal households of buyers (both local and foreign), with the most significant decline observed among buyers from outside Europe.

One in four homes sold in the Algarve is purchased by foreigners.

Of the transactions that involved foreign buyers in 2022 - a total of 10,722 transactions - about 36.9% were for properties located in the Algarve.

However, this was the lowest value since the statistics began in 2019.

The top three regions preferred by foreigners for purchasing property in Portugal are the Lisbon Metropolitan Area, which accounts for 20.1% of all transactions, and the Central Region (19.4%).

Thus, it was in the housing market in the Algarve that the most significant amount was noted, coming from abroad - 44.9% of the 3.6 billion euros spent by foreign buyers residing outside the country.

Following them is the Lisbon Metropolitan Area (31.6%) and the Center (8.9%).

The INE data indicates that the activity of foreign buyers in the housing market in Portugal varies and has different significance in different regions.

It is in the Algarve that the activity of foreign buyers is most noticeable.

Foreign buyers (both within and outside the EU) accounted for 26.2% of the total number of homes sold in the Algarve region in 2022 and 37.9% of the total amount of 4.3 billion euros.

The autonomous regions of Madeira and the Azores have also felt the impact of foreign buyers (although the scale is significantly lower than in the Algarve): in the Autonomous Region of the Azores, foreign buyers accounted for 7.0% of the total number of transactions in this region and 7.8% of the total value in 2022; in the Autonomous Region of Madeira, the percentage of home purchases by foreign buyers residing outside the country was 8.8% by number and 14.8% by value.

The northern part of the country is a region where the activity of foreign buyers is the least noticeable in the overall statistics.