A 21% decline in home sales in 2023 - slowing prices

Home prices in Portugal slowed again to 8.7% between January and March 2023. The purchase of real estate by foreigners is becoming more significant. The impact of rising interest rates and inflation is already starting to be clearly visible in the housing market in Portugal. Home sales in Portugal fell again earlier this year, down 20.8% year-on-year. This is the third consecutive time that the National Institute of Statistics (INE) has recorded a decline in house sales transactions, which continues to intensify. As a result, house prices also slowed between January and March, rising 8.7%, down 2.6pc from the previous quarter.

"Between January and March 2023, 34,493 dwellings were sold, which''corresponds to a decline of 20.8% (down 16.0% in the previous quarter) and a decline of 10.5% compared to the previous period,' INE explained in a bulletin published on Thursday, June 22. Fewer homes sold led to lower investment, as the total value of residential properties sold amounted to 6.9 billion euros, down 15.2% from the same period in 2022.

The decline in the volume of house sales leads to a decrease in supply demand and has an impact on house prices. In the case of the first quarter of 2023, house prices slowed to 8.7% year-on-year, down 2.6 p.p., "which is the least significant annual price increase since the second quarter of 2021," the institute emphasizes. Compared to the previous quarter, prices''housing prices rose by 1.3%. New and used home sales: how are prices evolving?

Home sales fell between January and February 2023, for the third consecutive quarter, and "the amplitude of this decline is increasing" from quarter to quarter. Fewer new and used homes were sold during this period, and price growth also slowed:

• Pre-owned homes: 27,523 units (79.8% of the total) were sold, down 23.4% from the same period in 2022. Here, prices slowed to 9.7% (up 12.7% in the previous quarter);
• New homes: 6,970 new dwellings were sold, down 8.3% from the first quarter of 2022. New home prices rose 5.7% in the first quarter, down 1.4pc on the previous period.

It is clear that''and the amount of capital driven by these transactions declined in the quarter.

Who buys the most houses in Portugal?

Families were the main buyers of real estate in our country at the beginning of 2023, accounting for 84.9% of the total (29,280 dwellings). However, they bought 22.6% less than in the same period in 2022 and 10.9% less than in the previous quarter. The total value of residential properties sold to families amounted to €5.8 billion (83.9% of the total), down 17.3% year-on-year.

Where do the buyers of these' come from? 'houses?

In the first three months of 2023, house purchases were predominantly made by buyers living in Portugal:

• Buyers with tax residency within Portugal: decreased by 21.9% year-on-year to a total of 32,001 units (92.8% of the total, the lowest weight in the series starting in the first quarter of 2019);
• Buyers with tax residency in the European Union: the total number was 1,269 transactions, down 11.6% year-on-year;
• Buyers with tax residency in other countries: the number of transactions increased by 9.1% to 1,223 units.

This means that while buyers resident in Portugal continue to be more important, the share of''foreign buyers' activity is starting to rise in total volume.

Where are the most homes for sale in Portugal

Home sales in early 2023 are not evenly distributed across the different regions of the country. There are regions that are more attractive for families and investors to buyreal estate, in particular the Northern region, which has even surpassed the number of homes sold in Greater Lisbon, as data from INE:

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 of €2.8 billion (about 40.6% of the total) was allocated to this region;
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• North: 9,924 transactions were made here, representing 28.8% of the total. The purchase of houses in the Northern region of Portugal moved at a value of 1.6 billion euros (23.5%). Within this region is the Portuguese Metropolitan Region, where 5,343 houses were sold for around a billion euros;
• Center: there were 7,654 transactions, representing 22.2% of the total. These transactions were worth around 938 million euros (13.7% of the total);
• Algarve: 3,080 homes were sold here at the beginning of 2023, representing 8.9% of the total. These transactions cost around 947 million euros (13.8%);
• Alentejo: 2,577 houses were bought in this region (about 8.9% of the total), at a cost of about €295 million (4.4%);
• Autonomous Region of Madeira: 898 transactions were made here (2.6%