How house prices in Portugal are affecting the country’s property market
Global market problems have had a negative impact on almost all sectors. Rising interest rates have put severe pressure on the property market. The effects are felt even in stable markets. In Portugal, for example, house prices continue to rise, but the number of transactions is falling. Such trends point to a slowdown in the market.
The National Statistics Institute INE has published the results of its property market analysis. According to this, the dynamics of the sector are as follows:
– in the first quarter of 2024, house prices rose by 7%;
– in the fourth quarter of 2023, the figure was 7.8%;
– the current dynamics is the lowest in the last three years;
– the market activity has slowed down: not only the number of transactions has decreased, but also their value;
– the dynamics of the sector have fallen to the level of 2020.
The analysts noted that the price growth rate began to slow gradually in the second half of 2023. The value fell by 0.8% in the new-build sector. In the secondary market, there is still growth, but it is insignificant — 1.1%.
During the first quarter, there were 33,077 house purchase transactions in Portugal, with a total value of around €6.7 billion. INE experts note that this result is the lowest since the second quarter of 2010, when the pandemic began, and the market practically came to a standstill. In addition to the COVID-19 period, a similar decline was in the country in 2017.
Overview of house prices dynamics by region
Even though prices are rising, the total value of transactions is falling. However, the situation is uneven across the country. The sales volume is increasing in the northern and central regions and Setubal. At the same time, the dynamics in Madeira and the Algarve have fallen by 20% or more.
Despite the general trends, the situation on the Setubal peninsula is more optimistic. There were 3125 house sales here in the first quarter. Compared to last year, the number of transactions increased by 1%. Their total value was around €1.7 billion. The increase over the year was 5%. The share of sales in Setubal represents 25% of the total in the Portuguese residential property sector.
In Lisbon, the number of transactions fell by 5%. However, rising prices partially offset this decline, resulting in a 1% increase in the total value of sales. Buyers in the capital made transactions worth more than €2.1 billion, representing almost 30% of the country’s total property market.
In the Algarve, analysts recorded a significant drop in transactions. Their number fell by more than 25%. The value of transactions also fell by 22% to €733 million. These figures are the lowest for the last three years.
In Madeira, the number of transactions fell by 22% and the sales value by 18%. The total value of transactions in Madeira during the period under review was €160 million.