Foreign buyers drive up prices of new buildings in Portugal
Demand for new buildings in Portugal has been rising since 2023. In the first six months of the previous period, more than 50% of properties for sale were sold. This is according to Confidencial Imobiliario, which analyses the property market in Portugal.
Since last year, the country has seen increased interest from foreign buyers in local property. Thanks to this, the market is actively developing and is not feeling the negative effects of rising interest rates. However, the increased demand is having a negative impact on purchasing power, as prices for apartments and houses are rising rapidly.
According to the Idealista portal, in July 2023, the cost of housing in Portugal increased by 6.2% compared to the same period in 2022. As property prices rise, so do other costs. This dynamic is particularly noticeable in Lisbon, where the cost of living has increased three times compared to 2015.
Despite this, foreign investors are actively investing in the local property market. According to Vanguard Properties, one of the country’s leading property developers, around 65% of its clients are foreigners or Portuguese citizens living outside the state. The company manages 22 properties in prestigious areas of Lisbon and popular locations along the coast.
Problems in the property market
According to the head of Vanguard Properties, José Botelho, the local market for new buildings is in crisis, as supply cannot keep up with demand and prices continue to rise. The situation will only worsen as developers find it difficult to obtain planning permission for new buildings. The approval process is extremely long and complicated.
The country’s authorities are aware of the problem and are looking for ways to solve it. The government has promised developers that it will review and speed up the building permit process. In addition, the cancellation of the Golden Visa programme is on the cards. The initiative to obtain a residence permit in exchange for investment has existed in Portugal for more than ten years. The minimum threshold for participation in the programme is 350,000 euros, the amount required for foreigners to buy local property.
Which Portuguese locations are in demand by foreigners?
Idealista notes that the most popular locations for foreign investors are the three main cities in Portugal:
– Lisbon, which accounts for around 19% of buyers;
– the proportion of foreigners looking for a home in Faro is around 14%;
– 13% in Porto.
In most cases, foreigners use mortgages to buy new properties. As one moves inland, the demand for housing decreases significantly.