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Strong Demand for Property in Portugal

24.07.17

Demand for property in Portugal continued to be solid in the first quarter of 2017 but fewer homes are being put on the market creating supply issues, the latest index report suggests.

There has been a steady rise in new buyer enquiries, a pick-up in sales instructions but new listings have now dropped in each of the last two months, according to the index from the Royal Institution of Chartered Surveyors (RICS) and Confidencial Imobiliario.

In the lettings market, tenant demand growth also remains strong, whilst new landlord instructions continue on a steeply downward trend, again creating supply issues.

All three regions covered by the index, Lisbon, Porto and the Algarve saw an increase in agreed sales and looking ahead, sales are expected to rise further in all three areas over the near term, although sales expectations did soften a touch in Lisbon relative to the previous month.

Prices continue to increase nationally, albeit the rate of growth eased slightly in comparison to the record monthly pace reported in April, the report points out.

Overall, demand saw a net balance of 36% more respondents recording an increase in new buyer enquiries which is in line with consistently solid readings over the past five months. Lisbon saw the biggest increase in new buyer enquiries.

Meanwhile, new sales listings declined further, with respondents in the Algarve reporting the most significant drop since 2011. The decline in new listings continues to support price growth and, looking ahead over the next 12 months, contributors envisage prices increasing by around 4% nationally.

Over the next five years, house price inflation is expected to average around 5% per annum. The national confidence index, an amalgamation of near term price and sales expectations, was firm, registering a figure of +38. That said, this did ease somewhat from +43 in April.

In the lettings market, tenant demand growth softened marginally but was solid nonetheless. By way of contrast, new landlord instructions continued to fall sharply. As a result, rental growth expectations remain elevated, returning the second strongest reading since the survey’s inception.

According to Ricardo Guimarães, CI director, all agents are very clear that the lack of supply is the main constraint on their activity and also the main factor determining how prices are changing.

‘This appears to be a topic that will dominate trends over the coming months. Meanwhile, prices are starting to move up, and not only across main cities. Price growth is becoming more widespread and this may induce a turning point, enabling development and financing of new properties, thereby reducing the gap between demand and supply. But this will take time,’ he added.

RICS chief economist, Simon Rubinsohn, believes the outlook is positive. ‘Employment growth has accelerated across the Portuguese economy in recent months, with the latest figures showing an annual increase in excess of 3%. This sustained improvement continues to support housing market activity and prospects for further growth over the year ahead look promising given the current macro climate,’ he said.

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