High unemployment and low confidence is driving down real estate property activity in Portugal in every region according to the latest survey. Falling demand remains the biggest factor for the depressed housing market because fewer people can obtain financing. Portuguese unemployment has risen to 12.4% and many Portuguese homeowners are being forced to sell their homes to due mortgages that are tied to short-term interest rates controlled by the European Central Bank. These combined factors have caused price drops in every region of the country, although some areas have experience sharper dips than others. For more on this continue reading the following article from PropertyWire.
Weakening demand is continuing to depress the residential property market in Portugal but prices are falling as a slower pace, according to the latest Royal Institution of Chartered Surveyors/Ci Portuguese Housing Market Survey.
Confidence nationally is still low and activity in the housing market is still declining with real estate agents experiencing much sharper price declines than developers, it also shows.
The National Activity and National Confidence indices fell by another one and two points respectively to –49 and –61. However, the report says it is noteworthy that the national price balance, whilst still indicating a weakening picture, suggests prices are falling at a slower pace than previously.
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‘With the Portuguese unemployment rate at 12.4%, it is unsurprising that house prices and activity is falling, while confidence remains very depressed. Interestingly, the main factor weighing down on prices is falling demand, rising supply is not an issue,’ said RICS senior economist, Josh Miller.
‘However, given that the vast proportion of Portuguese mortgages are tied to short term interest rates, if the European Central Bank continues to hike its main policy rate, then the risk of forced selling by Portuguese homeowners will likely increase,’ he explained.
‘The results also highlight that residential agents continue to experience much sharper price falls than developers, a trend in place all year, notwithstanding last month,’ he added.
Miller pointed out that the national picture masks some interesting regional variations. Firstly, while prices continue to fall across all three regions and at broadly the same pace, price falls nevertheless slowed in Lisbon and Porto, but accelerated in the Algarve.
Secondly, new instructions fell in Lisbon and Porto, but were flat in the Algarve. Thirdly, since the beginning of the year, the level of instructions have generally been more resilient in Lisbon than in Porto and the Algarve.
‘Looking forward, expectations for sales and prices remain negative across all three regions, although compared to the previous month, less so in Porto and more so in Lisbon,’ Miller said.
CI Spokesman, Ricardo Guimaraes said there is a two tier market emerging. ‘Potential buyers’ access to mortgage finance depends on their income and debt levels. Some agents note that wealthier households can still access mortgage finance, resulting in a two tiered market, with more activity at the top end than in the lower price ranges,’ he explained.
This article was republished with permission from PropertyWire.