The Royal Institution of Chartered Surveyors reports that Portugal’s property market continues to struggle even while confidence in the market seems to improve. Prices and transactions are on the decline, although experts noted that buyer inquiries were starting to stabilize and posted the best numbers since recordation began in 2010. The rental market is performing better than the sales market even though rents are still falling. Analysts say investors are still unwilling to enter the fray, in part because more information is needed about new lease laws. For more on this continue reading the following article from Property Wire.
Residential property prices in Portugal continue to fall due to weak demand and rents are also down but confidence in the country’s hard hit real estate sector has risen to its highest level for over two years.
The latest housing market survey from the Royal Institution of Chartered Surveyors (RICS) and Confidencial Imobiliario highlights the broad based weakness of the sales market in contrast to the partial strength of the lettings sector.
It points out that this has been an ongoing theme since at least the third quarter of 2011 when the lettings data was introduced.
In the sales market, transactions and prices continued to decline, with the national price net balance broadly stable at -61 which means that 61% more respondents experienced price falls rather than rises.
The good news is that new buyer inquiries are showing signs of stabilizing. Not only did the national inquiries balance improve from -11 to -1, the highest reading since the survey began in September 2010, but this improvement was quite broad based across the surveys three regional groups of Lisbon, Porto and the Algarve.
Moreover, the national confidence index, which is a composite measure based on price and sales expectations, improved 13 points from -44 to -31, which is the highest in over two years.
The report says that it is also noteworthy that residential developers, on the whole, are reporting less severe price declines than sales agents. This suggests the market for new build, whilst still under pressure, is holding up slightly better than for existing stock.
The lettings market, meanwhile, continues to benefit partly from the fall out in the sales market, as households who cannot access mortgage finance opt to rent instead. Indeed, tenant demand remains firm and rental transactions are expected to continue rising over the next 12 months.
However, rents are falling and rental expectations are quite negative. The report says this could reflect an excess of rental stock in the market, but affordability constraints may also be an issue.
Moreover, there is also some anecdotal evidence from agents of a mismatch between the type of stock currently on offer and that in demand.
‘Market participants are still uncertain about the new lease laws and point to a need for more information. Investors are still waiting on the sidelines for more clarity. A further challenge for the rented sector is the state of the labor market, which is causing downward pressure on rents,’ said CI spokesman, Ricardo Guimaraes.
According to RICS senior economist, Josh Miller, house prices continue to fall due to very weak demand. ‘Oversupply is not really an issue. Demand weakness, in turn, stems from a deteriorating labor market with the unemployment rate standing at 17.6%, and falling mortgage lending,’ he said.
‘That said, the February RICS/ Ci results did contain some positives for the sales market with stabilizing buyer inquiries and improving confidence,’ he pointed out.
‘The lettings market, meanwhile, continues to benefit partly from the fallout in the sales market, as households who cannot access mortgage finance opt to rent instead,’ he added.
This article was republished with permission from Property Wire.