Portugal’s Real Estate Prices Are Skyrocketing

The parallels are hard to ignore: the record prices, the bidding wars, the units that fill up as soon as they’re built, the ingenious buyer who clinched a deal by dropping off ovos-moles that matched the home’s interior paint colours.

The house price rise across the country is unprecedented. “The numbers certainly don’t make sense. How do you make a rational offer on a flat when you have irrational people in the game?” asks Pedro Castanha, an UK national of Portuguese descent who viewed more than 70 flats in Lisbon.

There is no doubt that the locals are finding it extremely challenging to get on the housing ladder. Inflation jumped 8.7 percent in June and interest rates on mortgages are rising with the steep rise in Euribor.

So does this mean we are staring at another housing bubble in the country? One hopes not, because when the last one burst, it triggered the great slump and crash which can still be remembered as one of the deepest economic downturn since the Great Depression.

According to the National Statistics Institute in Portugal (INE), in the first three months of the year, median house price of dwellings sales in Portugal was 1454 €/m2 , equating to a rise of 17.2 percent compared to the same period last year (+14.1% in the previous quarter). In 22 of the 25 NUTS 3 sub-regions, there was an increase in median house prices compared to the same period in the previous year.

Quarterly results: NUTS 3/Inter-municipality Entities and autonomous regions.

Source: Instituto Nacional de Estatística.

The two sub-regions with the highest median house prices - Algarve (2237 €/m2 ) and the Lisbon Metropolitan Area (1986 €/m2 ) - also had the highest values in both categories of purchaser's tax residence: national territory (respectively, 2115 €/m2 and 1969 €/m2 ) and foreign (2 588 €/m2 and 3 533 €/m2 ).

Between Q4 2021 and the Q1 of 2022, the year-on-year growth rate increased in nine out of the 11 municipalities with more than 100 thousand inhabitants in the Lisbon Metropolitan Area, and this acceleration was higher than witnessed at the national level (+3.1 p.p.) in Sintra (+7.9 p.p.), Setúbal (+6.5 p.p.) and Almada (+3.3 p.p.). In Lisbon (+2.3 p.p.), as in the previous quarter, and Cascais (+2.0 p.p.), the acceleration was less expressive. In Loures (-2.0 p.p.) and Oeiras (-1.7 p.p.) there was even a deceleration of prices.

In PortoMetropolitan Area, the municipalities of Santa Maria de Feira (+13.8 p.p.), Vila Nova de Gaia (+6.8 p.p.), Gondomar (+5.3 p.p.) and Porto (+3.7 p.p.) also marked a remarkable increase in the year-on-year rates of change higher than the country. In the other two municipalities with more than 100 thousand inhabitants - Matosinhos (- 9.8 p.p.) and Maia (- 2.4 p.p.) - there was a deceleration.

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